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Lending

Small mortgage lenders and large banks face off

Fannie Mae: Smaller lenders to contract credit standards

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Lending standards are likely to tighten at smaller and midsize lenders over the next three months, while larger lenders are more likely to estimate that their credit standards will ease further during the next three months, according to Fannie Mae’s newest lender sentiment survey results.

The quarterly Mortgage Lender Sentiment Survey is a new industry research initiative to track insights into current lending activities and market expectations among senior mortgage executives at Fannie’s lending institution partners.   

“Some, not all, of our prospective homebuyers have been limited by the more conservative underwriting standards resulting from current regulatory requirements,” said Marcus McCue, executive vice president and chief business development officer with Guardian Mortgage.  

“We do see some easing of the credit standards among our competitors in the large lender category, as they have the ability to retain those loans on their own balance sheets," McCue added. "Guardian Mortgage, like our midsized lender peers and other small mortgage lenders, do not have the ability to make this transition to more accommodating underwriting standards until those standards are acceptable to investors in the secondary market.”

However, as second-quarter earnings keep coming out, smaller lenders keep beating out the major banks like JPMorgan Chase (JPM) and Wells Fargo (WFC).

JPMorgan’s second-quarter mortgage originations came in at $16.8 billion, down 66% from the prior year and 1% from the prior quarter.

While Wells Fargo’s second-quarter results were better, executives were less than thrilled about the origination results.  

But FBR Capital Markets Managing Director Paul Miller said, “These guys continue to lose market share to the smaller guys because the smaller guys are able to take more risk and the bigger guys keep giving cookie cutter mortgages.”

Unlike other lenders, Freedom Mortgage, a full-service mortgage lender licensed in all 50 states, funded more than $2 billion in residential mortgages in June 2014. 

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