Fannie Mae

WASHINGTON, DC—The Qualified Mortgage rule issued by the Consumer Finance Protection Bureau that went into effect this year does not appear to be having much impact on lenders’ business strategies—but it is increasing their costs, according to Fannie Mae’s quarterly Mortgage Lender Sentiment Survey.

On the other hand, lenders by and large agreed that the quality controls under the rule will reduce their repurchase risk.

Fannie Mae first released its initial results of its quarterly Mortgage Lender Sentiment Survey at the end of July and followed up with the additional data on qualified mortgages last week.

It is a new survey the GSE has been conducting since the start of the year but only began making publicly available with this release, Steve Deggendorf, director of Economic & Strategic Research at Fannie Mae tells GlobeSt.com. It polls senior executives at the banks with which it does business on a quarterly basis. The first quarter 2014 Fannie Mae Mortgage Lender Sentiment Survey was conducted between March 4 and March 18. The second quarter survey was conducted between May 28 and June 8.

Fannie Mae decided to launch this new survey in large part due to the success it has had with its consumer survey, Deggendorf says. “We thought it was important to complement that view with what is going on with the lender as well,” he says.

The survey will have rotating questions, he explains—meaning that issues it hasn’t touched upon in the first two quarters could be addressed in the coming surveys. There will also be special topics focusing on, for example, capital markets.

Eventually Fannie Mae could use the data to make future projections and possibly become a leading indicator, but the GSE is nowhere near that point yet, Li-Ning Huang, market research manager tells GlobeSt.com. “We will need more time to see the trends and that could take one to two years of data.”

The most recent results made public from Fannie Mae’s survey include:

  • 80% of the lenders surveyed do not plan to pursue non-QM loans or prefer to “wait and see.” In addition, larger lenders are more likely than smaller and medium-sized lenders to report that they plan to actively pursue non-QM loans.
  • 84% of the lenders surveyed reported that they expect at least 90% of their single-family mortgage origination dollar volume to be considered qualified mortgages under the new QM rules.
  • 74% of the lenders surveyed reported that they expect their operational costs to increase as a result of QM rules.
  • 36% of the lenders surveyed reported that they expect to tighten their credit standards as a result of QM rules, whereas only 6% of the lenders surveyed reported that they expect to ease their underwriting criteria.
  • 85% of the lenders surveyed say their costs for QC-related activities increased over the last 12 months.
  • 74% of all lenders surveyed agree that “the quality control investments will reduce their repurchase risk.” Smaller lenders, however, are less likely to agree that “the quality control investments will reduce their repurchase risk.”

Among other findings, the survey showed that there was greater consumer mortgage demand in the second quarter of the year, compared to the first. It also noted that there is a steady and positive near-term mortgage demand outlook, and divergence between larger and smaller lenders in underwriting credit standards.

The survey also identified another trend: mortgage executives are significantly more likely than consumers to say it is difficult for consumers to get a mortgage today.

For all that, the survey also found that most lending institutions queried in Q2 reported that they expect to maintain their post mortgage origination execution strategies for the next three months and more lenders expect their profit margin over the next three months to stay the same and fewer lenders expect their profit margin to decrease. Also, lenders’ profit margin outlook improved from Q1 to Q2 2014.