Freddie Sees Plunging Originations

Lenders should already be feeling a downdraft if Freddie Mac's latest forecast is right, since originations of conventional mortgages are projected to plunge by 43% from the third to the fourth quarter -- with another significant drop coming in the first quarter of the new year.Freddie Mac economists estimate that third-quarter originations totaled $858 billion, while the forecast for fourth-quarter originations is $489 billion. Even though 30-year mortgage rates will remain steady at 6% over the next two quarters, conventional mortgage originations will drop by another 19% in the first quarter to $395 billion, before rising to $431 billion in the second quarter. Meanwhile, originations of loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs should decline by only 15% from the third to the fourth quarter, Freddie's economists predict. Overall, Freddie Mac's updated forecast calls for $1.85 trillion in single-family mortgage originations in 2004, compared with $3.26 trillion this year, as refinancings drop from two-thirds of originations to 36%.