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Fannie Mae lowers mortgage volume forecast for 2011 again

Mortgage finance giant Fannie Mae expects the market for new home mortgages in 2011 to total $1.05 trillion. A month ago it had forecast $1.2 trillion.

January 15, 2011|By E. Scott Reckard, Los Angeles Times

Despite slow improvement in the economy, the home lending market is expected to remain sluggish through 2012, according to a revised outlook by mortgage finance giant Freddie Mac.

Freddie Mac outlook: The headline for an article in the Jan. 15 Business section about Freddie Mac's revised outlook for the home lending market erroneously referred to the mortgage finance giant as Fannie Mae.

In its latest downward revision, the McLean, Va., loan buyer this week estimated that mortgage originations would total $1.05 trillion in 2011. Just last month, it had projected home lending this year would total $1.2 trillion. A year ago, it was projecting $1.8 trillion for 2011.

Freddie Mac economists also greatly marked down their expectations for 2012. That figure had been holding steady at $1.6 trillion since July, but Freddie revised it to $1.15 trillion in the latest forecast.

The revisions bring Freddie Mac more in line with an October forecast from the Mortgage Bankers Assn., which predicted that 2011 originations would fall below $1 trillion because of a drop in refinancings and a weak economic expansion.

Analysts predict the housing market will take longer than the overall economy to recover, because so many homeowners owe more than their houses are worth and the grim unemployment picture will keep foreclosures high and demand low.

Part of the expected decline in home lending is attributable to gradually rising interest rates choking off a mini-boom in refinancings that was the dominant story in the mortgage industry last year.

Government-controlled Freddie Mac, which buys and guarantees mortgages from lenders across the nation, said refinance transactions made up 69% of the total $1.55 trillion in home mortgage originations last year.

This year, refinancings are expected to constitute just 41% of mortgages and 35% in 2012, Freddie Mac said. The December estimate had been for 47% refinancings in 2011 and 40% in 2012.

Freddie's sister company, Fannie Mae, doesn't make public pronouncements on expected volume, a spokeswoman said.

Freddie Mac officials couldn't be reached for comment on the revisions.

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