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58 | Th e M Rep o RT O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET Department large lenders anticipate slight easing in credit standards pessimism about the ability of the American public to obtain a mortgage haunts senior executives. a s the mortgage sector struggles to cope with declining demand and stringent regula- tory requirements, new survey results from Fannie Mae show senior industry executives growing increasingly pessimis- tic about American consumers' chances of getting a mortgage. In a survey of mortgage lend- ers over the third quarter, Fannie Mae found 85 percent of senior executives believe it would be difficult for most Americans to get a home loan in today's envi- ronment, up from 81 percent in the second quarter. To compare, only 50 percent of consumers polled in the company's August National Housing Survey said they think securing a mortgage would be difficult. Lenders were also sourer on their outlook for purchase mortgage demand over the next three months, with only 21 percent expecting an increase in demand for GSE-eligible loans—a drop of 33 percentage points from the second quarter. Thirteen percent expect demand to fall as the housing market enters its slow season, while 66 percent say demand will stay in line with where it is now. Similar results were seen in the outlook for non-GSE loans and government-backed mortgages. "Lenders' diminished purchase mortgage demand outlook is broadly in line with the softened consumer housing sentiment seen in the August National Housing Survey results released last week," said Doug Duncan, SVP and chief economist at Fannie Mae. The expected fall-off in demand follows a quarter that presented a mixed bag. According to Fannie Mae, the number of lenders reporting a rise in demand for agency loans over the past three months dropped in the latest survey, as did the number of lenders reporting a decline in demand. Net demand for non-agency loans was up slightly, while demand was essentially flat for government loans. As in the second-quarter survey, large lenders expressed more willingness than smaller firms to open up their credit standards in the coming months, though on the whole, most lenders said they plan to keep criteria about where they are. "Historically, as lenders face a more competitive market for loan volume, it's not uncommon to see some loosening in the lending standards; however, this time, the easing will likely be around the edges," Duncan said. "Larger lenders are expecting to tap into the non-GSE-eligible and government loan market to maintain or grow their market share and offset their anticipated slowing mortgage demand as the peak spring/summer selling seasons are coming to an end." Fannie mae maintains lukewarm Housing Forecast The pace of growth will be "subdued" for the remainder of 2014. a n upward revision in GDP growth for the second quarter bolstered optimism at Fannie Mae for the rest of the year's economic track. The mortgage giant's Economic and Strategic Research Group put out its newest outlook recently, calling for accelerated growth following the most re- cent news of 4.2 percent annual- ized GDP growth in the year's second quarter. "In our September forecast, we see the economy continuing to accelerate toward 3-percent growth in the second half of the year, in line with our prior fore- cast," said Doug Duncan, chief economist at Fannie Mae. Duncan pointed to recent improvements in business spend- ing, employment, and consumer confidence, all of which he hopes will help offset unexpected weakness in consumer spending. On the other hand, the hous- ing market is still struggling to find any real traction after going through fits and starts earlier in the year. "Recent housing activity isn't quite as positive, having shown only lukewarm growth since a promising start to the third quarter, but our forecast is little changed from August," Duncan said. "Purchase mortgage applica- tions have trended down over the past three months, despite the declining interest rate envi- ronment. "We believe this suggests a residual conservatism on the part of consumers and supports our view that the pace of growth in the housing sector will be subdued during the remainder of 2014, with modest improvement in 2015," he continued. For 2014, Fannie Mae's econo- mists forecast $1.11 trillion in mortgage originations, a decline of 42 percent from last year. Production is expected to dip another 5 percent next year to an anticipated $1.05 trillion. At the same time, the pur- chase side of the mortgage market is expected to gain more ground, reducing refinance share to 39 percent this year and 26 percent in 2015. While the group says its projections could change in the next forecast, when it bench- marks its 2013 estimates to data recently released under the Home Mortgage Disclosure Act, it expects "general market trends to remain valid." "We believe this suggests a residual conservatism on the part of consumers . . ." —Doug Duncan, Fannie Mae.