Pipeline: MBA Now More Upbeat On Origination Volume

The Mortgage Bankers Association has become more optimistic in the last few months about loan origination volume this year and next.

At its annual convention in San Francisco last week, the association's chief economist, David Lereah, said he expected volume this year to reach $796 billion, about 4% more than his August prediction of $765 billion.

For 1997 he is forecasting $694 billion, a 6.6% improvement over his August forecast. The average rate on 30-year Treasury bonds should edge up to 7% or 7.25%, from the likely average of 6.8% this year, he says.

Looking a little further ahead, he said 1998 originations should rebound to about $750 billion.

Mr. Lereah said that consumer confidence remained very strong and that the briskness of home sales have also been surprisingly durable. He has increased his forecast for sales of new and existing homes this year by about 150,000, accounting for the bulk of the increase in the originations forecast.

The MBA forecast also said the mortgage companies' share of all loan originations is continuing to climb and should finish at about 57% this year, up from 56.1% last year. As recently as 1990, mortgage companies had a bit more than a third of the market.

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The MBA's board of governors opposed privatization of Fannie Mae and Freddie Mac in a resolution approved at the conclusion of the association's convention last week.

The resolution said privatization would:

*Raise the cost of a mortgage by 25 to 50 basis points.

*Reduce the funds available for affordable housing.

*Expose the regional housing markets to adverse economic cycles.

The board also urged Fannie, formally the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., to increase their commitment to underserved markets "and assume more than their traditional risk exposure," according to an announcement.

Another resolution urged Fannie and Freddie to make it easier for lenders to use both companies' underwriting systems as well as those of third parties.

The governors also said they favored a modification of the present rules on loan limits for Fannie and Freddie. While the limits should never be reduced, the board said, increases should be deferred after a decline in housing prices until the prices rise above their level before the decline.

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A report by Mortgage Information Corp., San Francisco, sees signs of deterioration in loan delinquency rates. In July, it said, the number of payments late by 30 days or more increased slightly from the June level - just 3 basis points.

But some internal data were more disturbing.

"Underlying the relative stability during the past three months is a steady increase in defaults of loans originated in 1994 and 1995," said Dan Feshback, president and chief executive of Mortgage Information.

These loans are defaulting faster than is typical, according to an announcement. They are types of loans that default at higher rates than average, and they have not yet reached the point in their seasoning where delinquencies typically peak.

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