Mortgage lenders remain optimistic about purchase mortgage demand and their profit margin during the next three months, according to Fannie Mae’s second quarter 2015 Mortgage Lender Sentiment Survey.
Conducted in May, the survey shows that lenders’ near-term outlook for both purchase demand and profit margin remains at high levels, and above the 2014 survey results. Additionally, more lenders have continued to report credit loosening than tightening.
“This quarter’s results showed that the growing optimism of lenders has been rewarded,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The share of lenders reporting increased purchase mortgage demand over the prior three months reached a survey high for both GSE-eligible and government loans. At the same time, the positive gap grows between lenders reporting loosening or maintaining existing credit standards, relative to those reporting tightening. While not matching first quarter 2015 levels, the profit margin and purchase mortgage demand expectations over the next three months remain above the 2014 readings. The results, when taken together with the continued positive trend in consumer attitudes shown in the recently released National Housing Survey, reinforce an increasingly optimistic outlook for housing in 2015, consistent with our forecast. We expect a continued housing expansion in 2015 after an uneven and disappointing 2014.”
Here are some of the highlights from survey:
Senior mortgage executives are increasingly optimistic, and significantly more optimistic than the general population of consumers, about future home prices. This quarter, the share of lenders expecting home prices to go up over the next 12 months reached a survey high of 70%.
The share of lenders reporting increased mortgage purchase demand over the prior three months climbed again this quarter, reaching a survey high for GSE-eligible and government loans (77% and 65%, respectively). For the next three months, the share of lenders reporting increased demand expectations fell this quarter from last quarter, but remains at a high level and above the 2014 readings, and may reflect some seasonality influences.
Credit tightening observed last year has continued to gradually trend down. The positive gap grows between lenders reporting loosening or maintaining existing credit standards, relative to those reporting tightening.
Most institutions reported that they expect to maintain their strategy in relation to secondary market outlets over the next 12 months. More lenders expect to increase rather than to decrease the shares of loans originated and then sold to GSEs.
The majority of institutions expect their current mortgage servicing rights execution strategies to stay about the same over the next 12 months.
- Although lenders’ profit margin outlook across institution sizes fell slightly this quarter from last quarter (Q1), with more lenders reporting decreased profit margin expectations over the next three months, it remains similar to the 2014 readings.