Nearly half of mortgage firms expect profit growth to slow: Fannie Mae

Mortgage lenders are enjoying a banner year for margins and volumes, but their outlook for the latter got notably dimmer in the latest quarterly survey Fannie Mae released.

During the fourth quarter, nearly half or 48% of respondents indicated they expect profit margins to shrink, up from just 15% in the previous quarter. By contrast, just 19% of respondents indicated they expected profit margins to increase, down from 48% in 3Q.

Another 33% surveyed anticipated margins would remain stable, compared with 37% in the third quarter.

Net lender sentiment about margins based on the difference between those expecting an increase and those expecting a decrease was -29%. That presents a contrast to 33% the previous quarter. It’s also the most pessimistic outlook for margins seen since the fourth quarter of 2018, when the equivalent number was -34%.

“We currently expected loan origination volume to total $4.1 trillion in 2020, the highest on record since 2003. However, moving into 2021, lender sentiment paints a more cautious picture,” Fannie Mae Chief Economist Doug Duncan said in a press release.

Among lenders that are expecting lower profit margins, the top reasons cited were “competition from other lenders” and the government-sponsored enterprises’ policies and pricing. The GSEs implemented a new refinancing fee in December.

Duncan also noted that a resurgence in coronavirus infections and uncertainty around economic recovery pose risks to housing market growth.

More than 220 senior executives from 202 companies participated in Fannie’s latest survey, which was conducted between Oct. 27 and Nov. 8.