Mortgage finance forecast released
By MortgageDaily.com staff
1/21/2003

Mortgage originations won't be enjoying the heyday they did in 2002, according to the latest mortgage finance forecast released by the Mortgage Bankers Association of America (MBA).

The report predicts that one to four-family originations will fall by almost 39% to $1.77 trillion in 2003 from the almost $2.46 trillion produced in 2002. Originations in 2001 totaled $2.03 trillion.

MBA chief economist Doug Duncan said originations are expected to fall because interest rates will probably rise in the second half of the year in response to the overall economy perking up.

"The [gross domestic product] will grow more healthily," he said, causing those rates to rise and curtailing the refinance frenzy. The 30-year will creep up to 6.8% by the fourth quarter, but that's still low enough to attract consumers who want to buy a home. It's high enough, however, to detract current homeowners from refinancing, he said.

In the beginning of the year, the MBA forecasts originations will reach $580 billion during the first quarter -- an almost 19% drop from the $689 billion in volume during fourth quarter 2002. The second quarter is expected to bring in $478 billion, a 21% decrease from first quarter.

And it won't get any prettier. The MBA says third quarter originations will reach $399 billion, an almost 20% drop from second quarter. The year's low will come in the fourth quarter at $318 billion, an almost 26% decrease from the third quarter prediction.

The refinance share of those originations also are expected to dramatically decrease. While 65% of originations in the first quarter are expected to be from refis, the percentage drops to 40% in the second quarter, 28% in the third quarter, and 25% of originations are expected to refis in the fourth quarter.

The adjustable-rate mortgage (ARM) share is expected to inch up through the year, going from 15% in the first quarter to 17% in the fourth. The ARM share is the percentage of the total number of conventional purchase loans closed. It was 12% in 2001 and 18% in 2002.

The quarterly predictions are revised each month based on economic indicators, Duncan said.

Article © MortgageDaily.com All Rights Reserved