Economists' Outlook

Housing stats and analysis from NAR's research experts.

The Survey of Mortgage Originators for the 4th quarter of 2014, takes stock of the QM rule, a year after its introduction, as well as a number of policy issues and changes.  Respondents were asked their view of new pricing at the FHA as well as the GSE’s 3% product, lower limits for the VA, the impact of new RESPA/TILA rules, and their perspective on representation and warrant risk as well as government overtures to ease overlays are all addressed.  In general the non-QM space remains small and lenders are concerned about risks, but they are optimistic for the future.

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Highlights of the Survey

  • Half of respondents indicated that the QM rule had had a “small negative impact” on the market, while 35% indicated that impact was significantly negative.  10% indicated no impact, while 5% reported a small improvement.
  • The non-QM share of originations tumbled to 1.8% of production in the 4th quarter from 5.0% in the 3rd.  However, the rebuttable presumption share rose from 3.5% to 6.3%.
  • 45% of respondents indicated having had an issue closing a loan due to some facet of the QM rule, down from 64% in the prior quarter.  After increasing in the 3rd quarter, the share of lenders using buffers to prevent infractions of the QM rule eased.
  • Respondents’ confidence in their preparations for the QM/ATR rules leapt to 70% from 59.9% in the 3rd quarter.
  • The share of lenders offering rebuttable presumption and non-QM products was roughly unchanged from the 3rd quarter.  However, willingness to originate non-QM mortgages flattened or fell only modestly from the 3rd to the 4th quarter after falling sharply over the prior two quarters.  Lenders’ willingness to originate prime mortgages continued to gain steam even for those with lower credit scores.
  • Over the next 6 months, respondents expect improvements in credit access for prime products, including lower credit prime borrowers, but a more modest improvement for non-QM and little change for rebuttable presumption.  Likewise, the majority expects improvement in investor demand across the board, but emphasized the prime segment.
  • 75% indicated that the GSE’s new 3% down payment product would improve access to credit, while 90% believe the FHA’s fee reduction will improve production with a weighted average increase of 8.5%.  Lower VA limits would reduce production by 0.8%.
  • 50% of originators indicated an increase in formerly distressed sellers seeking credit.
  • 85% of respondents either were or expected to expend considerable time preparing for the new RESPA/TILA rules, but 65% felt that CFPB guidance had been at least adequate.
  • 85% had been the subject of a GSE repurchase request and this factor was lenders’ primary concern about lending in the higher risk space.  Only 40% indicated that recent overtures by the GSEs to clarify and soften rep and warrant risk would improve their willingness to originate higher risk mortgages, while 20% would wait-and-see.  More clearly defined triggers for repurchase risk was the factor respondents felt would help most to improve credit access
  • Finally, low housing supply, more than tight credit access or weak demand factors, was the leading factor holding back production according to survey respondents.

Additional charts and insights are available in the full report.

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