New Report Predicts a Mixed 2017 for the Mortgage World

The mortgage industry may not be as consistently vibrant next year as it was this year, according to a new analysis released by Keefe, Bruyette & Woods Inc. (KBW).

In their new report titled “Mortgage Finance 2017 Outlook: Higher Rates Could Be Here to Stay,” KBW is predicting a year-over-year drop in origination from the estimated $1.83 trillion in 2016 to a potential $1.55 trillion in 2017. “We expect 2017 volumes to be lower than 2016 due to a sharp drop in refinance volumes, partially offset by higher purchase volumes,” the report stated. “We expect gain-on-sale margins to be down fairly meaningfully, especially from 3Q16 levels due to increased competition.”

But KBW also forecast a rising level of mortgage debt. “We expect mortgage debt to show modest growth again in 2017,” the report continued. “Historically, mortgage debt outstanding had grown steadily, driven by rising home prices, increased use of leverage, and a growing homeownership rate. After the downturn, these trends moved in the opposite direction, resulting in a decline in total mortgage debt outstanding … [currently], total mortgage debt outstanding has started to show some growth recently and we expect this to continue as the credit box of the GSEs widens, bringing new borrowers into the market.”

KBW also predicted mortgage insurers will do well next year, adding that it was “increasing our estimate for industry-wide insurance in force growth to seven percent from percent earlier.” But title insurers would not do well in 2017, KBW warned, due to lower refinance volumes.