According to a forecast released today by the Mortgage Bankers Association, mortgage originations will fall to their lowest levels since 2000 next year as tighter underwriting standards and increased foreclosures take their toll on the market.
“We have not yet seen fully the impact of the credit shock to the U.S. and world economies, and the severity of that impact will depend on how long it takes for the markets to return to normal functioning,” Doug Duncan, the MBA’s chief economist said at the annual meeting of the Mortgage Bankers Association.
The group expects total mortgage originations to decline 18 percent to $1.89 trillion, the lowest level since volume hit $1.14 trillion in 2000.
Total mortgages originated this year are expected to decline nearly 15 percent to $2.31 trillion from $2.73 trillion last year.
As a result of declining loan origination industry-wide, the group also predicts at least another 30,000 job losses for home finance professionals.
It’s “tough times,” Duncan said. “Continued consolidation is to be expected in the industry.”
The MBA chief also noted that high-risk loans were virtually gone, though it’s unclear if they’ll ever come back.
“If you’ve got a spotty employment record, but good financials on your credit record, you may well still be able to get credit,” he said. “But if you have a spotty employment record, and late payments on three credit cards, and you don’t have cash reserves, most likely you’re not going to get the credit.
If not, it’s going to be extremely difficult to obtain favorable home financing, if any at all.
The MBA also predicts existing home sales will likely fall 12 percent in 2007 to 5.72 million units, and an additional 10 percent in 2008, thought a 5 percent rebound in sales is expected in 2009.
Home prices are expected to decline 2 percent both this year and next, and bottom out in 2009, when loan origination should begin to pick up again.