Q3 Looking Grim For Mortgage Banks

Major U.S. banks are projected to underperform in Q3, according to investment bank FBR Capital Markets. The preview is based on bank stocks Mortgageunderperformance throughout the third quarter and closing in on the mortgage market – FBR is not optimistic about Q3 results.

FBR estimates that third-quarter originations will come in at $349 billion, which is a 29% decline over the entire quarter. FBR says, “We do not believe that there will be a strong enough increase in the purchase market this quarter to offset the loss in refi volume,” noting that the refi market continues to drag on the mortgage industry.

Another factor making refinance options less attractive are the rising interest rates. Looking into Q4 and the beginning of 2014, FBR expects declines in purchase originations before there is a significant uptick – not expected until the third quarter of 2014.

Despite the rising rates, the Federal Reserve’s announcement that it will not be scaling back its bond purchases anytime soon has increased margins as of recently.