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FBR Expects $1.6B in Mortgage Volume for 2013

Now that most of the nation's biggest mortgage players have put out their earnings numbers for the third quarter, investment bank ""FBR Capital Markets"":http://www.fbr.com/ says its mortgage banking forecasts--$1.6 billion for 2013 originations followed by $1.4 billion in 2014--are still well within reach.

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Examining the reports, FBR says the third quarter was a case of ""more of the same, with anemic loan growth ... weak mortgage banking, and lack of top-line expansion as the more notable items.""

While the beginning of the quarter promised greater net interest income for lenders as interest rates trended up, a ""dysfunctional"" government and lack of action on the [COLUMN_BREAK]

Federal Reserve's part have caused interest rates to move off their recent highs. This, combined with lower overall volume, resulted in disappointing mortgage numbers from most firms.

At the same time, though, purchase volumes were higher, supporting FBR's thesis ""that a purchase market recovery is underway despite today's 'somewhat' higher rates.""

""Many banks reported higher purchase originations as both a percentage of overall activity and on an absolute basis,"" said analysts Paul Miller, Scott Valentin, and Bob Ramsey in the firm's analysis. ""Further, although higher rates hurt affordability, it is important to remember that today's rates remain low compared to historical levels.""

Given Q3's results, FBR estimates originations were about $400-420 billion in Q3, in line with its revised predictions earlier in the month and putting the year on track for about $1.6 trillion. If the purchase market keeps moving toward normalized levels, the bank expects slightly lower overall numbers next year as refinancing volumes settle.

However, with many mortgage banks working to cut expenses, FBR says ""MSR [mortgage servicing rights] write-ups and eventual expense reductions are likely offsets in order to keep a sustainable level of mortgage banking profitability that will buy originators time for purchase volumes to meaningfully catch up to the decline in refi activity.""

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