TheMReport

TH E M R EP O RT | 49 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 Lender Sentiment Leans toward Purchase Mortgages Fannie Mae survey shows a 70-percent jump in purchase mortgage demand for Q2. M ortgage lenders reported demand growth for GSE- eligible purchase mortgages over the past three months rebounded significantly in the second quarter this year. Fannie Mae's second quarter 2016 Mortgage Lender Sentiment Survey found that lenders report - ed a 70 percent on net increase in purchase mortgage demand in the second quarter, compared with 20 percent in the first quarter and 71 percent a year ago. According to the report, which polls senior executives of its lending institution custom - ers on a quarterly basis to assess their views and outlook across varied dimensions of the mortgage market, lenders expect purchase mortgage demand to remain near levels observed last year for the next three months. Lenders said that demand will fall slightly for GSE-eligible and non-GSE eligible mortgages to 60 percent and 43 percent, respectively, but ticking up to 58 percent for government loans. In terms of refinancing, lenders reported a significant increase for demand across all loan types from the first quarter to the second quarter, but expectations for refinance mortgage demand for the next three months decreased dramatically since last quarter. "Key survey sentiment indica - tors suggest that lenders remain cautiously optimistic in their mar- ket outlook," said Doug Duncan, SVP and Chief Economist at Fannie Mae. "The outlook for purchase demand growth over the next three months returned to levels similar to last year, while the outlook for refinance demand and profit margin improved mod - erately versus last year's levels." Although lenders surveyed by Fannie Mae reported a moder- ate net easing of credit standards across all loan types over the prior three months, they do not expect to ease credit standards over the next three months. In fact, more than 90 percent of lenders expect to keep their credit standards the same. Only 4 percent of lenders said they expect to further ease credit standards over the next three months. "The trend toward easing of credit standards appears to be tapering off, as the vast majority of lenders, around 90 percent, reported plans to keep their credit standards about the same," Duncan said. "The survey was conducted before the recent May jobs report, and the weaker re - ported job gains might potentially temper this optimism." OCC Stands Behind Coexistence of Banks, Fintechs Curry encourages ongoing dialogue between the institutions to keep industry moving forward. I n various public addresses this year, Comptroller of the Currency Thomas J. Curry has staunchly defended the importance and relevancy of banks in 2016 as financial technology firms, or "fintechs," have become increas - ingly popular. Curry warned in an address in mid-March that fintechs would not replace banks, which caused some to believe that the OCC, which regulates federal banks, was reluctant to embrace innova - tion in the financial industry. However, in late March, the OCC released a white paper that advo- cated for responsible innovation in the industry as opposed to just plain innovation. As an example of innovation in the financial industry that did not work out as planned, Curry pointed to adjustable-rate mort - gages, which could be considered an innovative financial product but that turned out to be one of the main causes of the housing crisis. Earlier this summer, Curry reit - erated in a public speech that his efforts to oversee fintechs are not meant to prevent innovation in the financial industry, but rather to encourage dialogue between banks and fintechs, according to the Wall Street Journal. The OCC held a forum on June 23 that in - cluded both fintechs and banks to encourage such a dialogue. Curry described the advance - ment of technology in the industry and conversations between banks and fintechs as a chance to "rethink how we do things." He said in his speech that "It's not an issue of punishing or subjecting someone to a regulatory regime. Internally, we are looking at how we can be responsive to both sides of the question—both the banks and the fintech firms and what the relative advantages and disadvan - tages are of existing regulations." The OCC is soliciting comments on the white paper the office released in late March, which is entitled "Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective." "At the OCC, we are mak - ing certain that institutions with federal charters have a regulatory framework that is receptive to responsible innovation along with the supervision that supports it," Curry said. "Innovation holds much promise. It can help meet the needs of the underserved and provide better financial tools for families. It can help institutions scale operations efficiently, and it can make business and con - sumer transactions faster and safer. Innovation is not free from risk, but when managed appropriately, risk should not impede progress." Curry said of the upcoming dialogues between banks and fintechs, "We're talking about having a fresh look at ideas, not prejudging, not saying 'no' from a regulatory reflexive habit—really having a dialogue in a safe place with banks and with financial- technology firms." "The trend toward easing of credit standards appears to be tapering off." —Doug Duncan, Fannie Mae

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