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Second-Half 2013 Refi Outlook Raised

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The forecast for refinance originations during the second half of this year is brighter than it was just a month ago.

Total residential loan originations, including refinances and purchase financing, are expected to fall to $350 billion in the fourth quarter from the third quarter’s $450 billion.

In November, the forecast was for mortgage production to decline to $350 billion in the current period from $400 billion three months earlier.

The latest forecast came from Freddie Mac’s December 2013 Economic and Housing Market Outlook.

Freddie left its forecast for the first quarter of next year at $383 billion.

Refinance production is expected to fall to $172 billion in the fourth quarter from $252 billion. November’s outlook had refinances declining to $133 billion from the third quarter’s $228 billion.

The projection for purchase financing is for volume to drop to $179 billion in the final three months of 2013 from $198 billion. Freddie predicted last month that purchase production would increase to $217 billion from the third quarter’s $172 billion.

Both refinance and purchase figures were calculated using Freddie’s estimated refinance share.

Federal Housing Administration endorsements are expected to drop to $70 billion in the current period from $91 billion in the third quarter, the same as Freddie projected last month.

For all of 2013, the secondary lender has total mortgage originations at $1.900 trillion, up from $1.850 trillion predicted in November.

The 2014 forecast of $1.410 trillion and the 2015 projection of $1.190 trillion were unchanged from the previous month’s outlook.

Freddie lifted the 2013 refinance outlook to $1.178 trillion from $1.110 trillion, while estimated 2014 refinances were left at $0.564 trillion and expected 2015 refinance originations remained at $0.238 trillion.

Refinance share is expected to be reduced from 62 percent in 2013 to 40 percent next year then fall to 20 percent in 2015.

Freddie’s forecast of 2013 purchase volume was cut to $0.722 trillion from the previous projection of $0.740 billion. No change was made to next year’s $0.846 trillion projection or 2015’s $0.952 trillion forecast.

Freddie expects FHA production to decline from $0.370 trillion to $0.282 trillion in 2014 and $0.238 trillion in 2015. No change was made from the November outlook.

That put FHA share at 19.47 percent in the current year and 20 percent for both 2014 and 2015.

Freddie expects adjustable-rate mortgages to account for 9 percent of 2013 activity, 12 percent of next year business and 15 percent of 2015 originations.

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