Mortgage bankers will fund just $900 billion in new loans next year, the industry’s lowest volume since 1997, according to a new forecast from the Mortgage Bankers Association.
According to figures compiled by National Mortgage News and the Quarterly Data Report, the industry originated $644 billion in the first-half of this year and could wind up funding $1.3 trillion as long as rates stay low.
Many lenders are hoping that purchase money loans will pick up next year and also anticipate an increase in business as Bank of America continues to scale back its mortgage operations.
MBA’s new forecast, unveiled at its annual convention, isn’t much different than a forecast it made in August. It also does not factor in a possible White House plan to refinance underwater GSE loans.
Not surprisingly, MBA expects refis to decline significantly in 2012. Over the past six quarters refis accounted for 65% of all new originations, according to NMN/QDR.
Industry production hit an all-time peak of $3.9 trillion in 2003 and hasn’t come close to that zenith since.
Jay Brinkmann, MBA’s chief economist, predicted that mortgage rates will start to rise in the second quarter of next year. Brinkmann cited no particular drivers for the increase, nor for the current 200 basis point spread between the 10-year treasury and 30-year fixed rate mortgages. (Typically, the spread is 150 basis points).
Michael Fratantoni, the trade group’s vice president of single family research, said the wide spread is likely caused by a lack of foreign interest in purchasing Fannie Mae and Freddie Mac mortgage-backed securities. In other words, there is plenty of MBS to purchase, but few buyers, which means the GSEs will have a tough time meeting the goal of shrinking their balance sheets by 10% annually.
