Fannie Mae: Lenders expect boost from GSE 97% LTV products

Plus additional benefit from FHA mortgage premium insurance cut

The latest lender sentiment survey from Fannie Mae shows that mortgage lenders expect they will get a boost in business from the 97% LTV programs at Fannie Mae and Freddie Mac and from the reduction in the cost of mortgage insurance implemented by the Federal Housing Administration.

Late last year, Fannie Mae and Freddie Mac announced an expansion of the availability of certain loans with a maximum loan-to-value ratio of 97% in order to expand the credit box for first-time homeowners. 

In January, FHA reduced annual mortgage insurance premiums by 0.5% on new loans.

Fannie Mae’s Economic & Strategic Research Group surveyed senior mortgage executives in February 2015 through its quarterly Mortgage Lender Sentiment Survey to examine lenders’ views about the expected impact of these two initiatives.

Here are the results.

  • Approximately two out of three lenders surveyed expect that the GSEs’ 97% LTV products and the FHA’s MIP reduction will somewhat increase mortgage originations, while one-third of lenders surveyed do not expect those offerings to impact mortgage originations.
  • The majority of lenders surveyed think that the GSEs’ 97% LTV products and the FHA’s MIP reduction will be good for consumers and lenders
    • 76% believe the GSEs' 97% LTV loans will be good for consumers.
    • 81% believe FHA's MIP reduction will be good for consumers.
    • 81% percent of institutions surveyed reported planning to offer GSE-eligible 97% LTV loans sometime this year, though the expected impact on their own firm’s origination volume is more muted than their expectations for the impact on the overall mortgage market in the future.
    • 44% percent of those planning to offer GSE-eligible 97% LTV loans expect them to somewhat increase their firm’s origination volume.
    • 54% percent expect their firm’s origination volume to remain about the same.

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