Freddie Mac has raised its estimate for 2012 originations to $1.45 trillion in its latest economic and housing market outlook, citing lower expected 30-year rates.
With rates now expected by Freddie’s economics team to end 2012 with an average of 3.9% for the year, down from the previous month’s estimate of 4%, refinancing could boost volumes further than originally expected, a spokesman said. Freddie Mac previously had forecast that 2012 would end with a total of just $1.3 trillion in originations.
Fellow government-sponsored enterprise Fannie Mae earlier this week also raised its 2012 originations estimate, but more conservatively, boosting it to $1.34 trillion from $1.31 trillion.
In 2011 mortgage bankers originated $1.452 trillion in home mortgages, according to figures compiled by National Mortgage News and the Quarterly Data Report. (Freddie says fundings totaled $1.4 trillion in 2011, which means it is now anticipating a slight increase in originations this year as opposed to a drop. Fannie says fundings totaled $1.36 trillion a year ago and thus continues to expect a slight decline this year.)
Fannie believes refis will account for 64% of the origination market this year. This is two percentage points lower than last year, but Fannie Mae chief economist Doug Duncan said in an interview late Tuesday with this publication that the government-sponsored enterprise has become more optimistic about refinancing compared to its expectations earlier this year.
Freddie Mac thinks refinances will be 68% of closed originations, a percentage point higher than last year.
When asked about Fannie's forecast for lower refinancing year-to-year in 2012, Duncan told this publication that a certain amount of burnout is anticipated due to the prolonged downward trend in rates. Also government programs are likely to only give refis a temporary boost, he said.