Lenders Believe Industry Changes Will Benefit Buyers More than Originators

A new survey by Fannie Mae revealed that most mortgage lenders expect to see benefits from the industry’s most recent changes–particularly the Federal Housing Administration’s (FHA) move to reduce mortgage insurance premiums (MIPs) and the expansion of GSE-eligible 97-percent loan-to-value (LTV) products.

The survey, a quarterly Mortgage Lender Sentiment Survey conducted by Fannie Mae’s Economic & Strategic Research Group, studied the thoughts of senior mortgage executives throughout the U.S. Specifically, the survey asked about Fannie Mae and Freddie Mac’s recent expansion of GSE-eligible 97-percent LTV loan offerings and the FHA’s .05 percent reduction to annual MIPs, and the effect those would have on their business.

According to the results of the survey, two out of every three lenders that both increased 97-percent LTV products and MIP reductions will “somewhat” improve mortgage originations. A third of lenders don’t expect the changes to impact mortgage originations at all.

Though they’re on the fence about the benefits for themselves, most lenders surveyed agreed that both changes would be advantageous to consumers. In fact, 76 percent believe that expanding 97-percent LTV loan products will be good for homebuyers, and another 81 percent believe the MIP reduction will be beneficial, too.

The survey also revealed that 81 percent of lenders are planning to offer 97-percent LTV loans in the next calendar year, and though many believe these expanding offerings will improve the overall mortgage market down the line, not as many are confident in their ability to increase loan originations.

Of the lenders planning to offer 97-percent LTV loans, only 44 percent expect it to affect their loan origination rate. Another 54 percent expect the origination volume to remain about the same.

According to Steve Deggendorf, director of business strategy at the Fannie Mae Economic & Strategic Research Group, both the reduced MIPs and the expansion of 97-percent LTV loans were a response to past consumer and research.

“Lenders told us the top two causes of mortgage volume declines in 2014 were tighter credit underwriting standards and weak consumer demand,” Deggendorf said. “In prior research from our National Housing Survey (NHS), young renters said that gathering a down payment and affording the monthly mortgage payment [were] two of the top barriers to obtaining a mortgage. The GSE and FHA initiatives seek to address these lender and consumer concerns by expanding credit access through the GSEs’ lower down payment requirements (helping those who can’t afford a larger down payment) and from the FHA’s lower mortgage insurance premiums (helping those who need more affordable monthly mortgage payments).”

Head to Fanniemae.com to see the full results of the Mortgage Lender Sentiment Survey.