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62 | TH E M R EP O RT SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T FHFA's 2019 Plan for the GSEs In its 2019 Scorecard, the Federal Housing Finance Agency stated its expectations for the GSEs in the coming year. T he Federal Housing Fi- nance Agency (FHFA) released its 2019 Score- card for Fannie Mae, Freddie Mac, and Common Securitization Solutions. The FHFA notes that the 2019 Score- card furthers the goals outlined in the Agency's 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac. Much like the previous year's Scorecard, the GSEs as well as Common Securitization Solutions, will be assessed for all Scorecard items based on the following key criteria: the extent to which each Enterprise conducts initiatives in a safe and sound manner consistent with FHFA's expectations for all activities; the extent to which the outcomes of each Enterprise's ac- tivities support a competitive and resilient secondary mortgage mar- ket to support homeowners and renters; the extent to which each GSE meets FHFA's expectations under the Conservatorship Capital Framework (CCF), including FHFA's expectations on meeting appropriate return on conservator- ship capital targets; the extent to which each Enterprise conducts initiatives with consideration for diversity and inclusion consistent with FHFA's expectations for all activities; cooperation, and collabo- ration with FHFA, each other, the industry, and other stakeholders; and the quality, thoroughness, cre- ativity, effectiveness, and timeliness of their work products. Goals for 2019 include reducing taxpayer risk through increasing the role of private capital in the mortgage market; and building a new single-family infrastructure for use by the GSEs and adaptable for use by other participants in the secondary market in the future. Another key goal FHFA expects for 2019 is for the GSEs to main- tain, in a safe and sound manner, credit availability and foreclosure prevention activities for new and refinanced mortgages to foster liquid, efficient, competitive, and resilient national housing finance markets. In the Scorecard, FHFA notes that it expects Fannie Mae and Freddie Mac to operate their single-family and multifamily busi- ness activities safely and effectively, in a manner that supports safety and soundness, market liquidity, and access to credit. Fannie Mae Weighs in on Lender Sentiment Once all is said and done, how did 2018 shape up for the industry? Fannie Mae provides insights. F annie Mae's latest Mortgage Lender Sentiment Survey pre- dicted that 2018 would cross the finish line as a disappoint- ing year for the housing and mortgage industry. However, the GSE report remained hopeful for the year ahead. Doug Duncan, SVP and Chief Economist at Fannie Mae, said, "While 2018 is likely to end up a disappointing year for the hous- ing and mortgage industries, continued strength in demographics and the labor market offers hope that conditions should stabilize and may even improve next year." Quoting a mortgage lender survey, Fannie Mae stated that the profit outlook for mortgage lenders fell for the ninth consecutive quarter between October and November, as a result of declining demand for loans to buy homes and refinance existing mortgages. Duncan pointed out that stressful conditions hang over the mort- gage industry as lenders report the lowest purchase mortgage de- mand expectations across all types of loans. He also noted that the refinance demand expectation for GSE-eligible loans is abysmal—es- tablishing the lowest record in the survey's five-year history. Fannie Mae's Q 4 2018 Mortgage Lender Sentiment Survey found that outlook for profit among lenders in the fourth quarter reached an all-time survey low across all loan types— GSE-eligible, non-GSE-eligible, and government. Respondents cited competition from other lenders as the top reason for their pessimism for the eighth consecutive quarter. Consumer demand was listed as the second most important reason for decreased profit margin outlook, which also reached a survey high. Speaking of homebuying trends, Duncan said, "Rising mortgage rates and lean inventory amid solid home price appreciation have discouraged both first-time and trade-up homebuyers. However, mortgage rates have shown signs of stabilization, and annual home price gains have slowed from the red-hot pace" seen earlier in 2018. The report also found that lenders continued to ease credit standards at a modest pace since the beginning of 2018, how- ever, at a significantly slower compared to the previous year. Expectations on easing lending standards remain steady since 2017 up until from Q 4 2018. Goals for 2019 include reducing taxpayer risk through increasing the role of private capital in the mortgage market; and building a new single-family infrastructure for use by the GSEs and adaptable for use by other participants in the secondary market in the future.