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Press Release

Mortgage Lenders Approach 2018 with Negative Outlook on Profit Margin, Refinance Activity

December 26, 2017

Katie Penote


WASHINGTON, DC – Mortgage lenders again reported a negative profit margin outlook for the next three months, citing competition as the primary reason and continuing a quarterly trend beginning the same time last year, according to Fannie Mae’s Q4 2017 Mortgage Lender Sentiment Survey®. On net, the share of lenders who said “competition from other lenders” was the top driver behind their negative outlook reached another new survey high for the fourth consecutive quarter. Other reported factors include consumer demand, staffing, and market trend changes. Additionally, the net share of lenders who expect to see growth in refinance mortgage demand over the next three months fell to the lowest reading in a year across all loan types (GSE eligible, non-GSE eligible, and government). More lenders also reported declining refinance mortgage demand over the prior three months, marking four consecutive quarterly drops.

“Key trends have persisted throughout this year,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Lenders who see declining profits outweighed those noting improvements in the bottom line for the fifth consecutive quarter. Three-fourths of those seeing deteriorating profits cite competition as the most important reason – a survey high – compared with only about one-third two years ago. This is not surprising given that refinance volume continues to shrink. More lenders reported a pullback in refinance demand from the prior quarter than those who saw an increase, continuing the trend that started at the beginning of the year. This finding is consistent with our forecast for a steady drop in refinance originations this year. With the outlook calling for rising interest rates and continued tight housing inventory constraining home sales, increased competition will likely continue to drive lenders’ mortgage business strategies.”


Purchase mortgage demand

  • The net share of lenders reporting demand growth over the prior three months has fallen for all loan types when compared with Q4 2016, Q4 2015, and Q4 2014, reaching the lowest reading for any fourth quarter over the past three years.
  • However, the net share of lenders expecting increased demand over the next three months remains relatively stable for the fourth quarter over the past three years.

Refinance mortgage demand

  • On net, more lenders reported declining demand over the prior three months, continuing the trend that started in Q1 2017.
  • For the next three months, the net share of lenders expecting growth in demand for refinance mortgages dropped from last quarter (Q3 2017) across all loan types, reaching the worst outlook in a year.

Easing of credit standards

  • The net share of lenders reporting easing of credit standards over the prior three months has continued its upward trend since Q4 2016 across all loan types – reaching new survey highs for the second consecutive quarter.
  • Expectations of credit easing over the next three months declined on net for GSE Eligible loans.

Mortgage execution

  • On net, lenders continue reporting expectations to grow GSE (Fannie Mae and Freddie Mac) and Ginnie Mae shares over the next 12 months and reduce portfolio retention and whole loan sales shares.

Mortgage servicing rights (MSR) execution

  • This quarter, slightly more lenders reported expectations to decrease rather than increase the share of MSR sold and the share of MSR retained and serviced in-house.
  • The majority of lenders continued to report expectations to maintain their MSR execution strategy.

Profit margin

  • Lenders’ net profit margin outlook has been negative for five consecutive quarters (since Q4 2016).
  • Those expecting a lower profit outlook generally point to “competition from other lenders” as the primary reason.
  • While institutions of all sizes and types generally reported an expected net decrease in profit margin, larger institutions were the most likely to do so.
  • “Competition from other lenders” set a new survey high for the fourth consecutive quarter across all profit margin drivers, cited as the key reason for lenders’ lower profit margin outlook.
  • The other top drivers for a decreased profit margin outlook include consumer demand, staffing, and market trend changes.

The Mortgage Lender Sentiment Survey 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 2017 Mortgage Lender Sentiment Survey was conducted between November 1, 2017 and November 14, 2017 by PSB in coordination with Fannie Mae. For detailed findings from the fourth quarter 2017 survey, as well as survey questionnaires and other supporting documents, please visit the Fannie Mae Mortgage Lender Sentiment Survey page on 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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