The Mortgage Bankers Association (MBA) has increased its national mortgage origination forecast for 2012 by almost $200 billion due largely to an increase in refinances. The MBA now expects mortgage originations to reach $1.28 trillion in 2012, up from $1.26 trillion in 2011.

Refinance originations are expected to total $870 billion in 2012, an almost identical amount to 2011, according to s statement. The MBA is slightly lowering its purchase originations forecast for 2012 to $409 billion from $415 billion.

This month’s refinance estimate for 2012 reflects an upward revision of $188 billion from MBA’s April forecast, driven by an increase in the pace of refinance applications and originations, while purchase origination estimates were revised downwards by $6 billion to reflect lower than previously expected home prices and weaker than expected home sales.

"Scenarios we have consistently highlighted that could drive rates down and refis up have materialized, primarily due to market turmoil in Europe," said Mike Fratantoni, MBA’s vice president of Research. "Deterioration of the debt situation in Spain and Greece and a new regime in France that is a weaker proponent of European austerity, along with slower economic growth globally, have driven the U.S. 10-year Treasury yield down. Thus, we are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result."