Related Document(s):
	The Residential Mortgage Market and Its Economic Context in 2007

"The study provides relevant context and perspective on the current state of the economy and its implications for the housing and mortgage markets," said Doug Duncan, MBA's Chief Economist and Senior Vice President, Research and Business Development.  "In order to understand the developments with respect to trends in mortgage product choice and mortgage delinquency and foreclosure rates, one needs to understand the underlying economic trends.  The housing and mortgage markets respond to and reflect underlying economic strength or weakness. In light of the ongoing discussions surrounding suitability and other potential legislative and regulatory actions, policymakers need to consider the full economic context rather than examine any particular issue in isolation." 
Key findings of the study include:

·         The U.S. economy will continue to grow in 2007, but at a slightly below trend rate of growth.

·         The housing market will regain its footing by mid-to-late 2007, depending on what measure is used. Home sales and starts will likely begin to increase in mid-2007, but, given the large inventory overhang, prices are unlikely to show any significant increase until late 2007 or early 2008.

·         The residential finance market is fundamentally sound and working efficiently. The housing market will continue to benefit from relatively low long-term interest rates. For ARM borrowers, we expect short-term interest rates to be steady going forward.

·         Mortgage originations will fall in 2007 relative to 2006 as a result of a decline in home sales and diminished refinance activity.

·         Delinquency rates are evolving as any seasoned observer of the mortgage market would expect them to do. Barring any unexpected downturn in the economy, the recent increase in mortgage delinquency rates will likely peak by the end of 2007, but at levels well below those of past peaks.  This lower peak will come despite the change in the composition of outstanding loans, namely a larger proportion of subprime loans in recent years.

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 370,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.