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Mortgage Lender Sentiment Survey

Mortgage Lender Sentiment Survey - December 2015

December 17, 2015
Further Easing of Mortgage Credit Standards on the Horizon, According to Lenders

Mortgage lenders continue to report that they have eased and expect to continue easing their credit standards, according to Fannie Mae's fourth quarter 2015 Mortgage Lender Sentiment Survey. Conducted in November, the survey results show that more lenders reported expectations to ease rather than tighten mortgage credit standards for GSE-eligible loans and government loans over the next three months, which may help mitigate some of the decline of housing affordability moving into 2016. The share of lenders expecting to ease standards for GSE-eligible loans climbed to 16 percent while the share expecting to tighten standards dropped to 2 percent. In addition, more lenders reported easing as opposed to tightening of credit standards over the prior three months across all loan types, although the net shares fell somewhat from last quarter's survey highs.

“Lenders from our fourth-quarter Mortgage Lender Sentiment Survey tell us that, on net, they have eased and expect to ease credit standards, continuing the trend seen so far this year. These current practices and expectations toward easing among lenders compares to a historically relatively tight mortgage credit standard base,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “There are several factors that point to constrained housing affordability in 2016, particularly for first-time home buyers – including slow single-family supply response and limited inventory of starter homes on the market, strong inflation-adjusted house price appreciation outpacing household income growth, and an upward bias in mortgage rates. Lenders' thoughtful easing of credit standards should help mitigate some of this affordability decline. The use of Fannie Mae's HomeReady mortgage was cited by some lenders in the survey to explain their expectations for easing credit standards and how they will increase consumers' access to mortgage credit.”