Questions 12 and 13 dealt with profitability, both on the part of the industry in general and the executives’ own individual firms more specifically. Expectations for industry profits in 2015 were mixed, with 14 of the 24 expecting industry profits to rise this year. Meanwhile, thus far in 2015, 17 executives indicated their own firm’s profits will be up YoY, two reported a decline, and four message no change. Questions 14 through 16 wanted to know if these 24 firms were originating more, less or the same volume of highLTVs, high-DTIs and low FICO loans this year than last. More was the response from 14 executives to LTVs. Only one exec reported fewer high-LTVs and another nine reported no change. For
high-DTIs, unchanged tallied 15 compared to four reporting more high-DTI loans and another five reporting fewer. As for low FICO lending, five were doing more of it compared to four doing less and 15 others disclosing no change. Question 17 wanted to know if those surveyed thought the peer-to-peer business model was framing the next set of credit risks. The question was skipped since too few were familiar with the model. Question 18 asked if FHA’s new Supplemental Performance Metric was a positive for lenders. Almost three times as many execs thought it was a plus when compared to those who thought otherwise. Question 19 wondered about pro-
posed changes to FHA’s claims procedures. Thirteen indicated the proposal was not good for lenders, more than four times the number of execs who thought otherwise. Another seven indicated they didn’t know if it was favorable or not. Question 20 inquired whether the combination of low interest rates, looser credit standards and a seller’s market was pushing up house prices. Indeed it is reported 16 of the 24 surveyed. Question 21 concerned Fannie Mae’s Collateral Underwriter and whether it was viewed as a valuable new appraisal tool for lenders and borrowers. Yes it is, said 18 execs comcontinued on page 81
n National Mortgage Professional Magazine n JANUARY 2016
ly. That said, I think the findings well represent the expectations and thinking of the broader mortgage industry. Indeed, most readers of this report will likely find many more confirmations to their own thinking than surprises in the findings. However, there are some of the latter buried in the information. With that preface, it’s off to the questions, with the understanding that what follows is intended only as an elementary regurgitation of the responses, not a detailed, critical analysis of what was learned. (My analysis of the industry and its near-term direction is available for a fee.) Readers are advised to use the Scorecard as a guide in reading this text. Some of the questions and responses that I found especially interesting or surprising are in bold-face type. Question 1 asked those surveyed what they thought the interest rate on the 30-year conventional conforming fixed-rate mortgage would be at yearend 2015. The group average weighed in at 4.4 percent. The range of expectations was from 3.75 percent to 5.5 percent, but most responses were clustered between four and 4.5 percent. Question 2 wanted to know how much residential origination volume the execs expected this year. The unweighted group average was $1.3 trillion. The response range was from $950 billion to $2 trillion. Question 3 asked if their firm’s production was up, down or unchanged year to date compared to the same period last year. Twenty-three of the 24 surveyed said production volumes were up. Question 4 wanted to know what portion of their firm’s 2015 production is non-QM. All 24 executives report that non-QMs will account for far less than five percent of 2015 production, with an average of 1.5 percent. Questions 5 to 8 asked about YTD origination volume, specifically the portion of their total that was respectively refinance, agency conforming, jumbo and the combination of FHA, VA and RHS. On average, refinance volume accounted for 36.3 percent for the 24 firms surveyed. The range was from three percent to 85 percent. On average, 57.6 percent of the 24 firms’ volume to date was agency conforming, 9.6 percent was jumbo and 32.8 percent was government-insured. The ranges were very wide: 14 percent to 85 percent, zero to 86 percent, and one to 50 percent, respectively. Question 9 wanted to know if the executives’ firms experienced an increase in their FHA volume YTD. Only four of the 19 who answered didn’t report increased FHA volume. Question 10 inquired about the percentage of their firm’s YTD conventional production that exceeded an LTV of 80 percent. The average for the group was 28.5 percent, with a range of five percent to 87 percent. Question 11 asked what portion of 2015’s production will be conforming 97s. For the group, the average was 1.9 percent and the range was zero to six percent.