Photo: Robert Clark

Over the last three months, the share of US lenders that are reportedly easing credit standards climbed to a new high, according to the results of Fannie Mae’s latest Mortgage Lender Sentiment Survey.

The number has been steadily increasing since the fourth quarter of 2016, and is now at its highest level since March 2014, when the survey was created.

More lenders are choosing to loosen rather than tighten home mortgage credit standards due to “constrained mortgage demand and a negative profit margin outlook.” Fannie Mae says on net, lenders’ profit margin outlook has been negative for the last four consecutive quarters.

“Lenders’ comments suggest that competitive pressure and more favorable guidelines for GSE loans have helped to bring about more easing of underwriting standards for those loans,” says Doug Duncan, senior vice president and chief economist at Fannie Mae, in the report.

A highly competitive marketplace continues to drive down lender profits. Competition from other lenders was cited as the chief cause of declining profits, reaching a new survey high for the third consecutive quarter across all profit margin drivers.

Meantime, the net share of lenders reporting increased purchase loan demand declined year-over-year, reaching the lowest third quarter reading of the last two years.

Compared to previous third quarters on record, the net share of lenders anticipating an increase in demand in the next quarter remained stable year-over-year in the third quarter of this year, says Fannie Mae.

The Mortgage Lender Sentiment Survey polls senior executives of Fannie Mae’s lending institution customers quarterly to assess their views and outlook on the current and future state of the mortgage market.

Click here to read the entire report.

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