U.S. residential mortgage lending volume will struggle to reach the mid-$800 billion range in 2012, according to market research, as the recent boom in refinancings dries up at Fannie Mae and Freddie Mac. Furthermore, the report from iEmergent, paints a picture of a housing market floating in its own Twilight Zone — a reality where "the distribution and location of local lending opportunities will continue to re-shape and reset the long-term home financing prospects and projections for most U.S. communities." This year, roughly 838,400 Fannie and Freddie loans received a refinancing, according to data released by the Federal Housing Finance Agency. In 2012, this market share is likely to dry up, according to the forecasting and advisory firm (click chart below). Even more unfortunate, the other side of the mortgage origination — new home sales, is unable to fill the gap in business. "Home affordability indicators have never been better, yet total buyer demand shows no signs of life," the iEmergent report states. The reason for this forecast, according to the analysis, is that housing is in its own dimension of economic recession. The nation's economy may be recovering, but in terms of housing, lack of jobs, lower income and continued high levels of negative equity, America's property ladder is missing more than a few rungs. "The middle-class buyers on whom future homebuying demand depends will continue to struggle to re-build their cash reserves, pay down their debts, and grope their way out of the shadows," the report states. "Their recovery will be very slow." But there is a silver lining to the forecast that Fannie Mae, Freddie Mac will see higher purchases, yet very low refinance volume in 2012 (click chart below). In the total originations market, outside of the government sponsored enterprises, iEmergent projections indicate purchase home loan volume might actually rise 0.3%. However, through 2012, mortgage originations as a whole will see less business. Write to Jacob Gaffney. Follow him on Twitter @jacobgaffney.