NEW YORK ( TheStreet) -- Morgan Stanley analyst Betsy Grasek on Monday said "don't wait for lower credit-related expenses to get into" SunTrust ( STI). Grasek on Monday upgraded the Atlanta lender to an "Overweight" rating from "Equal Weight," while raising her price target for the shares by two dollars to $29, saying that the "Street is underestimating the strength of this refi cycle," and that the stock is "pricing in falling mortgage origination revs through 2012." For the first quarter, SunTrust reported $63 million in mortgage production income, compared to mortgage losses of $62 million in the fourth quarter, when the company increased its mortgage repurchase provision. The big drive for increased mortgage loan origination is the Home Affordable Refinance Program, or HARP, which was expanded by President Obama during the first quarter to allow qualified borrows with mortgage loans held by Fannie Mae ( FNMA) or Freddie Mac ( FMCC) to refinance their entire loans balances, no matter how much the value of the collateral property has declined. Graseck expects that "high gain-on-sale margins" on sales of new loans, primarily to Fannie Mae, "+ high refi demand + declining mortgage repurchase expenses will drive net mortgage origination revenues up on average 29% q/q throughout 2012." Banks are seeing higher gains on sales of newly originated mortgages because of lower rates, which have "investors searching for yield," and also because "HARP paper comes with no refi risk (these loans cannot be refinanced again under current rules), lowering prepay risk and supporting demand for the paper," according to the analyst. Morgan Stanley expects "another 3-12 quarters of Harp 2.0 activity at March 2012 close rates, a benefit to STI which has a top market share in 2 of the top 5 HARP refi states, Georgia and Florida." SunTrust estimates that it could still face additional mortgage loan repurchase expenses of up to $600 million. Graseck's estimate is "just north of this mid-way point at another $397mn" in mortgage purchase reserves through the end of 2012. Graseck also estimates that the bank's credit costs "will fall -19% y/y to $644mn in 2012, -25% y/y to $483mn in 2013 and -24% y/y to $369mn in 2014. This drives $0.27, $0.22 and $0.17 in EPS in 2012, 2013, and 2014 equating to 30%, 39% and 48% of EPS growth in each of those years."