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44 | TH E M R EP 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 Credit Standard Easing Predicted Lenders expect government and GSE-eligible loan standards to continue to loosen. F annie Mae's fourth quar- ter 2015 Mortgage Lender Sentiment Survey found more lenders expect credit standards to ease rather than tighten for GSE-eligible loans and government loans over the next quarter. The survey found the easing of credit standards may help solve some of the affordable housing problems the housing market has been experiencing. "Several factors point to con - strained housing affordability in 2016, particularly for first-time home buyers, including slow single- family supply response and limited inventory of starter homes on the market, strong inflation-adjusted house price appreciation outpacing household income growth, and an upward bias in mortgage rates," said Doug Duncan, SVP and Chief Economist at Fannie Mae. According to the data, 16 percent of lenders expect GSE-eligible loan standards to ease in the fourth quarter, up from 11 percent last quarter. Meanwhile, only 2 percent of lenders believe standards will tighten, down from 4 percent last quarter. For government loans, 12 percent of lenders expect credit standards to ease, while 3 percent expect them to tighten. "On net, lenders told us in our fourth-quarter Mortgage Lender Sentiment Survey that they have eased and expect to continue to ease credit standards, which was a consistent trend throughout 2015," Duncan noted. "Thoughtful easing will help mitigate some of the affordability decline moving into 2016. The use of Fannie Mae's HomeReady mortgage was cited by some lenders in the survey to explain their expectations for eas - ing credit standards and how they will increase consumers' access to mortgage credit." The survey results showed that the percentage of lenders reporting higher purchase mortgage demand expectations for the next quarter continues to decrease after reach - ing a record high in the second quarter. However, this outlook still remains above 2014's data. The share of lenders reporting a spike in mortgage demand over the previous three months is also down from the last quarter among all loans, but is above a year ago. The outlook for both stable mortgage execution and stable mortgage servicing rights (MSRs) execution was stable in the fourth quarter, Fannie Mae reported. In addition, fewer lenders expect their profit margins to increase during the next quarter, with a negative 29 percent expect - ing profit margins to rise, a new survey low. Fannie Mae said lend- ers surveyed blame "government regulatory compliance" for the stall in the profits. The picture is much worse for larger lenders and mortgage banks, with negative 56 percent and negative 53 percent, respectively reporting that nega - tive profit margin outlook.