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Refi Boom Set to Fuel $200B More Originations in 2012

A surge in refinance applications could propel mortgage originations by more than $200 billion in 2012, increasing to $1.28 trillion, according to the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA).

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The trade group attributed estimates ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô upwardly revised from $1.26 trillion in 2011 ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô to account for a refinance boom sparked by the crises in debt-saddled Europe.

""Scenarios we have consistently highlighted that could drive rates down and refis up have materialized, primarily due to market turmoil in Europe,"" ""Mike Fratantoni"":http://www.mbaa.org/files/SpeakersBureau/FrantantoniM.pdf, MBA's VP of research and economics, said in a statement.

""Deterioration of the debt situation in Spain and Greece and a new regime in France that is a weaker proponent of European austerity, along with slower economic growth globally, have driven the US Ten Year Treasury yield down,"" he added. ""Thus, we are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result.""

The MBA said that it expected refinance originations would amount to $870 billion this year, an amount nearly identical to forecasts from last year. The trade group lowered purchase originations from $415 billion to $409 billion.

Fratantoni said that the increase in refinance estimates is ""largely independent"" of modifications to the Home Affordable Refinance Program.

""We factored HARP lending of roughly $100 billion in both 2012 and 2013 into our April forecast, and the HARP share of refinance activity has remained relatively constant over recent months,"" he said. ""However, mortgage rates below four percent and regular media coverage showcasing ├â┬ó├óÔÇÜ┬¼├ï┼ôrecord low mortgage rates' provide sufficient incentive and impetus for borrowers to examine their current rate.""

Europe continues to titter as tough austerity measures and low growth rates force seasoned parties out of office in several countries.

The crisis in Europe in turn feeds low interest rates by stoking a flight by investors to the safe haven of U.S. Treasury bonds, whose yields fall accordingly, keeping mortgage rates low.

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