|Title: ||MBA Boosts Originations Forecast By Over $800 Billion|
Washington, DC (March 24, 2009) — The Mortgage Bankers Association today increased its forecast of mortgage originations in 2009 by over $800 billion. MBA
now expects originations to total $2.78 trillion, which would make 2009 the fourth highest originations year on record, behind
only 2002, 2003, 2005.
This boost is due entirely to the expected increase in mortgage refinancing activity motivated by the drop in interest rates
following last week’s Federal Reserve’s announcement on the Treasury bond and mortgage-backed securities purchases programs
and the Fannie Mae and Freddie Mac refinance programs. MBA lowered slightly its forecast of mortgage originations tied to
“While the Fed has not announced that it is targeting specific rates for either 10-year Treasury rates or rates on 30-year
fixed-rate mortgages, the effect of having the Fed bid in the market for a sustained period is enough to create a refinance
incentive for a tremendous number of homeowners. The vast majority of mortgages originated before the latter part of 2008
are probably going to have at least a 50 basis point refinance incentive for at least the next several months, with mortgage
rates hitting lows not seen since the early 1950s and late 1940s,” said Jay Brinkmann, MBA’s Chief Economist and Senior Vice
President of Research and Economics.
The previous record origination years of 2002, 2003 and 2005 had large amounts of subprime loans and jumbo loans. In contrast,
the 2009 originations will be almost entirely Fannie Mae and Freddie Mac-eligible loans, or eligible for FHA insurance.
MBA estimates that refinancings in 2008 totaled $765 billion and were forecast to increase to $1.13 trillion in 2009. With
the recent moves by the Federal Reserve and the Fannie/Freddie program, refinancings are expected to reach $1.96 trillion.
In contrast, MBA estimates that purchase mortgage originations in 2008 totaled $854 billion, and were forecast to fall slightly
to $851 billion in 2009. The new MBA estimate for 2009 is $821 billion, driven by a combination of continued declines in
home sales and lower prices on the homes that are sold, leading to smaller mortgages on average than in recent years.
“Even with amazingly low interest rates, lower home prices and the first-time homebuyers tax credit, it is unlikely that we
will see an increase in overall home sales until we see some stabilization of employment,” Brinkmann said.
MBA projects that total existing home sales for 2009 will drop 2.5 percent from 2008 to 4.8 million units. New home sales
will decline about 39 percent in 2009 from 2008 to 293,000 units. Median home prices for new and existing homes will continue
to fall, dropping by about five to six percent from 2008 levels.
Referring to the refinance forecast, Brinkmann said, “This level of originations will test the operational capacity of a number
of mortgage banking firms for multiple reasons. First, the reduced availability of warehouse lines of credit could limit
the ability of a number of independent mortgage bankers to handle this volume in a short period of time. Second, the capacity
burdens will be borne by the retail channel of loan officers working out of branch offices as the mortgage broker channel
for originations is considerably diminished since the last refinance wave. Third, the epidemic of fraud against lenders over
the last several years is leading to closer scrutiny of documentation and appraisals. Fourth, loan servicers that were already
burdened with loan delinquencies and workouts are going to be faced with massive churn in their portfolios as old loans are
paid off and new loans booked.”
As for how long interest rates will remain low, Brinkmann said that it depends on the volume of securities issued relative
to the amounts purchased by the Fed and the reaction of other investors. “We know that billions in Treasury securities will
be issued over this year to finance the record budget deficits and the Fed will only be purchasing a portion of those. The
effect on rates will largely be determined by whether other investors stay in the market or shy away from Treasuries due to
expectations of future inflation and the declining value of the dollar. If so, the effect on rates will be more short-lived
and our revised refinance forecast prove too optimistic,” Brinkmann said.
The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry
that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the
association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand
homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and
fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety
of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies,
mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending
field. For additional information, visit MBA's Web site: www.mba.org.