Skip to main content
Press Release

Mortgage Lenders’ Profit Margin Outlook Improves on Reported Continued Strength of Consumer Mortgage Demand

September 10, 2020
Lenders’ Expectations of Purchase and Refinance Mortgage Demand Near Record Highs as Mortgage Rates Hit Historic Lows

WASHINGTON, DC – Mortgage lenders’ profit margin outlook for the next three months increased even further due to strong consumer demand, according to Fannie Mae’s Q3 2020 Mortgage Lender Sentiment Survey®. According to the third quarter survey, 48% of lenders believe profit margins will increase compared to the prior quarter, building on an already strong profit margin outlook, while 37% believe profits will remain the same and 15% believe profits will decrease.

Reported consumer demand remained strong in the third quarter across all loan types, and in many cases neared or reached new highs. Lenders reporting purchase mortgage demand growth for both the prior three months and the next three months rose significantly from last quarter across all loan types (i.e., GSE-eligible, non-GSE-eligible, and government) and is back on par with the same time last year. Similarly, according to lenders, refinance mortgage demand remained extremely strong in the third quarter across all loan types on both a look-back and look-forward basis. On net, lenders also reported a further tightening of credit standards over the prior three months and expect them to remain largely the same over the next three months.

"This quarter's MLSS results align with the strong housing recovery amid the larger economic downturn due to COVID-19," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Lenders’ reported purchase mortgage demand for the prior three months across all loan types have returned from sharp drops to the levels seen last year for the same quarter. Purchase demand growth expectations for the next three months reached the highest third-quarter readings since survey inception. For the third consecutive quarter, lenders' profitability outlook has remained a strong positive. Pent-up consumer demand, continued low mortgage rates, and favorable mortgage spreads helped drive lender profitability."

"This quarter, lenders on net continue to report tightening of credit standards for the prior three months, but expected no further tightening next quarter," Duncan continued. "Lenders attributed credit tightening to the uncertainty on the economic recovery and labor markets resulting from COVID-19. Although the housing market is showing remarkable strength amid the economic and health crisis, potential longer-term downside risks remain, including labor market weakness, low inventory, and home price uncertainty."

Mortgage Lender Sentiment Survey Highlights

Wide Mortgage Spreads Persist and Continue to Point to Positive Profitability Outlooks

Mortgage spreads remain elevated, consistent with mortgage lenders' profitability outlook. The average primary mortgage spreads (FRM 30 contract rate versus 10-year Treasury) came in at 229 basis points in August, above the long-run average of approximate 170 basis points.

Purchase Mortgage Demand Rose Significantly; Refinance Mortgage Demand Holds Stable

For purchase mortgages, the net share of lenders reporting demand growth for both the prior three months and the next three months rose significantly from last quarter across all loan types (i.e., GSE-eligible, non-GSE-eligible, and government), after being negative or close to negative last quarter, and is now on par with the readings seen for the same quarter last year.

For refinance mortgages, the net share of lenders reporting demand growth over the prior three months remained strong, reaching a survey high for government loans and second highest reading since 2014 for GSE-eligible and non-GSE-eligible loans. Demand growth expectations on net for the next three months also remained high across all loan types, rising or remaining on par with the previous quarter.

Credit Standards Tightened

Lenders on net continued to report a tightening of credit standards for the prior three months, with the majority expecting credit standards to stay about the same for the next three months.

About Fannie Mae's Mortgage Lender Sentiment Survey

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 third quarter 2020 Mortgage Lender Sentiment Survey was conducted between August 4, 2020 and August 16, 2020 by PSB in coordination with Fannie Mae. For detailed findings from the third quarter 2020 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.

About Fannie Mae
Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit: | Twitter | Facebook | LinkedIn | Instagram | YouTube | Blog

Media Contact
Matthew Classick

Fannie Mae Newsroom

Photo of Fannie Mae

Fannie Mae Resource Center

Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic & Strategic Research (ESR) Group 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, including assumptions about the duration and magnitude of shutdowns and social distancing, could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.