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Outlook Improves for Refis, Deteriorates for Purchase Financing

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The projection for quarterly purchase-money production was pared, while a beefed-up forecast for refinances more than made up the difference. Longer-term forecasts point to a significant drop ahead in mortgage jobs.

Residential loan production is forecasted to fall to $530 billion in the fourth quarter from $550 billion in the prior period. That was the same as the prediction made last month.

Mortgage production is then expected to fall to $460 billion in the first-quarter 2013 followed by a rise to $480 billion in the second quarter.

The first-half 2013 forecast was lifted from November’s prediction that volume would go from $440 billion during the first three months of next year to $450 billion in the remainder of the first-half 2013.

Economists at Freddie Mac summarized their expectations in the secondary lender’s December 2012 Economic and Housing Market Outlook.

The fourth-quarter purchase financing projection was slashed to $127 billion from $180 billion projected last month. Purchase production is then expected to climb to $138 billion in the first quarter of next year, though that was less than the $145 billion predicted in November for first-quarter 2013 purchase financing.

But the fourth-quarter refinance forecast was raised to $403 billion from $350 billion projected last month. During the first six months of next year, Freddie expects primary lenders to originate $634 billion in refinances, more than the $583 billion projected in the November outlook.

Freddie expects the share of government originations, including loans insured by the Federal Housing Administration and mortgages guaranteed by the Department of Veterans Affairs, will fall from 19.6 percent in the final quarter of this year to 18.0 percent in the first quarter of next year. But Freddie has government share peaking at 22 percent in the third-quarter 2013.

This year is expected to end with $2.00 trillion in total originations. After that, business is expected to slow to $1.70 trillion in 2013.

Freddie predicts that total home-loan production will sink to $1.25 trillion by 2014.

In addition to the projected drop in originations, multiple sources have reported a sustained improvement in residential delinquency. If mortgage delinquency continues to decline and mortgage production falls the 60 percent over the next two years that is predicted by Freddie — fewer production and servicing employees will be needed.

Such an outcome could have a big impact on the mortgage employment base, which the Bureau of Labor Statistics preliminarily had at 284,500 for October.

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