Is MBA’s Shocking Originations Prediction on Target?


Industry insiders agree with the direction of the Mortgage Bankers Associations grim prediction that originations will drop by 32% next year to $1.2 trillion. They are less certain about the exact amount.

Chris Whalen, managing director and executive vice president of Carrington Holding Co., Aliso Viejo, Calif.:

The MBA got it right, and you got to remember theyve been saying this all year, even before the interest rates moved.

The change is structural more than interest rate based.

If youre a bank and youre not going anywhere near a 700 FICO, youll run out of customers. And then, for every five to seven dollars a bank loses on refis it will get one dollar worth of purchase loans. So I think the numbers are right.

By the end of the year when we have all the data in, I think the industry will start screaming and the tone of the conversation in Washington is going to change very dramatically.

Between the people at Dodd-Frank, Basel III and the mortgage settlement together, the three headless horsemen of the apocalypse, theyre really destroying the mortgage banking industry.

Tommy Duncan, chief executive officer of Quality Mortgage Services, Brentwood, Tenn.:

There will be a decline. I don’t know if it will be 32%, less or more than that. I believe in 2014 the decline in originations will be less than in previous years, given the absence of a (strong) refinance market.

I am hopeful, however, that we will see a robust first-time homebuyer market return. This will include military veterans who will be graduating soon after using their VA education benefits and moving into the work force.

I believe the MBA has the best awareness of the adverse impact of heavy regulations on the finance markets and their predictions are probably close.

Matthew Clarke, chief operating officer and chief financial officer, Churchill Mortgage, Brentwood, Tenn.:

I believe that 2014 volumes will dip. Rising interest rates discourage refinancing activity and also increase monthly payments for buyers, which hurts purchases.

In addition, the economys progress continues to be hindered by unemployment and underemployment simply because people are not spending money on goods as they would in a more prosperous environment. The economy will recover, but without any major job creation initiatives on the horizon, it will be at a slower pace.

Though I partially agree with the MBAs forecastjust this year, we have made numerous hires to support our growth and are optimistic about 2014.

Brian Moloney, a sales manager with Mortgage Network Inc. of Danvers, Mass.:

I dont know the exact amount of originations in 2013, but I assume refinances were around 50% and had dropped significantly in the last half of 2013. Less refinancing will cause 2014 total originations to fall.

However, I believe that 2014 purchase volume should be similar to 2013 volumes.

The economy is still crawling along slowly but surely, unemployment should drop, household formations are still important, and it seems that the Fed will still keep rates similar to the last half of 2013.

Most industry observers know that when inflation factors kick in, home prices and rates will rise. Consumers recognize this opportunity and will still keep the purchase market going.

Evan Nemeroff contributed to this report

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