Mortgage Lending Could See Significant Growth in 2015, Fannie Mae Says

Mortgage LendingFannie Mae’s new Lender Sentiment Survey released this week backs up the belief that the lending market in 2014 actually did quite well, and may do even better in 2015 in the run-up to spring home buying.

The report, which was authored by Fannie Mae senior manager of economic and strategic research Li-Ning Huang, stated that there are no financial institutions planning to downsize or leave the mortgage origination space, and only 4 percent of lenders planning to downsize servicing. 88 percent of lenders said that they in fact plan to grow their mortgage origination business, while 52 percent said that they are planning to ramp up their marketing initiatives to focus on more first-time home buyers.

Another 42 percent said that they have plans to increase marketing to home buyers who are “moving up.” Further, large financial institutions generally want to ramp up marketing to premium consumers, while smaller and mid-sized financial institutions prefer to focus their marketing on low-income to median-income consumers.

“In 2013, it was all about volume, and mortgages beefed up a lot through servicing and refinancing,” observed United Wholesale Mortgage president and CEO Mat Ishbia, in reaction to the Fannie Mae study. “In 2014, it was about purchases and which lenders would be in this long term. A lot of people did pretty well despite the doom and gloom going into 2014.”

As for 2015, he believes that institutions are now focused once again on growing their mortgage business. “We expect this year to be our best year in terms of overall business and are really bullish on the market this year,” added Ishbia, whose company launched yesterday its EASE loan origination system.

Another institution that felt bullish about Fannie’s statistics was Guaranteed Rate, who said it plans to grow both origination and servicing arms. “The recent drop in rates has allowed our refinance origination to increase from 2014 levels, and our purchase business will continue to thrive as it did in 2014, when purchases made up the majority of our volume,” said Guaranteed Rate senior vice president of lending Daniel Gjeldum.

He also noted that Fannie Mae’s new rules reducing the minimum down payment to 3 percent would be a boon to first-time home buyers, making it easier for these consumers to obtain a mortgage than in previous years.

The Fannie Mae report also took an in-depth look at how credit standards changed in the aftermath of the Ability to Repay/Qualified Mortgage rule. These reforms were instituted in January 2014 and some feared they may have a deleterious effect on the mortgage space, though they were launched in an effort to mitigate risk. That said, lenders said that debt-to-income ratio and documentation to be furnished were among the most common requirements changed as a result of the rule.

Other requirements, such as FICO score (“credit score”) and loan-to-value (LTV) ratio, were not commonly cited as criteria that had been changed following last year’s ruling. A total of 44 percent of lenders said that they had tightened their credit standards, according to Fannie Mae.