The year 2013 will bring strong gain-on-sale margins for the mortgage origination industry, but overall origination volume is likely to hit $1.54 trillion, according to a new report from Keefe, Bruyette & Woods.

That is down slightly from an estimated $1.7 trillion this year, KBW analysts said in a new report.

“Our estimate is roughly in line with other industry sources,” analysts with KBW explained. “The Mortgage Bankers Association currently forecasts 2013 volume of $1.3 trillion, and Fannie Mae has a $1.5 trillion estimate. Our estimate includes about $150 billion attributable to HARP 2.0. We expect HARP to continue boosting gain-on-sale margins.”

KBW expects mortgage rates to remain low and more enhancements to the government’s Home Affordable Refinance Program.

The research firm estimates credit trends will improve but Federal Housing Administration delinquency rates could increase as the portfolio matures.

Expenses related to representation and warranty risks also are expected to drive up mortgage credit costs next year, KBW said.

However, the group added, “We do not expect meaningful political change in the mortgage market in 2013, as GSE reform remains tied up in Congress. However, we expect changes to continue to take place through the Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac.”

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