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2012 Refi Outlook Second Highest Since 2007

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The latest boost to forecasted mortgage originations means that this year will blow past 2011 to rival 2010. All of the improvement was with refinance activity — which is now expected to be the second-highest on record during the last six years. The outlook for purchase production, however, was cut to the lowest level in more than a decade.

Total residential loan originations are projected to reach $1.650 billion during 2012.

That’s a $200 billion increase from last month’s outlook, when this year’s industry-wide production was projected to reach $1.450 trillion.

Last year’s total home-loan fundings were $1.400 trillion, while Freddie Mac puts next year’s forecast at $1.070 trillion in its July 2012 Economic and Housing Market Outlook.

The strength in the latest 2012 forecast was in refinances, which Freddie now expects will reach $1.221 trillion compared to $0.986 trillion projected in June. The only other year since 2007 when refinances were higher was 2008 — when refinance production amounted to $1.360 trillion.

But this year’s projection for purchase production was cut to $0.429 trillion from $0.464 trillion in the June outlook. Home-purchase financing has not been that low since at least 2001.

Both government and conventional forecasts were lifted, with government production now predicted by Freddie Mac to reach $0.375 trillion versus $0.300 trillion expected last month and the outlook for conventional business raised to $1.275 trillion from $1.150 trillion.

Third-quarter overall originations are forecasted to increase to $450 billion from $420 billion in the second quarter. The prior forecast was for volume to rise to $370 billion from $365 billion.

The latest outlook is for refinance originations to climb to $333 billion in the third quarter from $311 billion three months earlier, while purchase production is expected to grow to $117 billion from $109 billion.

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