Mortgage market research firm iEmergent projects that the $787 billion stimulus bill and the Obama administration’s new foreclosure prevention initiative could boost mortgage loan refinancings by 55 percent in 2009.
The Des Moines, Iowa-based forecasting firm is also forecasting a slight increase in purchase mortgage originations, compared to the company’s previous forecast for 2009-13.
The iEmergent forecast now projects 4.4 million purchase loans totalling $735 billion in 2009, 5.1 million refinancings totalling $916 billion, or 9.54 million mortgage originations in all amounting to $1.65 trillion.
The projected 55 percent growth in refinance volume is based on expectations that the Obama administration’s plan to help lenders modify or refinance up to 9 million loans will keep pressure on mortgage rates, unfreeze credit, and slow the rate of home-price declines.
The plan includes a $75 billion homeowner stability initiative the administration hopes will spur 3 million to 4 million loan modifications and prop up home prices by an average of $6,000. Fannie Mae and Freddie Mac will spearhead a new refinancing program that aims to put 4 million to 5 homeowners into more affordable loans.
The Mortgage Bankers Association has questioned whether the ambitious plan will work as advertised unless its eligibility requirements are broadened and some potential obstacles for loan servicers are removed (see story).
The $787 billion stimulus bill, HR 1, the American Recovery and Reinvestment Act of 2009, is aimed at saving or creating 3 million to 4 million jobs through government spending and tax cuts.
The bill increased the $7,500 limit on an existing tax credit for first-time homebuyers to $8,000, extended its sunset to Dec. 1, and eliminated a repayment requirement (Anyone who hasn’t owned a principal residence in the last three years is considered a first-time buyer).
It also restored the $729,750 upper loan limits for Fannie Mae and Freddie Mac in high-cost housing markets that was in place during much of 2008, and gives Secretary of Housing Shaun Donovan authority to make similar increases for FHA loan guarantee programs.
Dennis Hedlund, president of iEmergent, warned that the impact of the stimulus bill and foreclosure prevention initiative will not be instantaneous. Nor is the current wave of refinancings a "magic bullet" for lenders, he said.
"We expect refinance volumes to be very volatile throughout the year, causing many response and service problems," Hedlund said in a statement.
Hedlund said iEmergent’s projected increase in refinances could be offset by unemployment, uncertainty about the broader U.S. economy, and the eventual halt of interest-rate declines as the federal deficit forces mortgage rates higher by the end of the year.
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