MLSS Results Show Optimistic Mortgage Demand and Profit Outlook with Gradual Credit Easing

Data Support Forecast for Modest Housing Expansion in 2015

Pete Bakel

202-752-2034

WASHINGTON, DC – Fannie Mae’s first quarter 2015 Mortgage Lender Sentiment Survey™ reveals an improving outlook among mortgage lenders regarding their lending activities and market expectations. Compared with last quarter and the same period last year, this quarter’s results show that more lenders expect mortgage demand and their profit margin to grow over the next three months. Results also show that credit tightening observed last year has continued to trend down gradually moving into 2015. For GSE-eligible purchase loans, 71 percent of lenders surveyed say they expect purchase mortgage demand to go up over the next three months, compared with 59 percent reported during the same quarter last year. Additionally, 41 percent of lenders reported increased profit margin expectations, compared with 21 percent during the same quarter last year.

Improving economic conditions and a more upbeat outlook for lender profit margins appear to be fueling increased optimism among mortgage lenders at the start of 2015. “The first quarter results mirror a similar trend among American households, as shown in our recently released National Housing Survey^™ data,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “These results are consistent with our view that an improving economy, strengthening employment, and increasing consumer confidence should support a modest housing expansion in 2015, after an uneven and disappointing year for housing activity in 2014.”

MORTGAGE LENDER SENTIMENT SURVEY HIGHLIGHTS

Differences in Economic and Housing Sentiment Between Senior Executives and General Consumers

• Compared with the general population of consumers, senior mortgage executives continue to be more optimistic about the overall economy and more pessimistic about consumers’ ability to get a mortgage today.

Positive Consumer Purchase Mortgage Demand Outlook for the Next Three Months

• After gradually trending down throughout 2014, lenders’ purchase mortgage demand expectations for all types of loans (GSE eligible, Non-GSE eligible, and government loans) increased this quarter across institution sizes and types (mortgage banks, depository institutions, and credit unions), although there might be seasonal influences.

Gradual Credit Standards Easing

• This quarter, across all loan types, the share of lenders reporting credit easing is higher than the share of lenders reporting credit tightening. Mortgage banks continue to be more likely than depository institutions to report credit easing.

Stable Mortgage Execution Outlook

• Most institutions reported that they expect to maintain their mortgage strategy in relation to secondary market outlets over the next year. Among larger institutions and mortgage banks, more lenders reported expectations to decrease rather than increase the share sold to GSEs.

Stable Mortgage Servicing Rights (MSR) Execution Outlook

• The majority of institutions reported that they expect to maintain their Mortgage Servicing Rights (MSR) execution strategies over the next year. Among mortgage banks, more lenders reported plans to retain rather than sell their MSRs.

Positive Profit Margin Outlook for the Next Three Months

• Lenders’ profit margin outlook has improved significantly from last year, in particular among larger lenders, with the share of lenders expecting their profit margin to go up over the next three months increasing significantly this quarter.

The Mortgage Lender Sentiment Survey^™ conducted by Fannie Mae 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. The Fannie Mae first quarter 2015 Mortgage Lender Sentiment Survey was conducted between February 4, 2015 and February 16, 2015 by Penn Schoen Berland in coordination with Fannie Mae. For detailed findings from the 2015 first quarter survey, as well as survey questionnaires and other supporting documents, please visit the Fannie Mae Mortgage Lender Sentiment Survey page on fanniemae.com. Also available on the site are special topic analyses, which focus on findings and analyses of important industry topics.