Freddie foresees 20% drop in home loans next year.

Whipping their economic models into action, analysts say it's bye-bye to the refinance boom and hello to lower production levels in 1994.

The drop in refi business, which propelled the home-loan mortgage industry to record production levels in 1993, will cut hard into overall production volumes, economists say.

According to Robert Van Order, chief economist at the Federal Home Loan Mortgage Corp., overall residential mortgage production will fall more than 20% to $830 billion in 1994.

Nevertheless, originations of $830 billion still outshine most years' results. "It would still be a record, except for the last two years," he said.

Ease in Runoffs

Why will production remain so high?

Mark Obrinsky, chief economist at the Federal National Mortgage Association, expects $4.8 million in tow housing sales next year, beating the all-time high set in 1979. He said purchase volume would climb to $588 billion next year, from $500 billion in 1993.

David Lereah, chief economist at the Mortgage Bankers Association, said lenders would rely on purchase originations for next year's profits.

Certainly servicers should sigh in relief With refis ebbing, runoff from portfolios should also ease, signaling better servicing profits, economists say.

Thinning Ranks

The 20% drop in production estimated by most economists will have a major effect on mortgage brokers.

"It's a very easy industry to enter, but it's also easy to exit," said Mr. Van Order at Freddie Mac. "I think there is going to be

Mr. Lereah said the industry would face fewer cutbacks of permanent staff during the production decline because large numbers of temporary personnel had been hired.

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