Low housing inventory, rising mortgage rates, new regulations and a sluggish employment outlook are all contributing to a pessimistic forecast for mortgage originations this year.

$57 billion, down the tubes

The Mortgage Bankers Association reports that it is lowering its forecast for originations to $1.2 trillion this year, a reduction of $57 billion from its previous estimate.

“Despite an economic outlook of steady growth and a recovering job market, mortgage applications have been decreasing — likely due to a combination of rising rates and regulatory implementation, specifically the new qualified mortgage rule,” Mike Fratantoni, chief economist for the association, said in a prepared statement. “As a result, we have lowered our expectations for both purchase and refinance originations in the first half of 2014.”

The qualified mortgage rule, issued by the Consumer Financial Protection Bureau, went into effect last week. It is designed to protect borrowers from overextending on a mortgage. To be considered “qualified,” the borrower’s total debt, including a mortgage, cannot exceed 43 percent of his income. Other rules include loan terms no longer than 30 years, no interest-only payments and a cap on points and origination fees of 3 percent on loans of $100,000 or more.

Not only rules, but rates, too

Rising rates are also putting off some potential homebuyers. The latest Bankrate survey of large lenders shows the 30-year fixed-rate mortgage at 4.64 percent, up from 4.55 percent four weeks ago and 3.67 percent a year ago.

The Mortgage Bankers Association also lowered its estimates for refinance originations, from $463 billion to $440 billion, or approximately 60 percent lower than refinance originations in 2013.

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