Freddie Mac has slashed its origination forecast for the third quarter by $265 billion mainly due to a drop off in refinancings.

Freddie's latest housing market forecast shows that loan production in the third quarter coming in at $625 billion, down from its $890 billion estimate a month ago. All of the reduction in loan production comes from conventional loans that Freddie and Fannie Mae purchase.

The new forecast shows a slight pickup in originations of Federal Housing Administration and Department of Veterans Affairs-guaranteed loans. The government sponsored enterprise now is forecasting that lenders will originate $2.3 trillion in single-family loans in 2009, down $400 billion from its previous forecast.

The Mortgage Bankers Association recently cut its 2009 origination forecast by $700 billion to $2.03 trillion.

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