The Mortgage Bankers Association (MBA) is projecting that mortgage originations in 2012 will be $200 billion higher than was originally anticipated.  Almost all of the increase will be coming from a boom in refinancing, but none of the additional originations are pegged to the Home Affordable Refinance Program (HARP 2.0.) 

MBA said it now expects that the industry will do $1.28 trillion in business in 2012, up from $1.26 trillion in 2011.  The new number is an upward revision of $188 billion from the number MBA put out in April, driven by an increase in the pace of refinance applications and originations.   Refinancing is now expected to generate $870 billion during the year, virtually the same amount as in 2011.

At the same time, MBA revised its estimate of purchase loan origination downward by $6 billion to reflect lower than expected home prices and weaker than expected home sales.  This puts the expected volume of purchase originations at $409 billion rather than $415 billion.

Mike Fratantoni, MBA's Vice President of Research said "Scenarios we have consistently highlighted that could drive rates down and rifis up have materialized, primarily due to market turmoil in Europe.  Deterioration of the debt situation in Spain and Greece and a new regime in France that is a weaker proponent of European austerity, along with slower economic growth globally, have driven the US Ten Year Treasury yield down.  Thus, we are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result."

Fratantoni said the revised estimate is largely independent of the HARP 2.0 initiative.  "We factored HARP lending of roughly $100 billion in both 2012 and 2013 into our April forecast, and the HARP share of refinance activity has remained relatively constant over recent months.  However, mortgages rates below four percent and regular media coverage showcasing 'record low mortgage rates' provide sufficient incentive and impetus for borrowers to examine their current rate."

He said that MBA has also revised estimates for the first and second quarters of 2012 based on additional information from GSE securitization data and a refinement in pull-through assumptions from the associations Weekly Applications Survey.