Most housing finance companies are preparing to fight for a dwindling number of loans and operate on thinner margins, according to Fannie Mae's fourth-quarter Mortgage Lender Sentiment Survey.
"Lenders who see declining profits outweighed those noting improvements in the bottom line for the fifth consecutive quarter. Three-fourths of those seeing deteriorating profits cite competition as the most important reason — a survey high," said Doug Duncan, Fannie Mae's senior vice president and chief economist, in a press release.
The high percentage of lenders concerned about competition represents a marked contrast to two years ago, when only slightly more than one-third of lenders identified competitors as the biggest threat to their profits.
Other profitability pressures facing lenders are consumer demand, which 30% of lenders registered concern about; and staffing, which 29% of respondents to Fannie's survey said was a worry. In addition, 19% of those surveyed identified "market trend challenges" as a key driver of thinner margins.
The majority of lenders continued to see refinance demand dwindle compared to the previous quarter. Also purchase-mortgage demand fell to a three-year low, and credit easing reached a survey high for
"More lenders reported a pullback in refinance demand from the prior quarter than those who saw an increase, continuing the trend that started at the beginning of the year. This finding is consistent with our forecast for a steady drop in refinance originations this year," said Duncan.
"With the outlook calling for rising interest rates and continued tight housing inventory constraining home sales, increased competition will likely continue to drive lenders' mortgage business strategies."
