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Home >> Daily Dose >> Lenders Unenthusiastic About Mortgage Profit Margins in 2018
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Lenders Unenthusiastic About Mortgage Profit Margins in 2018


mortgage ratesContinuing a trend that began in Q4 2016, mortgage lenders reported a negative profit margin outlook for the next three months according to Fannie Mae's Q4 2017 Mortgage Lender Sentiment Survey. This quarterly survey of 224 senior executives from the mortgage lending industry is used not only to track lenders’ current impressions of the mortgage industry, but also their insights into the future.

This outlook has persisted for the last five quarters with lenders expressing negative sentiment, primarily due to competition with three-fourths of respondents who saw deteriorating profits, citing competition as the most important reason compared with only one-third two years ago.

“This is not surprising given that refinance volume continues to shrink. More lenders reported a pullback in refinance demand from the prior quarter than those who saw an increase, continuing the trend that started at the beginning of the year,” said Doug Duncan, SVP and Chief Economist at Fannie Mae.

Other reported factors include consumer demand, staffing, and market trend changes. Additionally, the net share of lenders who expect to see growth in refinance mortgage demand over the next three months fell to the lowest reading in a year across all loan types (GSE eligible, non-GSE eligible, and government). More lenders also reported declining refinance mortgage demand over the prior three months, marking four consecutive quarterly drops.

“Key trends have persisted throughout this year, with lenders who see declining profits far outweighing those noting improvement in the bottom line for the fifth consecutive quarter,” Duncan said. Additionally, this finding was consistent with Fannie Mae’s forecast for a steady drop in refinance originations this year.

“With the outlook calling for rising interest rates and continued tight housing inventory constraining home sales, increased competition will likely continue to drive lenders' mortgage business strategies,” Duncan said.

However, the survey noted that the net share of lenders reporting easing of credit standards over the prior three months continued its upward trend since Q4 2016 across all loan types – reaching or equaling survey highs for the second consecutive quarter. The survey also noted that the net share of lenders expecting increased demand in purchase mortgages over the next three months remained relatively stable.

To read the complete report click here.

About Author: Radhika Ojha

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Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her masters degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha, also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. She can be reached at [email protected]

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