Gross Fannie Mae, Freddie Mac and Ginnie Mae MBS issuance will total more than $1 trillion in 2014, down over $500 billion from 2013, MBS strategists at Bank of America Merrill Lynch are forecasting.
“That forecast is aligned with our forecast for total originations of about $1.2 trillion," Mortgage Bankers Association chief economist Mike Fratantoni told NMN.
The interest rate on the 10-year Treasury note rose above 3% on Thursday. The yield on the 10-year Treasury could reach 3.75% by yearend 2014 as the Federal Reserve proceeds with tapering and purchases fewer and fewer U.S. Treasury and agency mortgage-backed securities, accord to the MBS strategists.
“Assuming a linear taper for the Fed, its net MBS purchases in 2014 could total $240 billion,” down from $480 billion in 2013, according to a Dec. 20 BAML “Securitization Weekly” report.
Homebuilders are optimistic about the outlook for 2014. But the MBS strategists are concerned about tight credit and recent declines in mortgage purchase applications. “As a result, we continue to think that, due to persistence of a tight mortgage credit regime, mortgage purchase volume is more likely to surprise on the downside in 2014.”
December is generally a slow time of year for buying a home. Yet purchase mortgage applications are “continuing to run more than 10% below last year’s pace,” Fratantoni said.