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Takeaways from the Q1 Fannie Mae Mortgage Sentiment Survey

Blog Tile 9 28 2019

"...results show that lenders are more optimistic overall and that mortgage demand expectations are improving, for both purchase and refinance mortgages."

Emily Nash-Walker, Head of Solution Architecture 
May 29, 2019

Recently Fannie Mae published their Q1 2019 Mortgage Sentiment Survey. There were definitely some interesting findings! First, the good news - results show that lenders are more optimistic overall and that mortgage demand expectations are improving, for both purchase and refinance mortgages.

However, this optimism is a recent development – in fact, it’s just for the last three months

So, the bad news - the survey also states "Lenders' net profit margin outlook has stayed negative for the tenth consecutive quarter, but has improved significantly from the survey low in the prior quarter (Q4 2018) and one year ago."

Ten consecutive quarters? These results reflect how margins have been an issue in the industry for some time. It also shows what a competitive environment we are working in. How can you survive (or thrive) in a market where margins have been tight for ten consecutive quarters?

It’s Competitive Out There

Clearly, we are working in a competitive environment, which has led to tight margins for all lenders. So, how can you be more competitive in this market and stand out from the pack?

Automation can help make your organization faster and more efficient, which can reduce your costs and increase profits.

Also, a lender can attract more qualified borrowers when they know that you can process a mortgage faster than the other lenders out there. This is something that lenders should be highlighting as a competitive advantage to stand out in a crowded market. It’s a great opportunity to gain market share.

And, there could be more overall market to go after this year. Recently, MBA Chief Economist Michael Fratantoni told reporters that total originations of U.S. mortgages (on one-to-four family homes) is expected to rise to $1.682 trillion in 2019, up from $1.643 trillion in 2018.

Relax…the Lending Standards, that is…

Getting back to the survey…it states that “lenders on net continued to report easing lending standards at a modest pace across all loan types.” In a competitive market, lenders will relax their lending standards to try to gain more customers. Meaning, they are willing to take on more risk in order to secure more customers.

However, if you get more customers and have less stringent standards, you need to be able to process the increased application load efficiently so you can separate the good applicants from the bad ones, while delivering a great customer experience. This is where AI and Machine Learning can make a difference.   

How AI Technology Can Help

I think that AI and ML can give lenders reason to be more optimistic about the future of the mortgage industry. Once they see how different solutions can help them become more competitive, cost-effective and profitable, they might feel better about their ability to compete and their prospects for the future.

We’ve developed an ROI calculator to show lenders how they can benefit from using our AI-based platform. Hopefully tools like this will help demonstrate ROI and lead to optimism around new technology in the mortgage industry.

I’m glad to see lenders feeling better about demand and margins, and hope that technology like software robots and AI can help play an important role in the industry turnaround. I’m excited to see how the rest of 2019 turns out for the mortgage industry.

Contact the Author: 

Emily Nash-Walker
Head of Solution Architecture 

email: [email protected]