Senior mortgage executives say credit standards tightened and demand softened over the past three months, though demand is expected to improve.
For the second consecutive three-month period, the share of lenders, on net, that reported an easing of credit standards on home loans was thinner.
As residential lending conditions have tightened, the group is generally less optimistic about credit standards
over the upcoming three months.
That and more were discussed in the first-quarter 2016 Mortgage Lender Sentiment Survey from Fannie Mae.
There were 229 respondents who completed the survey who were among 3,000 randomly selected prospects invited to complete the survey.
The participants worked at 205 lending institutions — including 47 credit unions, 88 banks and 63 non-depository mortgage bankers.
The participants were senior executives — such as chief executive officers and chief financial officers — from Fannie’s lending institution customers. They were presented with between 40 and 75 questions.
The survey took between 10 and 15 minutes
to complete and was conducted from Feb. 3 through Feb. 16.
The results of the survey are used to provide mortgage-industry insights and benchmarks.
Credit standards on government-sponsored enterprise mortgages eased at 13 percent of lenders during the first quarter of this year, not as good as 17 percent in the prior quarter.
There was little change in the 5 percent share of residential lenders that considered GSE standards to have tightened during the last three months.
Over the next three months, 8 percent of lenders expect
easing in GSE credit standards, half of the share that was as optimistic in the last survey.
On non-GSE loans, the share who saw easing over the past three months fell to 13 percent from 18 percent in the fourth-quarter 2015 survey, while those who predict loosening over the next three months fell to 11 percent from 13 percent.
The share of larger and mid-sized lenders that reported tighter credit standards on non-GSE loans slipped, while the share widened at smaller lenders.
Although there was little change in the 8 percent share of lenders who experienced easing on government guidelines, the share who predicted an easing of standards fell to 8 percent from 12 percent.
The share of larger and smaller lenders that saw tighter government credit standards expanded while the share contracted for mid-sized institutions.
Demand for Fannie Mae and Freddie Mac loans to finance home purchases
was stronger at 43 percent of lenders in the first quarter, off from 47 percent who reported stronger demand in the final quarter of last year.
At the same time, 23 percent have recently seen a drop in demand, a far bigger share than 15 percent as of three months earlier.
On purchase financing loans that are ineligible for government-sponsored enterprise programs, demand increased at 36 percent of those surveyed, down from 49 percent the prior quarter. Weaker demand was reported by 18 percent, up from 15 percent.
The share who reported increased demand for government financing on home purchases fell to just under a third from 46 percent in the fourth-quarter 2015. The share of lenders reporting weaker demand doubled to 26 percent.
But the share of lenders who expect demand to rise during the next three months shot up on a quarter-over-quarter basis, to 71 percent on GSE loans from just a quarter in the fourth-quarter 2015 survey. The share of lenders reporting weaker expected GSE demand for home financing fell from a quarter in the final quarter of last year to 5 percent.
Similar trends were observed for non-GSE and government lenders.
A declining share of smaller institutions reported weaker non-GSE purchase mortgage demand, though the share widened for mid-sized and larger lenders.
For all types of refinances, demand was up at approximately a quarter of those surveyed, slightly stronger than the fourth quarter of last year.
Demand for refinances retreated at roughly a third of lenders.
Nearly half of lenders expect refinance demand to increase over the next three months, a much wider share than around 6 percent the previous quarter.
A widening share of executives at larger institutions indicated demand had dropped on GSE refinances, while the share thinned at mid-sized and smaller lenders.
On non-GSE loans, expected rising demand was cited by 36 percent versus 6 percent in the earlier period, and the share surged to 40 percent from 5 percent on government loans.
The share of larger and mid-sized institutions that saw stronger demand for non-GSE refinances moved up, but it slipped at smaller institutions.
On government refinances, a bigger share of larger institutions reported weaker demand though the share dropped for mid-sized and smaller lenders.
While just 4 percent of mortgage executives project a decline in home prices over the next 12 months, 59 percent expect appreciation. However, smaller lenders are less inclined to expect an increase in prices than their mid-sized and larger counterparts.
Since the fourth-quarter 2015, a slightly larger share of lenders and consumers see getting a loan as easy. At the same time, a slightly smaller share see lending conditions as difficult.
The view, however, from smaller institutions was slightly more negative.
