Both purchase and refinance mortgage activity may not be as strong as earlier thought in 2009, according to new commentary from the Mortgage Bankers Association.
They attributed the decline to a larger share of distressed sales in which cash is being used as opposed to a mortgage.
Refinance loan origination estimates have also been slashed from $1.96 trillion to $1.85 trillion, and are expected to drop about 35 percent in 2010 as mortgage rates rise amid a supposed economic recovery.
The expected decrease in refinance originations is a result of capacity constraints, which will extend the refinance boom over a longer period of time, presenting downside risks as interest rates climb later in the year.
“In addition, we pared down our projection of refinance originations for all of 2009 because some of the projected increase in refinance originations from the Homeowner Affordability and Stability Plan (those loans where a mortgage insurance policy already existed) will be treated as loan modifications rather than new mortgage originations,” the report said.
Total mortgage production should climb about 62 percent to $2.62 trillion this year from an estimated $1.62 trillion in 2008; the previous estimate was $2.78 trillion.
Total originations are expected to fall 19 percent in 2010 to $2.13 trillion as a drop in refinance originations will offset an expected increase in purchase originations.
The MBA expects existing home sales to rise 10 percent next year and new home sales to increase 17 percent.