Fannie Mae Predicts $ 4.2 Trillion Mortgage Lending In 2021


Fannie Mae cut its interest rate forecast in its July economic survey and now predicts slightly more purchasing and refinancing deals this year than this was expected in June.

The improved forecast does not take into account the cancellation by the Federal Housing Finance Agency Unfavorable market commission of 50 basis points state-funded enterprises are mostly refinancing, as announced last Friday. When the FHFA announced the payment last August, the industry was concerned that higher costs could reduce refinancing activities, but volume numbers for the first half of this year indicate limited impact.

Fannie Mae expects production to be over $ 4.2 trillion this year, up from $ 4.1 trillion in June. His prognosis is more optimistic than that of Freddie Mac, whose third quarter forecast requires $ 3.9 trillion. Freddie Mac’s forecast was released on July 15, two days before FHFA decided to cancel the unfavorable market levy.

The Mortgage Bankers’ Association has yet to release its July forecast, but it is consistently lower than GSE’s – in June it forecast $ 3.4 trillion in 2021.

Lower fees could affect refinancing, MBA chief economist Mike Fratantoni said, noting that 50 basis points would mean a 10-12 basis point increase in interest rates. The board ended up being “just sand in the gears, which definitely didn’t help.”

But when it comes to the impact of this latest change, there are some other factors to consider.

“It will be difficult to understand exactly what effect this change has had on what is happening in the market right now, we are seeing this decline in terms of [10-year Treasury] “You know that an additional 10 or 12 basis points due to commission will certainly help, but I think it will be reflected in this market movement and in general can benefit the volume of refinancing,” Fratantoni said.

In recent weeks, these organizations have reported declines in both purchase and refinancing applications. The removal of the commission should help maintain the volume of refinancing until the end of the year.

Moreover, if the loan is not closed by the date of the termination of the payment of the commission, that is, August 1, there are signs that some lenders are going to extend the exemption at the rate to their borrowers, he said.

Fannie Mae estimates that originals hit an all-time high of $ 4.5 trillion in 2020. Freddie Mac has an estimated total of $ 4.1 trillion and an MBA at $ 3.8 trillion.

“We expect the growth in housing demand that we have seen over the past year will subside as the impact of unique recent factors weakened, including adjustments for teleworking conditions due to the pandemic, stimulating inspections that drive household savings, and record low mortgage rates, “Mark Palim, deputy chief economist at Fannie Mae, said in a press release.

“Nonetheless, demographic trends remain favorable for a strong housing market over the next few years and, coupled with a chronic shortage of homes built over the past decade, upward price pressures are likely to remain in the forecast horizon – just not at this pace. saw this spring, ”he added.

The interest rate forecast was revised due to the downward trend in the yield on 10-year Treasury bonds in recent weeks. After early June at 1.62%, it fell 17 basis points at the end of the month. The 10-year yield closed on July 16 at 1.30%. As of 12:30 am ET on July 19, it fell another 11 basis points to 1.19%.

Fannie Mae now expects 30-year fixed rate mortgages to remain at 3% in the third quarter (unchanged from the second quarter) and then rise to 3.1% at the end of 2021 and 3.3% next year. In the June forecast, the FRM for 30 years was 3.2% by December and 3.4% a year later.

By comparison, Freddie Mac’s latest forecast foresees the 30-year FRM to hit 3.4% in the fourth quarter and 3.8% in 2022.

Housing price increases in the future will be modest as supply-side problems disappear as home developers bring more products to market as supply chain and labor problems resolve on their own. “However, we expect the rise in house prices to become one of the most persistent drivers of inflation in the future as other, more temporary factors diminish,” Palim said.

Fannie Mae also raised its forecast for 2022 to $ 3.23 trillion from $ 3.05 trillion in June.

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