Lender Survey: Has the Refi Boom Run Out of Steam?

Lenders responding to Fannie Mae's Q4 2019 Mortgage Lender Sentiment Survey^® didn't have as bright an outlook for their future profit margins as in the previous survey when their expectations were at a high for the survey which dates back to 2014. However, 44 percent of the 188 senior lending executives completing the survey believe their profit margins will remain about the same compared to the prior quarter, while the remainder are almost evenly divided among those who expect profits will fall (28 percent) and those who expect them to rise, 27 percent.   Fannie Mae cites the Mortgage Bankers Association's (MBA's) recent Quarterly Mortgage Bankers Performance Report which showed lender's per loan net production income has been on the rise over the first three quarters of 2019.

Only 2 Million U.S. Homes Remain Underwater

According to Dr. Frank Nothaft, chief economist for CoreLogic, "Ten years ago, during the depths of the Great Recession, more than 11 million homeowners had negative equity." This was a quarter of mortgaged homes, he said. Times have certainly changed. The third quarter report from CoreLogic on the equity in U.S. residential property shows only about 2 million homes to be underwater, with a higher balance on the mortgage or mortgages than the homes' value.  This is 3.7 percent of all mortgaged properties. The national aggregate value of negative equity was approximately $301 billion at the end of the third quarter of 2019. This is down quarter over quarter by approximately $2.4 billion, from $303.4 billion in the second quarter of 2019 and the number of homes affected was 220,000 fewer than a year earlier, a 10 percent decline.

Sluggish Loan Applications Show Weakness in New Home Sales

While the Mortgage Bankers Association (MBA) is predicting newly constructed homes sold at a much higher rate in November than they did a year earlier, sales are expected to be down significantly from this past October. MBA's Builder Application Survey (BAS) data for November 2019 shows mortgage applications for new home purchases increased 27.1 percent compared to November 2018 but were down 17 percent from the prior month. This change does not include any adjustment for typical seasonal patterns.  Based on the application data and information about market coverage and other data, the association estimates new single-family home sales were running at a seasonally adjusted annual rate of 688,000 units during the month.