The share of lenders who cite government regulatory compliance as a main factor that will cause a decrease in profits has dropped dramatically, according to the results of Fannie Mae's Mortgage Lender Sentiment Survey.
Fannie Mae reported Thursday that only 39% of lenders expecting a lower profit margin outlook cited regulatory compliance as one of the top two reasons for their pessimistic view, compared with 67% last quarter and 61% a year ago. Consequently, this reason dropped to second behind market competition, the first time in the survey's history it was not cited as the top reason for an eroding outlook.
Overall, only 17% of lenders surveyed said they expected their firm's net profit margin to decrease versus 28% who said they expect it to grow and 55% who believe it will remain unchanged in the next three months.
"More lenders, on net, reported a positive profit outlook for the third straight quarter, the first time that has happened since the survey's inception," Fannie Mae chief economist Doug Duncan said in a news release.
"Their perception of profit outlook in the third quarter of this year is in stark contrast to the third quarter of 2015, when a sizable net share of lenders expected a deteriorating profit outlook over the next three months," he added. "It appears that lenders have incurred the increased compliance costs from new regulations such as TRID, and are now on a stabilized though higher-cost footing to focus on growth strategies."
Fannie Mae also found that more lenders reported demand growth for both purchase mortgages and refinances, with growth for the latter being driven by a further mortgage rate decline following the Brexit vote.
Lenders also indicated plans to grow their Fannie Mae and Freddie Mac shares and reduce what they retain in their portfolio. And reversing the trend that was seen thus far in 2016, more lenders indicated that will decrease sales of mortgage servicing rights and increase the share that they retain.
