TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1108750
62 | TH E M R EP O RT SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Freddie Mac Looks Ahead The GSE has revised its estimates on mortgage originations and home prices for 2019 and 2020. D eclining mortgage rates, which fell at the start of 2019 after peaking last fall, are likely to provide some welcome relief to the housing market, according to Freddie Mac's forecast. The forecast projected a slight deceleration in the overall eco- nomic growth predicting the U.S. GDP growth at 2.5 percent in 2019 and 1.8 percent in 2020. Despite uncertainties in other areas of the economy, the forecast said that the labor market would hold strong. It expected unemployment to drop slightly to 3.6 percent by the end of 2019, "before returning to a more sustainable long-term rate of 3.9 percent in 2020." The forecast also revised its projections for mortgage origina- tions as well as the refinance share of originations in 2019. "We expect single-family mortgage originations to increase 2.6 percent to $1.69 trillion in 2019 and remain around that level in 2020," said Sam Khater, Chief Economist, Freddie Mac. "With mortgage rates easing up since the end of 2018, we revised up our forecast of the refinance share of originations to 27 percent and 24 percent in 2019 and 2020, respectively." The forecast predicted the 30-year fixed-rate mortgage rate to remain unchanged from 2018 averaging 4.6 percent in 2019 before increasing to 4.9 percent in 2020. The low mortgage rates and increase in originations are also expected to drive home sales, Freddie Mac said in its forecast. It projected sales to "slowly regain momentum" and increase to 6.10 million by the end of 2019 and 6.12 million in 2020. The growth will be mostly driven by existing home sales, while new home sales are expected to remain at their current levels, Freddie Mac said. However, total housing starts are expected to remain below the long-run demand, increas- ing to 1.29 million units in 2019 and 1.36 million units in 2020, the forecast predicted. Freddie Mac said that this was due to a lack of labor and other factors that will keep the recovery in housing construction constrained. Home price growth is also expected to decelerate with prices expected to increase 4.1 percent in 2019 before decelerating further to 2.8 percent growth in 2020, the forecast said. Harping on HARP —GSE Impact A report by the Federal Housing Finance Agency looked at the numbers behind the refinancing programs at Fannie and Freddie. R ising mortgage rates in the previous months resulted in a decrease in the total refinances at the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac in December 2018, accord- ing to the Q 4 Refinance Report released by the Federal Housing Finance Agency (FHFA). The report found that the GSEs completed 245,620 refinanc- es in the fourth quarter compared with 253,135 in the prior quarter. Of these loans, 1,390 loans were refinanced through the Home Affordable Refinance Program (HARP) during the quarter. It also indicated that the refinances done through HARP which ended in December 2018 would gradually taper off in 2019. In fact, at the end of the fourth quarter, HARP refinances represented just 1 percent of the total refinance volume at the GSEs. Borrowers completed 1,390 refinances through HARP bring- ing the total refinances through this program to 3.4 million from its inception. Looking at the year-to-date impact of the program, the report found that borrowers with loan-to-value (LTV) ratios that were greater than 105 percent accounted for 16 percent of the volume of HARP loans and that 33 percent of HARP refinances for underwater borrowers were for 15- to 20-year mortgages that are known to build equity faster than the traditional 30-year fixed- rate mortgage. Breaking it down by state, the report indicated that more people opted for HARP in Florida and Illinois where it represented 2 percent of the total refinance volume compared with the national average of 1 percent. In December, 9 percent of HARP loans had an LTV that was greater than 125 percent. The report also found that borrowers who refinanced through HARP had a lower delinquency rate compared to borrowers eligible for HARP who did not refinance through the program. As of June 2018, "nine states and one terri- tory accounted for 70 percent of the nation's HARP-eligible loans with a refinance incentive." From April 2009 through December 2018, 2,918,957 loans re- financed through HARP were for primary residences, 110,887 were for second homes, and 464,551 were for investment properties, the report indicated. In December, 9 percent of HARP loans had an LTV that was greater than 125 percent. The report also found that borrowers who refinanced through HARP had a lower delinquency rate compared to borrowers eligible for HARP who did not refinance through the program.