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Mortgage lender pessimism runs high

The profit outlook for mortgage lenders hit a five-year low this quarter as companies have been squeezed by fierce competition for a shrinking pool of borrowers, Fannie Mae’s lender sentiment survey suggests.

"Stressful conditions continue to hang over the mortgage industry,” Fannie Mae Chief Economist Doug Duncan said.

“Lenders are reporting the lowest purchase mortgage demand expectations across all loans types and the worst refinance demand expectations for GSE-eligible loans [government-sponsored enterprises Fannie Mae/Freddie Mac] in the survey's five-year history," Duncan said.

The outlook declined for the ninth consecutive quarter in the fourth quarter survey. Competition for buyers was the most often cited reason for the decline. The second major cause for the pessimism is falling demand for mortgages, according to Fannie.

The survey suggests optimism is at the lowest point since Fannie began the survey in 2014.  

Duncan noted that mortgage rates appear to have stabilized and home-price gains have slowed down in hot real estate markets, both of which should help spur some demand for mortgages.

“While 2018 is likely to end up a disappointing year for the housing and mortgage industries, continued strength in demographics and the labor market offers hope that conditions should stabilize and may even improve next year," Duncan said.

The survey also indicated that lenders were easing credit standards, but not at the same rate as in the fourth quarter of 2017. 


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