Credit unions that still believe purchase money lending will energize their waning mortgage programs may want to re-consider their assumptions after reviewing last week's data from the Mortgage Bankers Association.
The MBA forecast mortgage lenders will make fewer purchase money loans this year than they did in 2013, when refinanced home loans still dominated the market.
In April, the association predicted lenders would make $646 billion in purchase money loans, only slightly lower than last year's $652 billion. However, the MBA lowered that number to $621 billion in May.
Many economists had expected purchase money lending to strengthen in 2014 as the U.S. economy continues to improve; however, the association observed this has not happened.
However, the MBA offered some hope for a stronger year.
"The estimate for purchase originations was revised lower this month since the current pace of purchase applications will essentially cover the second quarter's originations flow and that pace is currently insufficient for purchase originations to end the year higher than in 2013," the association wrote. "However, if home prices continue to increase and home sales ride economic and job growth in the second half of the year, we might see more purchase originations."
In addition, the association raised its forecast of the percentage share of 2014′s refinance market, increasing that number from 39% to 41%, reflecting the slowdown in purchase money lending.
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