Press Release

Title: MBA Reaffirms Originations Outlook for Second Half of 2013, Lowers Outlook for US Economy
Source:   MBA
Date: 7/25/2013

WASHINGTON, D.C. (July 25, 2013) — The Mortgage Bankers Association (MBA) today reaffirmed its outlook for mortgage originations in the second half of 2013 but lowered its forecast for US economic growth.  MBA expects originations in the second half of the year to total $606 billion, up from the $527 billion it had forecast at the beginning of the year but down considerably from the estimated $976 billion in originations during the first half of the year. 

The increase in the forecast is due almost entirely to carryover refinance loans originated during the second quarter that will close in the third quarter.  Purchase loan originations during the second half of the year are expected to total $312 billion versus the $299 billion originally forecast.

MBA expects economic growth to average 2.2 percent in the second half of the year versus the 2.4 percent originally forecast, with the declines mainly due to reduced fixed residential investment and reduced government expenditures.  MBA expects the unemployment rate to be at the 7.5 (3rd quarter) and 7.3 (4th quarter) percent levels forecast at the beginning of the year but cautions that inflation over the next several months will be sharply higher due to higher oil prices and housing rental costs.

MBA expects the purchase mortgage rate as reported in the Freddie Mac weekly survey to average 4.4 during the third quarter and 4.7 percent during the fourth quarter, about 20 to 30 basis points higher than was forecast at the beginning of the year.

“As we said at the beginning of the year, the big unknown for origination volumes was the timing of the market reaction to any statements from Federal Reserve officials regarding the phasing out of quantitative easing and the impact on refinance volumes.  While the magnitude of the rate increase was larger than we had forecast, the timing of the increase and the impact on refinance volumes was pretty much in line with what we had expected,” said Jay Brinkmann, MBA’s chief economist.

“Part of the reason for the increase relative to our prior forecast for refinance originations for the third quarter is that lenders reported to us a jump in pull-through rates as a result of the rate jump.  Loan applicants were doing whatever they could to protect their locked-in rates so the applications volume at the end of the second quarter translated into a higher number of fundings in July.

“Overall economic growth will be slower than originally forecast and we were not forecasting particularly robust growth to begin with.  Consumer spending will be somewhat higher, with the auto and energy-related manufacturing sectors continuing to improve. We saw a sharp pickup in residential housing investment in the second quarter, higher than what we were expecting.  As a result, we expect that housing investment will continue at current levels but will not be the driver of growth that we had expected in the second half of the year.

“We still face several unknowns that are impacting economic growth.  First, the situation in Europe is far from settled.  While there are signs of growth in some of the stronger economies, the austerity measures in several southern European nations are facing increasing political opposition with no clear alternatives.  Second, the political situation in the Middle East could flare up and already the situation in Egypt has driven up the world price of oil.  Third, developments in China could impact that nation’s ability to invest in US and other international securities.  Finally, the domestic uncertainty over tax rates and what sections of the national health care law will be enforced and when continue to hold back small business hiring and investment.

“Against this backdrop, we expect to see employment grow in the range of 175,000 jobs per month.  However, a greater share of these jobs has been part-time or lower wage.  The result is that we are unlikely to see these increases in jobs translate into the same household formation rates and demands for homes that we saw in the past for similar increases,” Brinkmann said 
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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: