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Large Lenders Anticipate Slight Easing in Credit Standards

papers-and-figuresAs the mortgage sector struggles to cope with declining demand and stringent regulatory requirements, new survey results from Fannie Mae show senior industry executives growing increasingly pessimistic about American consumers' chances of getting a mortgage.

In a survey of mortgage lenders over the third quarter, Fannie Mae found 85 percent of senior executives believe it would be difficult for most Americans to get a home loan in today's environment, up from 81 percent in the second quarter. To compare, only 50 percent of consumers polled in the company's August National Housing Survey said they think securing a mortgage would be difficult.

Lenders were also more sour on their outlook for purchase mortgage demand over the next three months, with only 21 percent expecting an increase in demand for GSE-eligible loans—a drop of 33 percentage points from the second quarter. Thirteen percent expect demand to fall as the housing market enters its slow season, while 66 percent say demand will stay in line with where it is now.

Similar results were seen in the outlook for non-GSE loans and government-backed mortgages.

"Lenders' diminished purchase mortgage demand outlook is broadly in line with the softened consumer housing sentiment seen in the August National Housing Survey results released last week," said Doug Duncan, SVP and chief economist at Fannie Mae.

The expected fall-off in demand follows a quarter that presented a mixed bag. According to Fannie Mae, the number of lenders reporting a rise in demand for agency loans over the past three months dropped in the latest survey, as did the number of lenders reporting a decline in demand. Net demand for non-agency loans was up slightly, while demand was essentially flat for government loans.

As in the second-quarter survey, large lenders expressed more willingness than smaller firms to open up their credit standards in the coming months, though on the whole, most lenders said they plan to keep criteria about where they are.

"Historically, as lenders face a more competitive market for loan volume, it's not uncommon to see some loosening in the lending standards; however, this time, the easing will likely be around the edges," Duncan said. "Larger lenders are expecting to tap into the non-GSE-eligible and government loan market to maintain or grow their market share and offset their anticipated slowing mortgage demand as the peak spring/summer selling seasons are coming to an end."

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.

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