PHOENIX, Ariz. – The Mortgage Bankers Association has hiked its loan origination forecast for 2004 to $2.5 trillion, up from an earlier projection of $2 trillion. The MBA also now expects refinancing to account for 46% of originations in 2004. That compares to 66% in 2003 and 62% in 2002. The latest forecast was released last week during the MBA's Technology in Mortgage Banking Conference here. The conference drew a record 1,500 attendees. Doug Duncan, MBA senior vice president and chief economist, said he continues to believe the economy will grow strongly in 2004 with the real GDP up 4.6% as compared to 3.1% in 2003. “What are going to be the sources of that GDP growth?,” Duncan asked, rhetorically. He answered by listing the following: personal consumption up 3.5% compared to 3.1% in 2003; tax cuts working their way into the economy; continued cash out refinance activity; some wealth effect through stock market gains and increased dividends. Overall, interest rates are actually considered the key driver of the new forecast. The MBA now projects the 10-year Treasury rate will average only 3.9% during the second quarter this year and 4.1 in the third quarter. Mortgage rates will be correspondingly low, with the average 30-year fixed mortgage rate dipping to 5.4% in the second quarter. Duncan indicated it was appropriate to talk about productivity during a conference focused on technology and mortgages. “We've seen over the last three years an average productivity gain of 4.2%,” he indicated. “For the first time ever we have seen a sustained three-year rate of productivity gain that was greater than GDP growth over that same time period. “That is unprecedented. To give a sense of perspective, from 1970 to 1975 average productivity gains annually were 1.5 percent. That's a tremendous change. Economic models have no precedent for this.” The result, he continued, is employment gains have been overestimated because the impact of productivity gains has been underestimated. Adjusting for that, if productivity gains slow to 2.5 to 3%, Duncan expects employment gains of 150,000 to 175,000. If productivity rises above that, the number of workers added to the nation's payrolls will be lower. He noted the first-ever class of certified mortgage technologists will soon graduate. “That represents a professionalization of the work force and a formalization of the importance of technology in the mortgage industry,” Duncan said. [email protected]