Industry group says interest rates partly to blame
By ANNE LINEBERRY
8/20/2003

The Mortgage Bankers Association of America (MBA) has revised its forecast for originations this year.

The industry group now believes that originations will total about $3.2 trillion for 2003, it said.

"We have been forecasting mortgage interest rates to slowly increase, eventually drying up the refinance market, but the recent upsurge in rates has moved that event forward," said Douglas Duncan, MBA's chief economist and senior vice president of Research and Business Development.

Last month, MBA had forecast $3.4 trillion in mortgage originations for the year.

Refinancings continue to drop as a share of all originations, according to MBA data. In its forecasting release, MBA said it had dropped its forecasted total refinancing originations by eight percent. For 2004, MBA is predicting only $430 billion in refinancings, compared to a previous estimate of $833 billion.

Fannie Mae, in its July forecast by chief economist David W. Berson, predicted $3.7 trillion in mortgage originations.

At Freddie Mac, chief economist Frank Nothaft sees single family originations totalling $3.1 trillion for the year.

In his August Monthly Outlook, Nothaft pointed out the extreme volatility in the market of late.

"The impact of the volatility in interest rates and the contradictory information in other economic indicators on a forecaster's ability to predict the future cannot be stressed enough. The point estimates in our outlook are highly sensitive to these factors and we appeal to economic fundamentals in interpreting the projections," he and associate Amy Crews Cutts said in the monthly outlook.

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