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Press Release

Mortgage Lenders' Profit Margin Outlook Holds Steady on Strong Consumer Demand

December 12, 2019

Purchase Demand Expected to Increase, Refinance Demand Expected to Flatten

Matthew Classick


WASHINGTON, DC – Mortgage lenders’ profit margin outlook for the next three months remains on solid ground, according to Fannie Mae's Q4 2019 Mortgage Lender Sentiment Survey®. This quarter, 44% of lenders believe profit margins will remain about the same compared to the prior quarter, while 28% believe profits will fall and 27% believe profits will rise. Strong consumer demand, particularly among purchase mortgages, continues to buoy lenders' overall expected profitability, even as they expect refinance demand to soften amid a more stable interest rate environment.

"Mortgage lenders' profit margin outlook remains steady following gains in the first three quarters of 2019," said Fannie Mae Senior Vice President and Chief Economist Doug Duncan. "Credit standard trends also continue to hold steady amid the largely unchanged profitability outlook. Lower interest rates, which drove the refinance boom, have been the engine driving mortgage demand growth this year. Lenders' purchase and refinance demand expectations align with our own forecast: With interest rates stabilizing in 2020, we expect a decline in refinance activity and slightly higher purchase activity." 


Lenders Have Been Profitable and Expect to Remain So 

According to the MBA's Quarterly Mortgage Bankers Performance Report, on a per loan basis, lender's net production income has been on the rise over the first three quarters of 2019. Lenders reported Q3 2019 earnings of $1,924 per loan, versus a third quarter average of $1,061 over the last three years.

Widened Mortgage Spreads Point to Continued Positive Profitability Outlook

Mortgage spreads remain elevated, consistent with continued optimism in mortgage lenders' profitability outlook. The average primary mortgage spreads (FRM 30 contract rate versus 10-year Treasury) came in at 189 basis points in November, above the long-run average of 168 basis points.

Purchase Mortgage Demand Growth Up, Refinance Mortgage Demand Growth Outlook Softens

For purchase mortgages, across all loan types (GSE-eligible, non-GSE-eligible, and government), the net share of lenders reporting demand growth over the prior three months, as well as the net share reporting growth expectations for the next three months, remained positive and reached the highest readings for any fourth quarter in the survey's history. For refinance mortgages, across all loan types, the net share of lenders reporting demand growth over the prior three months continued the upward trend that began in Q1 2019 and reached new survey highs (since Q1 2014). Demand growth expectations on net for the next three months fell significantly from the survey highs of last quarter, but the net share of lenders that expect refinance volumes to increase remains well above shares observed a year ago across all loan products.

Credit Standards Unchanged

The pace of credit easing remained similar to last quarter. Overall, most lenders reported no major changes in their underwriting credit standards for the prior three months and expected no major changes for the next three months.

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 2019 Mortgage Lender Sentiment Survey was conducted between October 30, 2019 and November 10, 2019 by PSB in coordination with Fannie Mae. For detailed findings from the fourth quarter 2019 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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