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Outlook Raised for Refi Originations

Mortgage News

The forecast for refinance originations during the second half of this year has been boosted by more than $100 billion. But the outlook for financing home purchases remains weak.

In its August housing forecast, Fannie Mae had third-quarter production by all U.S. lenders at $301 billion. Fourth-quarter fundings were expected to fall to $195 billion.

But in its September outlook, the secondary lender lifted its expectation for the third quarter to $317 billion, while the fourth-quarter estimate was increased to $289 billion.

The improved forecast was due to a huge increase in projected refinance production. Fannie now has refinance volume at $214 billion in the third quarter and $201 billion in the fourth quarter versus the $194 billion and $107 billion predicted for the respective periods in last month’s report.

The second-half purchase forecast didn’t change much, with purchase financing activity expected to fall from $103 billion this quarter to just $88 billion during the final three months of the year.

The prediction for full-year 2011 originations was raised to $1.202 trillion from last month’s projection of $1.094 trillion. Volume is expected to fall to $0.988 trillion next year then bounce up to $1.124 trillion in 2013.

Fannie has adjustable-rate mortgages accounting for 6 percent of third-quarter applications then falling to 4 percent in the final quarter of this year.

Single-family mortgages outstanding are estimated to end this month at $10.285 trillion, lower than $10.360 trillion at the end of the second quarter. By the end of this year, the outstanding is expected to fall to $10.254 trillion.

First liens are expected to account for $9.375 trillion of third-quarter outstandings then fall to $9.346 trillion by the end of 2011.

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