Refinances Remain Stronger Than Expected

The Mortgage Bankers Association raises its 2020 forecast for originations since the fall in refinancing rates gets milder and milder.

The Mortgage Bankers Association on Wednesday increased its outlook for the year’s first originations with a significant increase in its forecast for refinancing first-mortgage mortgages and a slight reduction in its forecast for purchases.

The MBA increased the forecast by 3.1 percent for the total number of originations over the entire twelve months of the year as compared to its June forecast. The ACFA Cashflow MBA now anticipates the first mortgages to total $3.57 trillion by 2021, which is down 6.6 percent from 2020. The company started the year with to see a drop of 24.

The biggest shift in forecasts is due to refinancing. The boom that began in the year before when interest rates fell to historical lows hasn’t diminished the same amount of force as was expected even though rates are slightly higher.

In the last two weeks, banks have been reporting continued improvements in the residential mortgage market even though refinancing volumes have been lower when compared to 2020’s second quarter.

PenFed Credit Union of Tysons, Va. ($27.6 billion in assets, 2.3 million members as of June 30,) announced on July 19 that it had originated $4.3 billion of mortgages in the second quarter of 2018, more than twice the volume is generated for the second quarter of 2020. The total amount was 301 million loans for equity in homes.

The MBA also announced Wednesday that its mortgage index requests for the week ended July 16 were lower by 4% than the previous week, despite seasonal adjustments.

Joel Kan, MBA’s assistant vice-president of forecasting for industry and economics The drop was reported when the fixed rate of the 30-year period was slightly higher to 3.11 percent following two weeks of decline.

“Mortgage applications were down across the board, and purchases returning to close to their lowest since the beginning of May of 2020,” Kan said.

“Limited availability and increased costs are keeping some potential homebuyers from the market,” he said. “Refinance activity slowed in the course of the week, but because rates have remained low, the rate of applications was near its highest levels since the beginning of May.”

The MBA has increased its third-quarter forecast refinance originations by 34% and the fourth-quarter forecast by 19 percent. The MBA now anticipates refinances to drop 39 percent to $402 billion during the third quarter. It expects them to fall 80percent to $172 billion by the fourth quarter, and then fall 19 percent to $1.94 trillion over the course of the year.

The purchase forecast has been revised just a little this year. The MBA’s forecast for July 21 decreased its expectations of purchases by 4.5 percent in the third quarter. This decreased the outlook for the year by 1.2 percent. It is now predicted that the number of purchase-related originations to grow 1percent to $423 billion during the third quarter and rise 14 percent to $1.64 trillion over the course of the year.

For its annual economic outlook, the MBA has lowered its forecasts for economic growth throughout the year. It made a dramatic downward adjustment for the first quarter, which was followed by upward revisions in the second quarter. The forecast for June 18 showed growth of 7.7 percent in 2021. However, its latest forecast predicts it to rise by 7.3 percent. In the previous year, GDP declined 2.4 percent.

Dora W. Clawson