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FBR: Origination Slow in Q1, 2013 Outlook Still Bright

Mortgage banks faced some headwinds at the beginning of 2013 in terms of origination slowdown, according to an earnings report preview from ""FBR Capital Markets & Co."":http://www.fbr.com/

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While the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA) estimates about $482 billion of originations in Q1, FBR--citing comments from industry contacts--believes first-quarter volume to be closer to $400 billion, a drop of nearly 25 percent from the $525 billion of originations in Q4 2012.

""We now believe that 1Q13 stands to be lower than we expected from an industry origination standpoint, largely driven by seasonal weakness with the most significant [COLUMN_BREAK]

impact at larger originators and potentially driving near-term weakness across the group,"" FBR said in its report.

Though the year may have started slow, the investment banking advisory firm attributes the drop-off in activity to seasonal slowdown, especially as activity appeared to pick up in March.

In addition, FBR notes third- and fourth-quarter origination volumes have been upwardly revised recently, giving hope that the first quarter will look better than originally thought once the numbers have settled.

For the rest of the year, FBR's outlook remains bright, with low interest rates and government expansion initiatives driving greater demand for refinances even as purchase loan volume recovers.

""As such, we continue to believe the perceived 'refinance cliff' will happen later rather than sooner, with the hopes that refinance volumes will remain elevated long enough for the purchase market to continue to gain traction,"" FBR said. ""Though gains on the purchase side have been incremental thus far, housing supply improvements and mortgages for additional credit tranches provide meaningful tailwinds to volumes even as gain-on-sale margins continue to contract.""

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