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Fannie Increases Outlook

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Last month, Fannie Mae predicted that the current quarter’s originations by U.S. residential lenders would fall from the prior period. This month the secondary lender sees an increase in third-quarter production, while it raised its annual estimate and predicted adjustable-rate share will more than double over the next two years. The refinance outlook also perked up.

The mortgage finance giant released its August housing forecast indicating that residential originations from all U.S. lenders are expected to be $408 billion during the third quarter.

That is a nice improvement from the second quarter’s $379 billion in home-loan fundings.

Last month, when Fannie had estimated $404 billion in second-quarter business, third-quarter volume was projected to fall to $391 billion.

Fannie expects originations to tumble to $340 billion in the fourth quarter.

Full-year 2010 production is forecasted at $1.450 trillion — higher than last month’s prediction of $1.397 trillion. Last year, mortgage bankers, mortgage brokers and financial institutions originated $1.922 trillion. Next year, the Washington, D.C.-based firm expects $1.277 trillion in volume.

Refinance share of originations is pegged at 63 percent this quarter, up from the second quarter’s 54 percent and higher than 60 percent forecasted for the fourth quarter. Last month, Fannie had fourth-quarter refinance share at just 47 percent.

Adjustable-rate mortgages are expected to account for 5.9 percent of the current quarter’s loan applications, easing from 6 percent three months earlier. By the end of next year, ARMs activity is estimated to increase to 12.2 percent, while it rises to 13.7 percent at the end of 2012.

Mortgage debt outstanding is expected to finish September at $10.633 trillion. Borrowers owed $10.709 trillion three months earlier and $11.012 trillion a year earlier.

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