December 17, 2014Mortgage Lender Sentiment Survey Results Show Increased Concerns with Mortgage Demand Growth
Data Support Forecast for Modest Housing Expansion in 2015
Fewer mortgage lenders are reporting tighter credit while weak consumer demand is increasingly cited as driving lenders’ decreased profit margin outlook, according to results from Fannie Mae’s fourth quarter 2014 Mortgage Lender Sentiment Survey™. Conducted in November 2014, the survey shows that for GSE-eligible loans, the share of lenders who say they have tightened their credit standards during the prior three months has gradually trended down this year, decreasing to 13 percent in the fourth quarter compared to 28 percent in the first quarter. For non-GSE-eligible loans, more lenders reported easing than tightening of credit standards for the second consecutive quarter. Despite this, consumer demand reported for single-family purchase mortgages over the prior three months declined significantly from Q3 to Q4, and the share of lenders expecting demand to go down during the next three months has climbed, supporting expectations that the housing market will continue to grind its way upward next year.
“Overall, lenders’ growing concerns with purchase mortgage demand is broadly in line with major industry indicators and supports our views of a modest housing expansion going into 2015,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “While government regulatory compliance remains the top driver of declining profit margin expectations across all lenders, more lenders, and in particular larger lenders, are increasingly concerned with consumer demand risk.”
“The increased share of lenders who reported easing of credit standards could be associated with Fannie Mae and Freddie Mac releasing updated guidelines to their representations and warranties frameworks, intended to provide lenders with greater certainty and clarity around potential repurchase risk. These efforts indicate industry endeavors to boost housing activities by making mortgages available to more borrowers,” said Duncan. “We believe that some combination of easing of credit standards, relatively low mortgage rates, and ongoing labor market improvements will help the housing market to grow steadily, albeit modestly, in 2015.”
MORTGAGE LENDER SENTIMENT SURVEY HIGHLIGHTS
Differences in Economic and Housing Sentiment Between Senior Executives and General Consumers
- Compared to general consumers, senior mortgage executives, and especially those at larger lenders, continue to be more optimistic about the overall economy and more pessimistic about consumers’ ability to get a mortgage today.
Downward Consumer Purchase Mortgage Demand Reported Over the Prior Three Months
- Consumer demand reported for single-family purchase mortgages over the prior three months declined significantly from Q3 to Q4, in particular among larger lenders.
Negative Consumer Purchase Mortgage Demand Outlook for the Next Three Months
- Lenders’ purchase mortgage demand outlook has gradually trended down each quarter throughout the year, with fewer lenders each quarter reporting increased mortgage demand expectations over the next three months, although we recognize that there might be seasonal influences.
Gradual Credit Standards Easing
- Credit tightening observed early this year has gradually trended down each quarter throughout the year, with fewer lenders each quarter reporting credit tightening over the prior three months. Larger lenders are more likely to report credit easing than tightening, across all loan types, throughout the year.
Stable Mortgage Execution Outlook
- Throughout the year, most lenders reported that they expect to maintain their mortgage execution strategies for the next three months.
Stable Mortgage Servicing Rights (MSR) Execution Outlook
- Throughout the year, most lenders reported that they expect to maintain their Mortgage Servicing Rights (MSR) execution strategies over the next three months.
Stable Profit Margin Expectations for the Next Three Months
- Lenders’ profit margin outlook has remained relatively stable after the first-quarter drop. Among larger lenders, the importance of government regulatory compliance in driving their decreased profit margin outlook has gradually declined and the importance of consumer demand has gradually increased.
The Mortgage Lender Sentiment Survey conducted by Fannie Mae polls senior executives of its lending institution customers on a quarterly basis to assess their views and outlook across varied dimensions of the mortgage market. The Fannie Mae fourth quarter 2014 Mortgage Lender Sentiment Survey was conducted between November 5, 2014 and November 24, 2014 by Penn Schoen Berland in coordination with Fannie Mae. For detailed findings from the 2014 fourth quarter survey, as well as survey questionnaires and other supporting documents, please visit the Fannie Mae Mortgage Lender Sentiment Survey page on fanniemae.com. Also available on the site are special topic analyses, which focus on findings and analyses of important industry topics.
Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) group or survey respondents included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group or survey respondents as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
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