MBA Raises 2011 Origination Forecast, Trims 2012 Outlook

The Mortgage Bankers Association raised its 2011 forecast of residential originations on Friday, citing historically low mortgage rates that have ignited refinance activity.

But the higher projections do not indicate a recovery in the housing market. The MBA's new projection of $1.1 trillion this year is still 30% lower than the total residential originations in 2010.

The weak economy and events surrounding the U.S. debt crisis also caused MBA chief economist Jay Brinkmann to reduce the outlook for 2012 to just $931 billion in originations, which would be the lowest level of mortgage lending volume since 1997.

Lenders rely on the MBA's projections to determine staffing levels and to plan their own budgets for the year ahead.

"Nothing in the housing market data suggests any significant change from our previous expectation of a frustratingly slow period with lackluster sales volumes," Brinkmann said in a press release. "Purchase application volumes remain stuck at low levels."

He said the historic lows of mortgage rates are the only silver lining to the pessimistic outlook for the economy, the job market, homes sales and home prices. Refinance volume is still being choked by tight credit standards, a weak job market and the nearly one-quarter of all borrowers who are underwater on their mortgages, meaning they owe more than their property is worth, he said.

Brinkmann is forecasting that purchase originations will total $412 billion this year, down from $472 billion in 2010, but says they should rise next year to $531 billion. Refinancings are projected to increase to $697 billion this year and $400 billion in 2012.

In January, the MBA reduced its overall forecast for mortgage originations, largely because of the impact of loan-repurchase requests that lenders continue to receive from Fannie Mae and, to a lesser extent, Freddie Mac.