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MBA Cuts 2017 Q1 Origination Forecast

Following the Federal Reserve’s decision to raise rates a quarter point, the Mortgage Bankers Association (MBA) lowered its origination forecast for the first quarter of 2017.

“We have adjusted the path of interest rates upwards a bit more quickly in 2017 reflecting the fact that the recent rate increase following the election has been sustained,” the MBA reported.

Forecast Commentary Dec 2016The total volume of one- to four-family mortgage loan originations is expected to reach $352 billion in the first quarter, according to the MBA’s December Mortgage Finance Forecast. This is down from the $365 billion in first-quarter volume the MBA had predicted in November. The lower forecast remains higher than the $350 billion in origination volume recorded in the first quarter of 2016.

The biggest drop off will be experienced in the refinance channel as rates have moved higher, forcing a more rapid decrease in an already slow refinance market. The MBA reported that refinance volume is now expected to reach $140 billion in the first quarter, down from the November forecast of $145 billion. The MBA also projected that purchase origination volume will total $212 billion, down from its prediction of $220 billion last month.

“We still forecast $1.10 trillion in purchase mortgage originations during 2017, an 11 percent increase from 2016,” the MBA reported. “Strong household formation coupled with further job growth, rising wages, and continuing home price appreciation will drive growth in purchase originations in the coming years.”


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The MBAA origination forecast for 2017 may prove too optimistic. Although home purchase fundamentals seem to be improving, available home inventories remain thin, so it may be difficult for home sales to increase very much. Likely higher mortgage rates and rising prices also represent a deterrent to faster sales growth, and already slow refinance activity could diminish further for much of the year. One wildcard is how much pent-up activity will be expressed when the replacement for HARP comes late in 2017; If rates are still favorable, there may be some flare in refinance activity as a result of the new program.

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