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Refi Outlook Raised Again

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Just when it seemed that the outlook for this year’s refinance originations couldn’t get any better, the forecast was upped again. But some of the improved outlook came at the expense of next year’s projected production.

Fourth-quarter residential originations by all U.S. lenders are expected to reach $532 billion, just shy of third-quarter volume of $541 billion. Business is expected to fall to $435 billion in the first-quarter 2013 then tick up to $440 billion in the second quarter.

Expectations have improved from last month, when originations were expected to fall from $465 billion in the final three months of 2012 to $434 billion during the first quarter of next year.

The forecast was delivered Tuesday by secondary lender Fannie Mae.

Economists at the Washington, D.C.-based company predict that refinance transactions will account for $404 billion of fourth-quarter activity and $321 billion of first-quarter 2013 volume. Last month’s outlook had refinances falling from $337 billion to $322 billion.

Purchase financing is expected to decline from $129 billion to $114 billion in the first quarter of next year. That wasn’t much different than the $128 billion expected for the fourth quarter last month or the $111 billion projected for the first quarter.

Full-year production is forecasted to come in at $1.871 trillion during 2012 — the highest level of business since 2009’s $1.914 trillion — then fall to $1.551 trillion next year.

The November outlook had this year’s total production at $1.809 trillion and 2013 originations at $1.542 trillion.

With refinance share projected to go from 72 percent this year to 62 percent next year, full-year refinance originations are expected to fall from $1.353 trillion to $0.956 trillion.

Purchase production is forecasted to rise, however, from $0.518 trillion to $0.595 trillion in 2013.

Fannie expects adjustable-rate mortgages to represent 4 percent of overall business from the fourth-quarter 2012 through the second-quarter 2013.

Total residential loans outstanding, which finished last year at around $10.158 trillion, are forecasted to end this year at $9.910 trillion and next year at $9.814 trillion.

First liens will account for $9.305 trillion of 2011’s outstandings, $9.130 trillion of outstandings as of the end of 2012, and $9.064 trillion of the total as of the end of 2013.

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