The Mortgage Bankers Association reports that mortgage originations could plummet in 2014 due to a drop in refinancing by homeowners. Purchase loans are projected to climb as the housing recovery continues, but a projected 57% drop in refinance mortgages could take the mortgage originations down by as much as 32%. Refinancing rates are still favorable for many homeowners, particularly under the Home Affordable Refinance Program, but eligible homeowners have shown a lack of interest in participating that is expected to increase as interest rates increase. For more on this continue reading the following article from TheStreet.
Mortgage originations could fall 32% in 2014 as refinancing volumes continue to plunge, the Mortgage Bankers Association said on Tuesday.
Total originations are expected to drop to $1.3 trillion from an estimated $1.7 trillion in 2013. While loans to finance the purchase of homes are expected to climb 9% to $723 billion in 2014 on the back of higher home sales and home prices, refinances could drop as much as 57% to $463 billion from $1.08 trillion.
Although the government's Home Affordable Refinance Program will remain open until the end of 2015, the scope for further refinances under the program is limited, according to Jay Brinkman, chief economist at MBA.
"While on paper the number of HARP-eligible borrowers appears large, the reality is these borrowers have been unresponsive to numerous attempts to encourage them to participate in the program and are less likely to do so now that rates have gone up," he said.
For 2015, originations are forecast to drop slightly to $1.2 trillion, with the mix further shifting towards purchase loans.
The MBA predicts the 30-year mortgage rate would increase above 5% in 2014 and would rise to 5.3% in 2015.
This article was republished with permission from TheStreet.