Outlook Improves For Mortgage Lenders’ Profit – NMP Skip to main content

Outlook Improves For Mortgage Lenders’ Profit

Keith Griffin
Sep 10, 2020
Mortgage lender profits

Mortgage lenders’ profit margin outlook for the next three months increased even further due to strong consumer demand, according to Fannie Mae’s Q3 2020 Mortgage Lender Sentiment Survey. The survey says 48% of lenders believe profit margins will increase compared to the prior quarter, building on an already strong profit margin outlook, while 37% believe profits will remain the same and 15% believe profits will decrease.
 
Reported consumer demand remained strong in the third quarter across all loan types, and in many cases neared or reached new highs. Lenders reporting purchase mortgage demand growth for both the prior three months and the next three months rose significantly from last quarter across all loan types (i.e., GSE-eligible, non-GSE-eligible, and government) and is back on par with the same time last year.
 
Similarly, according to lenders, refinance mortgage demand remained extremely strong in the third quarter across all loan types on both a look-back and look-forward basis. On net, lenders also reported a further tightening of credit standards over the prior three months and expect them to remain largely the same over the next three months.
 
“This quarter’s [survey] results align with the strong housing recovery amid the larger economic downturn due to COVID-19,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “Lenders’ reported purchase mortgage demand for the prior three months across all loan types have returned from sharp drops to the levels seen last year for the same quarter.
 
“Purchase demand growth expectations for the next three months reached the highest third-quarter readings since survey inception. For the third consecutive quarter, lenders' profitability outlook has remained a strong positive. Pent-up consumer demand, continued low mortgage rates, and favorable mortgage spreads helped drive lender profitability.”
 
“This quarter, lenders on net continue to report tightening of credit standards for the prior three months, but expected no further tightening next quarter,” Duncan continued. “Lenders attributed credit tightening to the uncertainty on the economic recovery and labor markets resulting from COVID-19. Although the housing market is showing remarkable strength amid the economic and health crisis, potential longer-term downside risks remain, including labor market weakness, low inventory, and home price uncertainty."
 
Mortgage Lender Sentiment Survey Highlights
Wide Mortgage Spreads Persist and Continue to Point to Positive Profitability Outlooks
  • Mortgage spreads remain elevated, consistent with mortgage lenders' profitability outlook. The average primary mortgage spreads (FRM 30 contract rate versus 10-year Treasury) came in at 229 basis points in August, above the long-run average of approximate 170 basis points.
 
Purchase Mortgage Demand Rose Significantly; Refinance Mortgage Demand Holds Stable
  • For purchase mortgages, the net share of lenders reporting demand growth for both the prior three months and the next three months rose significantly from last quarter across all loan types (i.e., GSE-eligible, non-GSE-eligible, and government), after being negative or close to negative last quarter, and is now on par with the readings seen for the same quarter last year.
  • For refinance mortgages, the net share of lenders reporting demand growth over the prior three months remained strong, reaching a survey high for government loans and second highest reading since 2014 for GSE-eligible and non-GSE-eligible loans. Demand growth expectations on net for the next three months also remained high across all loan types, rising or remaining on par with the previous quarter.
 
Credit Standards Tightened
  • Lenders on net continued to report a tightening of credit standards for the prior three months, with the majority expecting credit standards to stay about the same for the next three months.
 
About Fannie Mae’s Mortgage Lender Sentiment Survey
The Mortgage Lender Sentiment Survey 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 Fannie Mae third quarter 2020 Mortgage Lender Sentiment Survey was conducted between Aug. 4, 2020 and Aug. 16, 2020 by PSB in coordination with Fannie Mae. For detailed findings from the third quarter 2020 survey, as well as survey questionnaires and other supporting documents, visit the Fannie Mae Mortgage Lender Sentiment Survey page. Also available on the site are special topic analyses, which focus on findings and analyses of important industry topics.
Published
Sep 10, 2020
Biden Reappoints Powell As Federal Reserve Chairman

A signal that The Fed will continue its policies as inflation surges and economic uncertainty spikes due to an emerging variant of the coronavirus. 

Industry News
Nov 29, 2021
Servion Taps Sagent For Consumer-First Servicing Tech Stack

A 7-year deal between Servion Mortgage and Sagent will equip Servion with Sagent's tech stack for performing, non-performing, and consumer experience.

Tech
Nov 29, 2021
Guaranteed Rate's Banosian Funds $2B In Total Loan Volume

The mortgage industry shouldn't be surprised by Guaranteed Rate's top loan officer, Shant Banosian, funding $2 billion in total loan volume during a record-breaking year. After all, “The Billion Dollar Man” is one of the top 5 loan originators in the U.S.

Wholesale
Nov 29, 2021
Chairman Xu Sells Off Personal Assets To Avoid Default

The Evergrande saga continues as Chairman Xu Jiayin sells off 7 billion yuan ($1.1 billion) of his personal assets to prop up the deflating property giant.

Industry News
Nov 23, 2021
OptiFunder Secures $25 Million In Capital

OptiFunder, a warehouse management system provider for mortgage originators, raised $25 million in additional capital lead by Arthur Ventures, a growth capital firm focused on high-growth, founder-led and capital efficient B2B software companies.

Tech
Nov 23, 2021
Mortgage Company Donates $100K To High School In Memory Of Fallen U.S. Navy Corpsman

Cleveland-based CrossCountry Mortgage donated $100,000 to Milan Edison High School in memory of U.S. Navy Corpsman, Maxton W. Soviak, who died while assisting in the evacuation of Americans and refugees in Afghanistan in August.

Community
Nov 23, 2021