US banks see surge in home loans in '09

BOSTON: The Mortgage Bankers Association boosted its forecast for 2009 home-loan originations by $800 billion to $2.78 trillion as a wave of refinancing and low interest rates spur homeowners to seek out new loans.

Refinancing will total $1.96 trillion in 2009 and purchase originations will increase to $821 billion, the group said in a statement.

Total originations may rise to the fourth-highest on record, driven by a drop in fixed mortgage rates and last week���s Federal Reserve announcement that it will triple its planned purchases of mortgage-backed securities, the Washington-based trade group said.

���The effect of having the Fed bid in the market for a sustained period is enough to create a refinance incentive for a tremendous number of homeowners,��� said Jay Brinkmann, MBA���s chief economist and senior vice president.

The Fed said March 18 it would increase purchases of mortgage-backed securities this year by up to an additional $750 billion.