Fannie Mae slashes mortgage investment forecast

Fannie Mae, the largest provider of U.S. residential funding, on Wednesday slashed its forecast for residential investment this quarter following a "setback" in home sales, and warned on its impact on the economic recovery, according to Reuters. 

Fannie Mae (FNM.N) also cut its forecast for 2010 mortgage originations for a second month, according to its monthly outlook.

Residential investment is likely to drop 17.2 percent in the first quarter and rebound for the rest of 2010, Fannie Mae economists, led by Doug Duncan, said in their outlook. Just a month ago, they expected the first quarter's residential investment would rise 2.8 percent.

For all of 2010, residential investment will grow 10 percent, slightly below the previous forecast, they said.

Severe weather disrupted activity in the first two months of 2010, while the extension of the U.S. home-buyer tax credits drew fewer buyers than expected, the economists said. With activity waning for the short-term, Fannie Mae lowered its forecast for U.S. gross domestic product to 2.7 percent for the first quarter, from 3.1 percent.

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