2020 is expected to go down as one of the best years for the mortgage industry since 2003. This week the Mortgage Bankers Association released its forecast for the remainder of 2020 and into 2021. The group predicts mortgage originations will increase to $3.18 trillion in 2020. That's the most since we hit $3.81 trillion in 2003. 

Looking ahead to 2021, the MBA believes that purchases will take the top spot over refinances, despite rates remaining extremely low. The MBA's experts say “purchases originations are expected to grow by 8.5% to a record $1.54 trillion in 2021. And after a substantial 70.9% jump in activity in 2020, MBA anticipates refinance originations to slow next year, decreasing by 46.3% to $946 billion.” 

Because of the drop in refinances, total origination volume in 2021 is expected to decrease. However, if the $1.54 trillion prediction holds, that will eclipse the previous high of $1.51 trillion in purchase originations that the industry hit in 2005. These predictions, it should be noted, are predicated on the assumption that a vaccine for COVID-19 will help control the pandemic and spur a faster economic recovery. 

Helping to keep the mortgage origination volume booming are incredibly low interest rates. This week's 30-year fixed-rate average from Freddie Mac dipped yet again to 2.8%. According to Freddie Mac economists, “Mortgage rates today are on average more than a full percentage point lower than rates over the last five years. This means that most low- and moderate-income borrowers who purchased during the last few years stand to benefit by exploring refinancing to lower their monthly payment.”

Pandemic politics spur market volatility

Stimulus plan negotiations, a second Presidential debate and now potential voter registration hacks are all playing into the ups and downs of Wall Street this week. A report Wednesday night from the Federal Bureau of Investigation showed Iran and Russia had both obtained some voter registration information. Director of Intelligence John Ratcliffe said, "This data can be used by foreign actors to attempt to communicate false information to registered voters that they hope will cause confusion, sow chaos and undermine your confidence in American democracy."

Uncertainty about the election was already an issue for investors, but they were uplifted Thursday with positive news of a potential stimulus plan. Speaker of the House Nancy Pelosi said negotiations for a stimulus bill were progressing and, according to her chief of staff, the two sides were “closer to being able to put pen to paper to write legislation.” 

Friday morning's futures were up on the stimulus news and a much more calm Presidential debate. The 10-year Treasury note yield was trading up for the seventh-straight day, hitting 0.859% Friday morning. That's its highest level since June. 

Of Note:

• Initial unemployment claims came in at 787,000 this week, significantly lower than expected.
• Many of those who filed traditional unemployment claims exhausted their 26-week allowance and are now filing for the Pandemic Unemployment Assistance emergency compensation program, which allows 13 extra weeks of benefits. 
• The number of people applying for those benefits increased by more than 500,000 in the first week of October, with the total number now well over 3 million.
• The National Association of Realtors reports that the median price of an existing home sold in September came in at $311,800. That is nearly 15% higher than home prices in Sept. 2019. 
• Home inventory has been decimated by demand, with the NAR reporting just a 2.7 month supply available. 
• The Consumer Financial Protection Bureau issued an indefinite extension to the Qualifying Mortgage (QM) patch until a new version is agreed upon. 
• This summer, the CFPB announced it was moving toward removing the DTI requirement and instead proposing an "alternative, such as a pricing threshold (i.e., the difference between the loan's annual percentage rate and the average prime offer rate for a comparable transaction.)"