Home Loan Wholesale

Slowly rising mortgage interest rates along with relatively sluggish home sales will have repercussions in the mortgage industry over the next few quarters according to the Mortgage Bankers Associations Mortgage Finance Forecast for the Fourth Quarter of 2009.  “The most important factor driving recent declines in real estate market activity and increases in home loan delinquencies and foreclosures has been the ongoing job losses and rising unemployment rates stemming from the most severe recession the country has experienced in a generation.

Current mortgage interest rates, home prices, and household incomes all impact affordability. Today, mortgage rates remain near record lows, and with the continued decline in home prices, for those with resources, it is a buyers’ market like we haven’t seen in years. Obviously, the problem is that there are not enough potential homebuyers who have the income and down-payment, and who feel confident both that the housing market will recover, and that their job situation is secure, to boost demand despite the improvements in affordability.”

MBA economists expect long term mortgage interest rates to raise slowly from the average of 4.9 % expected for the fourth quarter to 5.2% in the first quarter of 2010 and 5.7% in the fourth quarter.  Rates will climb to 6.0% during the second quarter of 2011.  One year adjustable rates are projected to be almost completely flat over the next year.  At 4.6% this quarter, they will trade between 4.7 and 4.8% throughout 2010 and rise to an average of 5.3% in 2011.  At the same time, sales of existing homes, estimated at nearly 5 million this year will continue at that pace through the first three quarters of 2010 before increasing in the fourth quarter for total of 5.55 million sales for that year.  Sales are expected to reach 6 million in 2011.  New home sales, projected to reach an estimated annualized rate of 442,000 in the fourth quarter and 391,000 for the year will move around in a narrow annualized range of 468,000 to 508,000 during the four quarters of 2010 and finish the year with around 483,000 sales. New home sales will total 609,000 in 2011.  All of the above outlined circumstances are expected to result in a slow year for home mortgage originators with home loan originations increasing but not strongly enough to make up for a plunge in home refinancing.  It is expected that purchase mortgages will total 718,000 for this year; 804,000 in 2010 and 896,000 in 2011.  FHA refinance activity is forecasted to be strong, even though HUD recently announced new FHA mortgage lending revisions.

During the fourth quarter it is expected that 238,000 households will seek refinance loans.  This will be the slowest quarter of the year, down substantially from the 426,000 transactions in the second quarter and 296,000 in the third.  The estimate for the entire year is 1,246,000 mortgage refinance loans.  However, next year with interest rates up and much of the demand for refinancing wrung out of the system the number of refinances is expected to plummet to little more than half the 2009 number; 2010 will be even worse.  Refinancing in the first quarter of 2010 will be 175,000 units compared to 287,000 during the first quarter of this year and the total in Q4 will be 140,000 compared to 238,000 this quarter.  MBA is projecting a total of 693,000 refinances in 2010 is estimated at 693,000 and in 2011 the total will be 591,000.