The Mortgage Bankers Association today lowered its forecast of mortgage originations in 2009 to $2.03 trillion, a drop of over $700 billion from its March forecast.  $84 billion of the drop is due to lower purchase originations and the rest is due to lower rate/term refinancings and very low volumes in the Fannie Mae and Freddie Mac Home Affordable Refinance Program (HARP).  MBA is now forecasting $737 billion in purchase originations and $1,297 billion in refinance originations

The March increase in refinance originations was driven by two factors. The first factor was the drop in interest rates. The subsequent increase in interest rates, however, began to choke off the refinance wave in May, much earlier than anticipated in the March forecast. The second factor was the large volume of loans expected from HARP. While generally accepted estimates were that around 1.5 to 2 million borrowers might avail themselves of this program, with many more potentially eligible, to date only about 13,000 loans have been completed according to press reports.