Mortgage lenders are looking more positively at their firm’s profit, and are even much less concerned about compliance costs than ever before, according to Fannie Mae’s third quarter 2016 Mortgage Lender Sentiment Survey.
About 28% of lenders said they expected their firm’s profit margin to increase over the next three months. On the other hand, 17% expect their profit to decrease, and 55% expect it to remain the same. The survey compiles the opinions of 3,000 senior executives among the Fannie Mae approved lender network. Its an online survey that's sent out where they answer 40-75 questions.
“For lenders, the most encouraging aspect of the survey is a significantly brighter profit outlook this year compared with last year,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “More lenders, on net, reported a positive profit outlook for the third straight quarter, the first time that has happened since the survey’s inception.
“Their perception of profit outlook in the third quarter of this year is in stark contrast to the third quarter of 2015, when a sizable net share of lenders expected a deteriorating profit outlook over the next three months,” Duncan said. “It appears that lenders have incurred the increased compliance costs from new regulations such as TRID, and are now on a stabilized though higher-cost footing to focus on growth strategies.”
Lenders cited the same two factors as in every survey, operational efficiency and technology and consumer demand, as the main things they expect to increase.
That being said, for lenders who expect a decrease in their profit margin, those saying government regulatory compliance is a driving factor reached a survey-low of 39%. This is compared to 61% last year. If fact, it markets the first time in the survey’s history that government regulatory compliance is not the top reason for decreasing profits.
“However, any upward move in interest rates will bring reduced origination volumes and competitive pressure on profits,” Duncan said. “That pressure would likely result in lowered expectations and additional demands for cost containment.”
Last quarter, Fannie Mae's survey showed that approximately 90% of the lenders surveyed said they have no plans to ease their credit standards for at least the next three months.