Boy, Was MBA Wrong on Originations—And Happy About It

A year ago economists at the Mortgage Bankers Association were bracing for an ugly 2012, one in which a meager $900 billion in fundings would come to pass. But happily, the trade group now predicts that originations could top $1.7 trillion by the time the books are closed on 2012.

And now for the bad news: next year will bring $1.3 trillion in fundings, a 23% decline from this year, but still a much better year than expected.

National Mortgage News and the Quarterly Data Report are forecasting $1.75 trillion in fundings this year, 70% of which will be refinancings. Last year mortgage bankers funded $1.452 trillion, according to NMN/QDR.

The MBA sees fundings breaking out this way: $1.2 trillion of refis and $500 billion of purchase money loans. Next year it forecasts that purchase transactions will top $585 billion.

In a media briefing at the group’s annual convention in Chicago, chief economist Jay Brinkmann said events that could mar its estimates did in fact happen—namely the Federal Reserve’s “Operation Twist” program and QE3.

Mike Fratantoni, vice president of single-family research and economics, added that while QE3 was no surprise, it is an open-ended program and its focus on mortgage securities was not expected.

Fratantoni said the trade group’s outlook was colored by Home Mortgage Disclosure Act figures which showed that the origination side of the business has been deconsolidating to some degree, a trend first reported in NMN.

Smaller mortgage bankers claimed a larger market share of 2011 originations. Seeing that, he said, caused the MBA to revise its 2012 purchase origination projections.

As for the 2013 forecast, Fratantoni said the MBA assumes regulators will grant a broad safe harbor for certain loans when the qualified mortgage regulation comes out of the Consumer Financial Protection Bureau.

Brinkmann also addressed the “fiscal cliff” issue, predicting that if large tax increases and spending cuts go into effect in January the economic fallout will impact the housing market.

When asked about another possible financial calamity—speculation that if the U.S. government deficit gets so large, it would result in less interest in government securities, resulting in a rate increase—Brinkmann, while noting the U.S. has a higher level of debt than Spain, said America is still “the best looking horse in the glue factory.”

However, if interest in U.S. government securities would abate, a correction in interest rates would happen rather quickly, he said.