Weak Third Quarter Expected for Mortgage Banks

Investment bank FBR Capital Markets released its preview of third-quarter earnings for major U.S. banks Monday, with a cloudy outlook for mortgage banking. In general, bank stocks have underperformed the broader market by about 2 percent over the third quarter; and zeroing in on the mortgage market, FBR is not optimistic about Q3 results.

“We believe mortgage banking results will be weak, with volumes coming in low,” FBR stated.

FBR’s third-quarter mortgage originations estimate is $349 billion, a 29 percent decline over the quarter.

The abating refinance market is a major drag on the mortgage industry, and, “[w]e do not believe that there will be a strong enough increase in the purchase market this quarter to offset the loss in refi volume,” FBR stated.

FBR estimates a 46 percent decline in refinances in the third quarter and a 2 percent rise in purchase originations.

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