Production volumes will drop from an estimated $1.2 trillion this year to $900 billion next year, according to newly released projections from the Mortgage Bankers Association (MBA). If the association's predictions play out, origination volumes next year would be at their lowest level since 2007.
The drop will be driven by a significant decline in refinance originations, while purchase originations will increase only slightly, says the MBA, adding that 2012 will be a year of anemic economic growth.
Although the MBA predicts that consumer and business spending next year will enable the U.S. to avert another recession, MBA Chief Economist Jay Brinkmann says there is "significant uncertainty around this forecast."
‘Europe is in or soon will be in recession," he says. "There is the risk that the European situation could harm the U.S. financial system and could lead to further damage to U.S. consumer and business confidence. If that were to happen, we think that the U.S. could fall into a short and relatively mild recession.
"We do not anticipate any actions out of Washington that would have a material impact on the economic outlook," Brinkmann adds.
Purchase originations are expected to fall to $400 billion this year from approximately $472 billion last year, the MBA reports. Brinkmann says purchase volumes will remain low next year.
The first half of 2012, however, may benefit from a spillover of refinance applicants from the end of this year, he says. Potential changes to the federal Home Affordable Refinance Program could also boost volumes.
No matter how you cut it, 2012 will be another "tough year," Brinkmann says.
"Continued slow economic growth will mean that unemployment will remain elevated through 2012, which could slow the improvement in delinquency and foreclosure volumes, meaning that in addition to lower production volumes for the industry, mortgage servicers will also continue to be under pressure," he explains.