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Mortgage bankers cut U.S. loan origination forecast

June 24th, 2009 12:01 AM by Lehel Szucs

Mortgage bankers cut U.S. loan origination forecast

Bloomberg News
1:34 PM PDT, June 22, 2009

Mortgage originations in the U.S. may total $2.03 trillion this year, 27 percent less than earlier forecast, as rising interest rates reduce home refinancings, the Mortgage Bankers Association said.

Today's forecast cuts $700 billion from the Washington- based group's March estimate, a change MBA Chief Economist Jay Brinkmann said came because the Federal Reserve's pledge to buy as much as $300 billion in U.S. Treasuries hasn't been enough to keep Treasury yields and mortgage rates down.

While home sales have been higher than expected, home prices have fallen more than expected, leading to smaller loans, Brinkmann said. Rising mortgage rates began to choke off the refinance wave in May, much earlier than anticipated.

MBA now projects existing home sales for 2009 of 4.8 million units, a drop of 1.2 percent from 2008. New home sales will be 352,000 units, a decline of 27 percent from 2008, MBA said.

Federal Reserve Chairman Ben S. Bernanke is trying to lower consumer borrowing costs with a $1.25 trillion program to purchase mortgage-backed securities in addition to buying Treasuries.

After initially succeeding in cutting 30-year home loan rates to a record 4.78 percent in April, the program stalled in May. Mortgage rates rose in five of the last seven weeks, according to McLean, Virginia-based mortgage buyer Freddie Mac.

Mortgage rates and Treasury yields are climbing on investor concern that a greater supply of government debt being sold to fund federal spending will fuel inflation.

The average 30-year mortgage rate was 5.38 percent in the week ended June 18, down from 5.59 percent a week earlier, which was the highest since November, according to Freddie Mac.

Rising mortgage defaults and slumping prices have prompted government programs to stem foreclosures and spur demand for homes.

Federal Housing Finance Agency Director James Lockhart said June 18 that mortgage buyers Fannie Mae and Freddie Mac may soon get permission to purchase mortgages for loan amounts of more than a home is worth.

U.S. mortgage applications fell in the week ended June 12 to the lowest since November. The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan dropped 16 percent to 514.4. Purchase applications fell 3.5 percent while requests to refinance fell 23 percent.
Posted in:General
Posted by Lehel Szucs on June 24th, 2009 12:01 AM

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