The Mortgage Bankers Association (MBA) has announced it is increasing its mortgage origination forecast for 2012 by almost $200 billion, due entirely to an increase in refinances. MBA now expects that mortgage originations will reach $1.28 trillion in 2012, up from $1.26 trillion in 2011. Refinance originations are now expected to total $870 billion in 2012, an almost identical amount to 2011. MBA is slightly lowering its purchase originations forecast for 2012 from $415 billion to $409 billion.
“Scenarios we have consistently highlighted that could drive rates down and refis up have materialized, primarily due to market turmoil in Europe,” said Mike Fratantoni, MBA’s vice president of research. “Deterioration of the debt situation in Spain and Greece and a new regime in France that is a weaker proponent of European austerity, along with slower economic growth globally, have driven the U.S. Ten-Year Treasury yield down. Thus, we are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result.”
This month’s refinance estimate for 2012 reflects an upward revision of $188 billion from MBA’s April forecast, driven by an increase in the pace of refinance applications and originations, while purchase origination estimates were revised downwards by $6 billion to reflect lower than previously expected home prices and weaker than previously expected home sales.
“The increase in our estimated refinance activity is largely independent of the HARP 2.0 initiative. We factored HARP lending of roughly $100 billion in both 2012 and 2013 into our April forecast, and the HARP share of refinance activity has remained relatively constant over recent months," said Fratantoni. "However, mortgage rates below four percent and regular media coverage showcasing ‘record low mortgage rates’ provide sufficient incentive and impetus for borrowers to examine their current rate. Additionally, we have revised our estimates for the first and second quarter of 2012, based on additional information from GSE securitization data and a refinement in pull-through assumptions from our Weekly Applications Survey.”