What Has Mortgage Lenders So Upbeat?

DAILY REAL ESTATE NEWS | WEDNESDAY, MARCH 29, 2017

Mortgage lenders’ optimism reached a high in a first-quarter survey, even as lenders expressed pressing challenges to their profit margins, according to Fannie Mae’s 2017 Mortgage Lender Sentiment Survey.

Lenders say they’re most upbeat about the direction of the economy and home prices. They also continue to report modest easing of credit standards across all loan types, with plans to continue to do so over the next three months.

“This quarter, lenders’ optimism toward the overall economy and home price appreciation hit survey highs, mirroring the consumer confidence seen in our February Home Price Sentiment Index,” says Doug Duncan, Fannie Mae’s chief economist. “However, lenders’ profit margin outlook remains significantly less positive than this time last year and two years ago.”

Lenders cite competition from other lenders and a market shift from refinance to purchase as the top reasons for the weak profit margin outlook, Duncan notes.

“With mortgage rates expected to rise, we expect refinance activity will fall and purchase affordability will tighten, increasing competitive pressure in a shrinking mortgage market,” he says. “Lenders may choose to adjust their production capabilities and staff resources given their profitability outlook.”

Lenders surveyed reported a sharp decline in demand expectations for purchase mortgages, mostly due to rising mortgage rates. The share of lenders who expect an increase in purchase mortgage demand over the next three months for conventional mortgages dropped to the lowest level recorded in any first quarter in the survey’s history, Fannie Mae notes.

Source: Fannie Mae