Real Estate & Mortgage Insights

Mortgage Lender Optimism Reaches Record High

Rapidly growing home prices and increased demand for mortgage loans has pushed lender optimism about the housing market to new heights, according to mortgage guarantor Fannie Mae, a sign that a recovery is continuing to gain steam in 2015. In its Mortgage Lender Sentiment Survey for the 2015 second quarter, a survey of small, mid-sized and large U.S. mortgage lending companies, Fannie Mae reported that the 70 percent of lenders said they expected home prices to rise over the next 12 months, a new record high for the survey which began in March 2014. And mortgage lenders were much more positive about rising home prices than the general population. They increase in optimism about rising prices may be fueled by lenders’ experience with growing home purchase demand in the past several months. “This quarter’s results showed that the growing optimism of lenders has been rewarded,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The share of lenders reporting increased purchase mortgage demand over the prior three months reached a survey high for both GSE-eligible and government loans.” Demand has made a comeback in the past year as interest rates have remained near all-time record lows. Although rising prices have held back some demand, growing inventory has fanned the flames of potential homebuyer excitement. During the second quarter, 77 percent of lenders reported an increase in demand for government sponsored entities (GSEs –including Fannie Mae and Freddie Mac) home purchase mortgage loans and 65 percent stated that saw an increase in demand for government mortgage loans. Fannie Mae and Freddie Mac are currently under the conservatorship of the U.S. government and guarantee roughly half of all mortgage loans made in the country today. While fewer lenders this quarter predicted that demand will continue to grow in the next quarter, there are more now who expect demand increases than there were last year in the second quarter, a sign of an upward, long-term trend in optimism. At the same time, even though mortgage credit has not been significantly loosened in the past quarter, the credit standards seem to have stabilized, with most lending institutions reporting plans to leave credit standards unchanged for the next 12 months. That is welcome news to homebuyers and mortgage borrowers who saw mortgage loans become more difficult to obtain in 2014. Those who did report having tightened their credit standards in the past quarter cited government regulatory concerns and changes in government fees as the cause. All of the survey data points to a sustained recovery in the U.S housing market, according to Fannie Mae. “The results, when taken together with the continued positive trend in consumer attitudes shown in the recently released National Housing Survey, reinforce an increasingly optimistic outlook for housing in 2015, consistent with our forecast,” said Duncan. “We expect a continued housing expansion in 2015 after an uneven and disappointing 2014.”



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