The boost from lower interest rates that’s driving origination volume will continue into the first six months of 2020. But according to the Mortgage Bankers Association, mortgage lenders should expect a huge drop-off after that.
The MBA’s forecast is the latest to predict this year’s volume will top $2 trillion. At $2.06 trillion, the MBA is forecasting this will be the strongest origination year since 2007, when production was $2.31 trillion. Economists at Fannie Mae and Freddie Mac also are projecting there will be at least $2 billion in originations during 2019.
But for 2020, the MBA is projecting volume of $1.89 trillion. Rates will likely remain under 4%, “which is still very supportive of a purchase market,” Fratantoni said. “Given how much refi volume lenders are seeing right now, they’re not going to get all done this year. It’s going to spill over into at least the first quarter, if not the first half of 2020,” he added.
But volume during the last six months of 2020 may make lenders feel like it is 2018 again, he quipped. Refi volume will drop, lenders will chase a smaller number of loans, and margins will get thinner.
Volume will continue to drop in 2021 and rebound slightly the following year, according to the MBA. The 2021 forecast is for $1.74 trillion (75% purchase) and 2022 is for $1.8 trillion (76% purchase).
However, Fratantoni noted, “uncertainty is very high, volatility is high,” when it comes to both the global and U.S. economies. So the MBA’s forecast is subject to change.
The forecast for growth domestic product growth for 2020 has been further reduced to 0.9%, as the U.S. economy is slowing “fairly abruptly,” Fratantoni said. Unemployment could rise to 4.1% as a result, which while not terribly high, is likely to lead to an increase in mortgage loan delinquencies given the tie between jobs and the borrower’s ability to make payments.