Mortgage Pros, Consumers Differ Significantly in View of Economy, Mortgage Standards

Senior executives polled recently by Fannie Mae expressedrnincreased optimism about the demand for purchase mortgages and their ownrnprofitability, at least over the short term the company said today.  The results of Fannie Mae’s Mortgage LenderrnSentiment Survey for the second quarter showed confidence among mortgagesrnlenders that home prices would continue to increase as would the demand forrnpurchase mortgages while fewer report further tightening of credit restrictions.</p

The share of respondents to the survey who said the demandrnfor purchase mortgages had climbed over the last three months increasedrnsubstantially, exceeding 20 percentage points compared to responses from thernfirst quarter survey for GSE-eligible and governmentrnloans and reaching a survey high for each of 77 percent and 65 percentrnrespectively.  Those reporting increased demand for non-GSE eligible loansrnincreased from 52 percent to 62 percent.</p

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The increasedrnoptimism did not extend forward as the share of lender expecting growth inrndemand over the upcoming three months was down from the first quarter.  The decrease however was reflected in anrnincrease in those expecting demand to remain static rather than to fall. FanniernMae said that those expecting an increase in demand remained higher than inrn2014 surveys and the second quarter decrease could reflect seasonal factors. </p

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“This quarter’s results showed that therngrowing optimism of lenders has been rewarded,” said Doug Duncan, senior vicernpresident and chief economist at Fannie Mae. “The share of lenders reportingrnincreased purchase mortgage demand over the prior three months reached a surveyrnhigh for both GSE-eligible and government loans. At the same time, the positiverngap grows between lenders reporting loosening or maintaining existing creditrnstandards, relative to those reporting tightening. While not matching firstrnquarter 2015 levels, the profit margin and purchase mortgage demandrnexpectations over the next three months remain above the 2014 readings. Thernresults, when taken together with the continued positive trend in consumerrnattitudes shown in the recently released National Housing Survey^TM, reinforce anrnincreasingly optimistic outlook for housing in 2015, consistent with ourrnforecast. We expect a continued housing expansion in 2015 after an uneven andrndisappointing 2014.”</p

Credit tightening observed last yearrnhas continued to gradually trend down. Over 80 percent of lenders however saidrnthat standards for all three types of loans had remained basically unchangedrnover the last three months.</p

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Lenders are decidedly less upbeat thanrnconsumers about the ease of getting a mortgage. rnWhile 50 percent of consumers responding to the National Housing Surveyrn(NHS) question thought it would be easy for them to get a mortgage only 18rnpercent of lenders thought the process was easy for consumers.  This was a drop of 10 percentage points fromrnthe Q1 survey. </p

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Fannie Mae said the executives are<bincreasingly optimistic, and significantly more so than the general populationrnof consumers, about future home prices. This quarter, the share of lendersrnexpecting home prices to go up over the next 12 months reached a survey high ofrn70 percent. Only 49 percent of consumer’s participating in Fannie Mae’srnNational Housing Study in May expected home prices to rise over the next 12rnmonths. </p

There was also a dramatic differencernbetween lenders and consumers when it comes to the economy in general.  While a majority (52 percent) of thosernsurveyed by the NHS thought the economy was on the wrong track only 29 percentrnof lenders believed this although that sentiment had increased by 8 percentagernpoints since the Q1 survey.</p

Most institutions reported that theyrnexpect to maintain their strategy in relation to secondary market outlets overrnthe next 12 months. More lenders expect to increase rather than to decrease thernshares of loans originated and then sold to GSEs.  The majority of institutions expect theirrncurrent mortgage servicing rights (MSR) execution strategies to stay about thernsame over the next 12 months.</p

Although lenders’ profit margin outlook</bacross institution sizes fell slightly this quarter from the first quarter withrnmore lenders reporting decreased profit margin expectations over the next threernmonths, it remains similar to the 2014 readings. </p