Lenders Report Easing of Some Credit Standards

The net share of lenders reporting easing rather than tightening credit standards over the prior three months fell for the second straight quarter, according to Fannie Mae's first quarter 2016 Mortgage Lender Sentiment Survey. However, lenders on net reported tightening of credit standards for government loans for the first time since the third quarter of 2014, and more lenders expect credit easing rather than tightening credit standards for all mortgage types over the next three months.

The Fannie Mae survey also found the net share of lenders reporting increased purchase mortgage demand for the prior three months declined significantly across all loan types on a year-over-year basis, while the net share of lenders reporting increased purchase mortgage demand for the next three months is at an overall similar level to the first quarter of 2015.

"This quarter's Mortgage Lender Sentiment Survey results reflect recent market volatility. Lenders anticipate a pickup in refinance demand in light of the decline in interest rates this year, but report a slowdown in purchase demand perhaps because of a seasonal component," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The survey suggests a slower pace of easing, as the net share of lenders who reported that they have eased credit standards overall over the past three months remained positive but has declined since the third quarter of last year. Lender expectations for easing over the next three months have also moderated. Many lenders also indicate a likely increase in the sales of mortgage servicing rights, possibly to compensate for these countervailing pressures on profits and to take advantage of current favorable pricing in the market."