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Fannie Mae: Almost no lenders plan to ease credit standards

Lender survey results suggest constrained credit box will continue

A recent report from the Mortgage Bankers Association showed that mortgage credit availability is on the decline, with the Mortgage Credit Availability Index for May showing a decrease for the third straight month.

And a new report from Fannie Mae suggests there’s no light at the end of the tunnel for those who hope to see credit standards relaxed any time soon.

According to Fannie Mae’s second quarter 2016 Mortgage Lender Sentiment Survey, approximately 90% of the lenders surveyed said they have no plans to ease their credit standards for at least the next three months.

The survey, which is conducted by Fannie Mae and polls senior executives of its lending institution customers on a quarterly basis to assess their views and outlook across varied dimensions of the mortgage market, showed that lenders actually report a “net easing” of credit standards for all loan types over the last three months, but notes that the easing is “moderate.”

Fannie Mae’s survey showed that the lenders surveyed said that their expectations to ease standards during the next three months have gradually moved lower since the fourth quarter of 2015, with 90% of lenders expecting to keep their credit standards unchanged.

And for loans eligible for sale to Fannie Mae and Freddie Mac, the news is even bleaker, as only 4% of lenders on net expect to further ease credit standards on Fannie and Freddie loans within the next three months.

Additionally, Fannie Mae’s report showed that lenders said that they saw a “significant increase” in net demand growth for refinance mortgages across all loan types in the second quarter over the prior three months of the year, a likely outcome given the continued “historic lows” for mortgage interest rates.

But Fannie Mae’s survey showed that lenders think that the refinance demand is likely to drop for the rest of the year.

“Key survey sentiment indicators suggest that lenders remain cautiously optimistic in their market outlook,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

“The outlook for purchase demand growth over the next three months returned to levels similar to last year, while the outlook for refinance demand and profit margin improved moderately versus last year’s levels,” Duncan continued.

“Additionally, the trend toward easing of credit standards appears to be tapering off, as the vast majority of lenders, around 90%, reported plans to keep their credit standards about the same,” Duncan said. “The survey was conducted before the recent May jobs report, and the weaker reported job gains might potentially temper this optimism.”

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