According to Fannie Mae’s Q2 2020 Mortgage Lender Sentiment Survey, mortgage lenders’ profit margin outlook for the next three months fell slightly but remained positive due to strong reported refinance demand.
This quarter, 52% of lenders believe profit margins will increase compared to the prior quarter, while 24% believe profits will remain the same and 23% believe profits will decrease. The increased optimism supplements prior quarter MLSS results revealing already-strong lender expectations of profitability. The survey of senior mortgage executives was conducted between May 5 and May 18.
Continuing strong consumer demand for refinance mortgages, in particular, outweighed a reported decline in purchase mortgage demand and drove lenders’ expectations of increased profitability, with GSE pricing and policies cited by lenders as the second most common reason for the optimistic outlook.
Lenders attributed the purchase mortgage demand decline to COVID-19-related factors, including home price uncertainty, higher unemployment, policy changes, and lower inventory. Lenders pointed to the same reasons for credit tightening.
For the first time in survey history, more lenders responded that they believe the U.S. economy is on the wrong track, rather than on the right track. After years of remaining largely unchanged, this quarter the majority of lenders reported tightening credit standards across all loan types.