MBA: Mortgage Originations to Reach $1.3 trillion in 2013, Refis to Slow Down

Accounting for economic uncertainty, mortgage originations are projected to hit $1.3 trillion in 2013, according to an announcement made by the Mortgage Bankers Association during its annual convention in Chicago this week.

The MBA anticipates $1.3 trillion in mortgage originations during 2013, thus increasing 2012 expected originations to $1.7 trillion.

MBA bases speculation on an overflow of refinances set to occur during the first half of 2013, which will drop off substantially in the second half of the year. In contrast, the association sees purchase originations climbing to $585 billion, an upward revision from its previously estimated $503 billion for 2012.

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“We expected 2012 originations to be front-loaded in the first half of the year, with refis falling off with rate increases. Instead, we saw the refinance market grow during the year due to a combination of low rates, thanks to QE3 and slowing global growth because of continuing problems in Europe, and adjustments in the HARP and FHA refinance programs,” said MBA Chief Economist Jay Brinkmann.

As for 2013, MBA expects 2013 refinance originations to play out like its original expectations for 2012, with a long tail of refis extending through the first half of the year followed by a rapid drop-off in the second half.

MBA also expects to see a 16% increase in purchase originations in 2013 over 2012, with every quarter of 2013 exceeding those of 2012.

“The increase in purchase volumes will be driven by continued modest growth in the economy, an increase in owner-occupied sales financed with mortgages as opposed to cash purchases by investors, an increase in new home sales and a small increase in average home prices,” said MBA.

These speculations emerge assuming that regulation changes slated for 2013 do not cause the FHA and Fannie Mae/Freddie Mac to tighten credit policies.

Regarding the “fiscal cliff” that will increase a series of taxes and spending cuts at the very start of 2013, that is, unless the White House and Congress reach an agreement, MBA believes that if left unaddressed, the “fiscal cliff” would hinder growth, cutting 3.5 to 4 percentage points from the MBA’s speculated growth forecast.

“While the fiscal cliff is the most immediate threat, it is at least one we can control.”

Written by Jason Oliva

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