This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Mortgage Originations Seen Dropping 30% in 2014

NEW YORK (TheStreet) -- Mortgage origination volumes could fall as much as 30% in 2014, driven by a dropoff in refinance activity as mortgage interest rates rise, according to a report Tuesday by KBW analysts Bose George and Jade Rahmani.

The analysts forecast residential mortgage origination volume of $1.15 trillion in 2014, down from almost $1.8 trillion in 2013. That is slightly lower than the Mortgage Bankers Association's forecast of $1.2 trillion.

Purchase activity, however, is expected to be strong with a growth of more than 10%.

Increased competition for business should also pressure gain-on-sale margins, the spread that lenders earn from selling mortgages in the secondary market. KBW expects margins to decline by another 15% in 2014.

The outlook for the mortgage sector as a whole is mixed. "We generally expect declining earnings from the mortgage originators and title insurers, more stable earnings from the mortgage servicers and increasing earnings from the mortgage insurers," the analysts wrote.

KBW is positive on mortgage insurers including Radian (RDN - Get Report), MGIC Investment (MTG) and Essent Group (ESNT), which are poised to benefit from the continuing shift away from the Federal Housing Administration. It is also bullish on holders of mortgage servicing rights such as Home Loan Servicing Solutions (HLSS)and New Residential Investment Corp (NRZ).

It is neutral on mortgage servicers including Ocwen (OCN) and mortgage banks, with the exception of Penny Mac Mortgage Investment Trust (PMT), on which it has an outperform rating based on valuation.

KBW also continues to believe the common shares of Fannie Mae (FNMA) and Freddie Mac (FMCC) are worthless and that housing reform is unlikely until at least 2015.

-- Written by Shanthi Bharatwaj in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
FNMA $2.82 0.00%
RDN $17.15 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%
GOOG $524.05 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs