Large lenders' expectations that underwriting standards will ease over the next three months coincide with overall lenders' expected pullback in the demand for single-family purchase mortgages, according to results from Fannie Mae's third-quarter Mortgage Lender Sentiment Survey. The share of lenders who expect purchase mortgage demand to go up over the next three months decreased significantly—between 26 to 33 percentage points depending on loan type—with the largest decline of 33 percentage points on GSE-eligible loans. Among those surveyed, larger lenders continue to be more likely than their smaller counterparts to say they expect to ease their credit standards during the next three months, in particular for non-GSE-eligible and government loans, perhaps indicating an effort to boost purchase mortgage activity before the year comes to a close. "Lenders' diminished purchase mortgage demand outlook is broadly in line with the softened consumer housing sentiment seen in the August National Housing Survey results released last week," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Historically, as lenders face a more competitive market for loan volume, it's not uncommon to see some loosening in the lending standards; however, this time, the easing will likely be around the edges." These latest third quarter results are largely consistent with Fannie Mae's study released last month, titled "Impact of QM," that shows larger lenders are more likely than smaller lenders to pursue non-QM loans. "Larger lenders are expecting to tap into the non-GSE-eligible and government loan market to maintain or grow their market share and offset their anticipated slowing mortgage demand as the peak spring/summer selling seasons are coming to an end," said Duncan. ►Differences in economic and housing sentiment between senior execs and general consumers: Compared to general consumers, senior mortgage executives continue to be more optimistic about the overall economy and more pessimistic about consumers' ability to get a mortgage today. ►Steady consumer purchase mortgage demand over the prior three months: Consumer demand reported for single-family purchase mortgages over the prior three months remain little changed from Q2 to Q3 2014. ►Negative consumer purchase mortgage demand outlook for the next three months: The share of lenders expecting demand growth for the next three months declined significantly from Q2 to Q3. ►Expectations of easing credit standards among larger lenders for non-GSE eligible and government loans: Most lenders reported no major changes in their credit standards for the prior three months and expected no major changes for the next three months. However, larger lenders continue to be more likely than smaller lenders to say their credit standards eased over the prior three months and that they expect standards to ease during the next three months, in particular for non-GSE eligible and government loans. ►Stable mortgage execution outlook: As in Q1 and Q2, most lending institutions surveyed in Q3 2014 reported that they expect to maintain their post mortgage origination execution strategies for the next three months. ►Stable mortgage servicing rights (MSR) execution outlook: As in Q1 and Q2, the majority of lenders surveyed in Q3 2014 reported that they expect to maintain their Mortgage Servicing Rights (MSR) strategies for the next three months. ►Slightly negative profit margin expectations for the next three months: Lenders' profit margin outlook for the next three months appears to have worsened from Q2 to Q3. The net percentage of larger and mid-sized lenders reporting decreased profit margin expectations increased from Q2 to Q3. This first-of-its-kind Mortgage Lender Sentiment Survey conducted by Fannie Mae polls senior executives of its lending institution customers on a quarterly basis to assess their views and outlook across varied dimensions of the mortgage market. The third quarter 2014 Fannie Mae Mortgage Lender Sentiment Survey was conducted between Aug. 6, 2014 and Aug. 22, 2014. Interviews were conducted by Penn Schoen Berland in coordination with Fannie Mae.