MBA boosts originations forecast by more than $800 billion: 2009 could be fourth highest on recordMortgagePress.comMBA, statistics, mortgage originations, refinancing
The Mortgage Bankers Association has increased its forecast of
mortgage originations in 2009 by over $800 billion. MBA now expects
originations to total $2.78 trillion, which would make 2009 the
fourth highest originations year on record, behind only 2002, 2003,
2005.
This boost is due entirely to the expected increase in mortgage
refinancing activity motivated by the drop in interest rates
following last week's Federal Reserve's announcement on the
Treasury bond and mortgage-backed securities purchases programs and
the Fannie Mae and Freddie Mac refinance programs. MBA lowered
slightly its forecast of mortgage originations tied to home
purchases.
"While the Fed has not announced that it is targeting specific
rates for either 10-year Treasury rates or rates on 30-year
fixed-rate mortgages, the effect of having the Fed bid in the
market for a sustained period is enough to create a refinance
incentive for a tremendous number of homeowners. The vast majority
of mortgages originated before the latter part of 2008 are probably
going to have at least a 50 basis point refinance incentive for at
least the next several months, with mortgage rates hitting lows not
seen since the early 1950s and late 1940s," said Jay Brinkmann,
MBA's chief economist and senior vice president of research and
economics.
The previous record origination years of 2002, 2003 and 2005 had
large amounts of subprime loans and jumbo loans. In contrast, the
2009 originations will be almost entirely Fannie Mae and Freddie
Mac-eligible loans, or eligible for FHA insurance.
MBA estimates that refinancings in 2008 totaled $765 billion and
were forecast to increase to $1.13 trillion in 2009. With the
recent moves by the Federal Reserve and the Fannie/Freddie program,
refinancings are expected to reach $1.96 trillion. In contrast, MBA
estimates that purchase mortgage originations in 2008 totaled $854
billion, and were forecast to fall slightly to $851 billion in
2009. The new MBA estimate for 2009 is $821 billion, driven by a
combination of continued declines in home sales and lower prices on
the homes that are sold, leading to smaller mortgages on average
than in recent years.
"Even with amazingly low interest rates, lower home prices and
the first-time homebuyers tax credit, it is unlikely that we will
see an increase in overall home sales until we see some
stabilization of employment," Brinkmann said.
MBA projects that total existing home sales for 2009 will drop
2.5 percent from 2008 to 4.8 million units. New home sales will
decline about 39 percent in 2009 from 2008 to 293,000 units. Median
home prices for new and existing homes will continue to fall,
dropping by about five to six percent from 2008 levels.
Referring to the refinance forecast, Brinkmann said, "This level
of originations will test the operational capacity of a number of
mortgage banking firms for multiple reasons. First, the reduced
availability of warehouse lines of credit could limit the ability
of a number of independent mortgage bankers to handle this volume
in a short period of time. Second, the capacity burdens will be
borne by the retail channel of loan officers working out of branch
offices as the mortgage broker channel for originations is
considerably diminished since the last refinance wave. Third, the
epidemic of fraud against lenders over the last several years is
leading to closer scrutiny of documentation and appraisals. Fourth,
loan servicers that were already burdened with loan delinquencies
and workouts are going to be faced with massive churn in their
portfolios as old loans are paid off and new loans booked."
As for how long interest rates will remain low, Brinkmann said
that it depends on the volume of securities issued relative to the
amounts purchased by the Fed and the reaction of other investors.
"We know that billions in Treasury securities will be issued over
this year to finance the record budget deficits and the Fed will
only be purchasing a portion of those. The effect on rates will
largely be determined by whether other investors stay in the market
or shy away from Treasuries due to expectations of future inflation
and the declining value of the dollar. If so, the effect on rates
will be more short-lived and our revised refinance forecast prove
too optimistic," Brinkmann said.
For more information, visit www.mortgagebankers.org.
