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NEW YORK – A key industry group on Monday slashed its estimate for mortgage volume by 27 percent because of higher interest rates and the slow start to the government's refinance program.
The Mortgage Bankers Association said it expects lenders to make $2.03 trillion in mortgages this year. That's $750 billion less than its forecast just three months ago and a signal that the government's efforts so far to repair the housing market have fallen short.
In March, the Obama administration said its Home Affordable Refinance Program could help up to 1.5 million to 2 million borrowers. But so far, only 13,000 loans have been refinanced through the program.
"It is difficult to craft a scenario under which origination volumes would come anywhere close to reaching the numbers originally envisioned for the program," said MBA Chief Economist Jay Brinkmann.
Brinkmann now only expects refinance loans to total $1.3 billion, down 34 percent from his March forecast.
Back then he was also more optimistic because interest rates tumbled to near record lows after the Federal Reserve announced it would buy Treasury bonds and mortgage-backed securities to help lower rates. While rates remained below 5 percent through most of April, they jumped in May, choking off the refinance surge shortly after it started.
The Mortgage Bankers Association also lowered its estimate for mortgages to purchase homes by 10 percent to $737 billion. The group said lower home prices mean smaller loan amounts and more all-cash deals.
