Refinancing Likely to Top Previous Records
The recent decline in mortgage rates to 1958 lows is going to boost refinancings to nearly $2.6 trillion this year, closely matching last year's record for total originations, according to Fannie Mae chief economist David Berson.
For all of 2003, the Fannie Mae economist is predicting the lenders will originate a record $3.7 trillion in 1-4 family loans.
"I don't know if this is as good as it gets, but it's the biggest we have ever seen," Mr. Berson said.
Next year, he is forecasting originations will total $2 trillion as refinancings slow.
Mr. Berson told reporters that the housing and mortgage finance markets are operating at a "stupendous pace" and he has noticed no effect from the news about the management shakeup and accounting problems at Freddie Mac.
"There has been no noticeable impact in the housing market or the mortgage market," the Fannie Mae economist said. "Our borrowing cost relative to Treasuries have gone up a little bit, but not a lot. But all of that continues to be swamped by what is happening in the overall market."
Mr. Berson expects mortgage rates will stay below 5.5% for the rest of the year, even though the economy should "pick up steam" in the second half of the year.
The Federal Reserve will reduce interest rates by 25 basis points at its June 24-25 meeting, he said. And he does not expect the central bank will raise rates until well into 2004.
Meanwhile, mortgage debt outstanding is growing at a 10% rate this year, which would be the third year in a row of double-digit increases in mortgage debt, he explained. Such growth rates have not been seen since the late 1980s.
Looking on the servicing side,
Mr. Berson believes the number of loans seriously delinquent (90 days or more past due) may have peaked already. "I think, as the year goes on, we will continue to see a decline in serious delinquency rates."
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