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Net Profit Margin Outlook For Mortgage Lenders Hits New High

Strong mortgage demand expectations, particularly in the refinance space, is driving a strong net profit margin outlook for mortgage lenders. New data in the Fannie Mae's Q3 2019 Mortgage Lender Sentiment Survey shows the expectations hitting a new high.

"Lender profitability sentiment hit a survey high this quarter, despite the movement of credit standards from net easing to net tightening," said Fannie Mae Senior Vice President and Chief Economist Doug Duncan in an announcement. "Lenders attributed their upbeat profitability outlook to consumer demand and operational efficiency. Many lenders pointed to declining interest rates as the engine behind consumer demand, particularly for refinance mortgages. Together, the results suggest that lenders' positive profitability outlook is being driven primarily by business fundamentals, not by lowered credit standards."

Among the highlights of the survey:

  • The recent widening of the primary/secondary mortgage spread appears to confirm mortgage lenders' reported profitability.

  • For refinance mortgages, across all loan types (GSE-eligible, non-GSE-eligible, and government), the net share of lenders reporting demand growth over the prior three months and next three months continued the upward trend that began in Q1 2019 and which has now reached new survey highs.

  • Mortgage banks and credit unions continued to indicate a net easing of credit standards over both the prior three months and next three months for non-GSE loans. However, depository institutions indicated a net tightening of credit standards over the prior and next three months.

Click on the photo above for more in-depth information on the Mortgage Lender Sentiment Survey.

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