Originations Predicted to Fall 20 Percent Next Year: Report

A forecast released Tuesday by industry research and forecasting think-tank iEmergent predicted that total national originations could fall more than 20 percent from 2008’s likely-already-dismal totals, as tighter mortgage guidelines and a real estate market in flux continue to pinch borrowers. iEmergent’s forecast suggests total originations could fall as low as $1.53 trillion next year; by comparison, the group has predicted that 2008’s total will range from $1.94 to $2.1 trillion, depending primarily on refi volume.

The company said that total originations in 2009 will likely range from a low of $1.53 trillion to a ceiling of $1.61 trillion; refinancing volume is estimated to range from $695.6 billion to $768.9 billion next year. To put those refinance estimates into context, it’s worth noting that iEmergent has forecast refis between $997 billion and $1.16 trillion in 2008.

In other words: don’t expect a mortgage market rebound any time soon.

But the drop in originations isn’t likely just to be tied to slowing repayments. iEmergent’s 2009 forecast calls for purchase origination volume of 4.95 million loans totaling $837.9 billion; that’s a four percent drop from expected 2008 volume, the company said.

The last time total originations fell below the $2 trillion mark was in 2000, well before a myriad of factors led to a run-up in much of the nation’s housing prices; total originations at the group’s low-end estimate would represent one of the worst years on record for mortgage bankers.

“The depth and duration of the recovery will be different for individual local markets and neighborhoods based on each market’s unique lending history, local economics, housing demand, housing inventories, price dynamics and net household growth pressures,” said Dennis Hedlund, president of iEmergent, stressing that while the national numbers are likely to suffer well into next year, local areas of opportunity yet remain.

“As lenders evaluate their markets, reduce staff, cut costs, alter their lending models and pursue new mortgage strategies, knowing as much as possible about the changing size, density and long-term growth rates of the lending opportunities in local mortgage markets will be crucial to their performance and growth plans,” he said. All of which points to growth for local lenders, perhaps, moreso than their national counterparts.

And for Wall Street’s finest, the iEmergent forecast suggests that orienting strategy towards slowing prepayments may be a very good idea.

The forecast from iEmergent comes as officials at the Mortgage Bankers Association say they also expect loan originations to fall off next year, to just $1.66 trillion. A report at National Mortgage News last week cited the group’s new chief economist Jay Brinkmann in providing the numbers.

For more information, visit http://www.iemergent.com.