Mortgage Lenders Have Bleak Outlook in Fannie Mae’s Lender Sentiment Survey


With falling demand from consumers, increased competition from new entrants and shrinking profits, it’s not exactly a great time to be a mortgage lender, Fannie Mae’s First Quarter 2018 Mortgage Lender Sentiment Survey shows.

Mortgage lenders reported a net negative profit margin outlook in the first quarter that matched the all-time low reading from the fourth quarter of 2016, the report shows.

It was the sixth consecutive quarter that mortgage lenders had a negative view of future profit margins.

Lenders that expected lower profit margins moving forward continued to point to “competition from other lenders” as the primary reason, which set another new survey high for the fifth consecutive quarter.

“Market trend changes” were cited as the next biggest reason for the first time in three quarters.

Compounding their profit margin concerns, more lenders also had a negative view of consumer demand for purchase and refinance mortgages. The net share of lenders who reported growth in purchase demand over the prior three months was negative for the first time in four years, falling to the lowest reading since the first quarter of 2014.

Those that had positive demand expectations over the next three months decreased to the lowest first-quarter reading since the survey began.

Lenders also continued to report a downbeat outlook with regard to refinance demand over the prior three months and next three months.

“Lenders have faced an increasingly difficult market environment, as they report the most sluggish refinance demand expectations in more than a year, the most anemic purchase demand outlook on record for any first quarter, and the worst profit margin outlook in the survey’s history,” says Doug Duncan, senior vice president and chief economist at Fannie Mae.

“Despite the pressures to remain competitive and profitable, signs of lender caution appear to be emerging. While more lenders eased lending standards than tightened them, continuing the trend that started more than three years ago, the net share of lenders reporting easing credit standards declined for the first time in five quarters to the lowest level in a year.”

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