2009 Mortgage Origination Forecast Slashed by $800 Billion

June 23, 2009 No Comments »

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It didn’t take long for the mortgage refinance bonanza to fall flat on its face, and now the MBA is slashing origination estimates for 2009.

The bankers group now expects mortgage originations in 2009 to ring in at just $2.03 trillion, down from earlier estimates over $2.7 trillion.

MBA now forecasts $737 billion in purchase mortgage activity and $1.30 billion in refinance activity.

Much of the decline can be attributed to weaker refinance demand as a result of rising mortgage rates, while about $84 billion is the result of purchase activity.

The purchase numbers were dragged down by the fact that many sales are distressed, and thus bring in more cash buyers, and because home prices in general have fallen more than expected, decreasing loan amount sizes.

“In March we boosted our forecast of mortgage originations by over $800 billion following the drop in interest rates associated with the Federal Reserve’s announcement on the Treasury bond and mortgage-backed securities (MBS) purchases programs as well as the implementation of HARP, said MBA chief economist Jay Brinkmann, in a statement.

“While the Fed has been successful in reducing the spread between conforming mortgage and Treasury rates through its purchase of agency MBS, it has not been successful in maintaining lower Treasury yields.

As a result, mortgage rates have been unable to maintain record lows, and have since risen by about one percentage point in the past couple months.

Looking forward, the MBA expects mortgage rates to increase through the end of the year and in 2010, thanks to inflationary issues and the Fed’s eventual liquidity withdrawal.

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