U.S. Mortgage Lenders Finally Expect Profit After More Than 2 Years

For the first time in nearly three years, mortgage lenders in the U.S. turned optimistic about profits in the second quarter as falling interest rates led to a surge in demand for home loans, a recent Fannie Mae survey showed.

The report also showed the share of the lenders polled who said they expect their profits to rise in the next three months exceeded the portion of those who anticipate a decline by 29 percentage points.

The finding was the second most optimistic since the start of the survey in the first quarter of 2014.

The latest figure was a shift from the first quarter when the share of lenders with negative views about future profits surpassed the share of those who held a positive outlook by 8 percentage point.

Most of the senior executives at major lending institutions polled for the report cited the upbeat in consumer demand and operational efficiency as the main reasons for their positive take on the mortgage market.

Fannie Mae Senior VP and Chief Economist Doug Duncan said lenders are also indicating strong demand-driven mortgage market dynamics, with optimism for both consumer demand and profitability prospects reaching multi-year highs. Those who reported a decreased profit margin outlook cited competition from other lenders and staffing as the top reasons.

Lenders also reported robust growth in purchase mortgage demand. The last quarter saw a significant rise in the net share of those indicating purchase growth. Expectations for purchase demand growth in the next quarter also spiked for both government-supported enterprise (GSE) and non-GSE loans.

The report also revealed strong growth in refinance demand. For the first time in more than two years, lenders said they experienced positive demand growth for refinancing across all loan types, Fannie Mae said. Expectations for refinancing demand in the next quarter also turned positive for the first time in more than two years.