TheMReport — News and strategies for the evolving mortgage marketplace.
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46 | 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 ORIGINATION the latest lenders increasingly optimistic about Purchase demand and Home Prices More than three-quarters of lenders reported an uptick in purchase demand in the second quarter, according to an industry survey. M ortgage lenders are feeling more positive on purchase mortgage demand, profit margin, and credit standards over the next three months, according to Fannie Mae's second quarter 2015 Mortgage Lender Sentiment Survey. The survey showed lenders' near-term outlook for purchase demand and profit margin are reaching higher levels than 2014's survey results. Lenders are also reporting looser credit standards. "This quarter's results showed that the growing optimism of lenders has been rewarded," said Doug Duncan, SVP and chief economist at Fannie Mae. "The share of lenders report- ing increased purchase mortgage demand over the prior three months reached a survey high for both GSE-eligible and government loans. At the same time, the posi- tive gap grows between lenders reporting loosening or maintaining existing credit standards, relative to those reporting tightening." Fannie Mae's Mortgage Lender Sentiment Survey was conducted between May 7, 2015 and May 17, 2015 by Penn Schoen Berland in coordination with Fannie Mae, according the GSE. The survey polls senior executives of Fannie Mae's lending institution custom- ers every quarter to review their opinions and outlooks. The survey that senior mort- gage executives are not only optimistic, but even significantly more optimistic than general consumers about future home prices. This quarter, 70 percent of lenders expect home prices to go up over the next 12 months, a new survey high. The share of lenders reporting increased mortgage purchase de- mand climbed again this quarter, reaching a survey high for GSE- eligible loans at 77 percent and government loans at 65 percent, according to the survey. Meanwhile, credit tighten- ing has continued to fall since last year, Fannie Mae reported. Lenders are reporting loosening or maintaining existing credit standards. Most institutions reported to Fannie Mae that they expect to maintain their strategy in rela- tion to secondary market outlets over the next year. Many lenders also expect to increase the shares of loans originated and then sold to GSEs. The majority of institutions expect their current mortgage servicing rights execu- tion strategies remain constant over the next year. "While not matching first quarter 2015 levels, the profit margin and purchase mortgage demand expectations over the next three months remain above the 2014 readings," Duncan said. "The results, when taken to- gether with the continued posi- tive trend in consumer attitudes shown in the recently released National Housing Survey, rein- force an increasingly optimistic outlook for housing in 2015, consistent with our forecast. We expect a continued housing ex- pansion in 2015 after an uneven and disappointing 2014." Majority of loans in 2014 Were Qualified Mortgages A majority of respondents to an American Bankers Association survey said regulation is negatively impacting business. t he American Bankers Association's (ABA's) 22nd Annual Real Estate Lending Survey determined 90 percent of the typical bank's mortgage loans made last year were qualified mortgages (QMs). The survey also found 78 percent of respondents expect the Consumer Financial Protection Bureau's (CFPB's) Dodd- Frank mortgage lending rules will continue to limit credit availability, with 19 percent labeling the impact as "severe." "As expected, the ability- to-repay and QM rules have dampened the housing market recovery," said Robert Davis, EVP at the American Bankers Association. "Combine that with new mortgage disclosures, which are just around the corner, and we'll continue to see a slow down in what should be the ideal time to buy a home." The survey found high debt- to-income levels is the most like- ly reason for a mortgage loan not meeting QM standards, followed by lack of required documenta- tion. Of the 182 respondents, 77 percent with assets less than $1 billion, reported the highest percentage of loans to first-time homebuyers in the survey's 22- year history. Surveyed banks' foreclosure rates declined from 0.78 percent in 2013 to 0.57 percent in 2014, while the average delinquency rate for single-family homes decreased from 2.16 percent to 1.76 percent, the ABA reported. The 30-year fixed-rate increased slightly at 50.5 percent of all loans in 2014 com- pared to 50.3 percent in 2013. According to the survey, bankers are most concerned about compliance and increasing regulatory burden followed by economic uncertainty, the inter- est rate environment, and com- munity bank challenges. Of the total respondents, 87 percent said regulation is having a moderate to extreme negative impact on the bank's business. "June is American Housing Month and primetime for home- buyers. If you're thinking about buying a home, my advice is to start by talking to your banker," Davis said. "Your local banker knows the housing market in your community and can discuss your long-term financial goals to help you achieve the American dream of homeownership."