In the 6th Survey of Mortgage Originators, several important trends are highlighted that took shape in the 1st quarter of 2015 and bode well for the second half of 2015. In addition, a number of policy issues loom on the horizon and were examined in the survey. Lenders discussed their expectations for implementation of new closing documents as well as the impact of FHA’s indemnification and condo rules on their willingness to lend and the lingering impact of the QM rule’s 3% cap on points and fees.
Here are some highlights from the survey:
- The non-QM share of originations shrank to just 1.2% of production in the 1st quarter from 1.8% in the 4th.
- However, willingness to originate non-QM loans rose for the first time in a year while willingness to originate high quality prime mortgages grew at a slower rate and rebuttable presumption slid. The share of lenders offering high quality, prime was little changed while those offering non-QM and rebuttable presumption eased modestly.
- The share of respondents that indicated an improvement in investor demand for non-QM loans surged to 37.5%.
- Over the next six months, respondents expect better access to credit for non-QM, rebuttable presumption and lower credit score borrowers as well as increased demand from investor for these same mortgages. Little change was expected for high quality prime loans.
- The share of respondents that indicated having had an issue closing a loan due to some facet of the ATR/QM rule fell to 33.3%, its lowest on record. However, the share of respondents utilizing overlays ahead of the 3% cap peaked at 33.3%, while overlays on other facets of the QM rule eased.
- Survey participants reported that 4.5% of their lending was impacted by the 3% cap. The bulk of issues were created by including LLPAs and affiliated services (e.g. title insurance) in the 3% calculation.
- Roughly 90% of respondents reported spending time and money to implement the new TRID documentation, while 60% have unanswered questions.
- Two thirds expect the TRID implementation to delay some closings and 26.7% expect delays and some deals not to close at all.
- Finally, while roughly half of lenders report being asked to indemnify the FHA for a loans since 2009, two thirds indicate that this policy impacts their willingness to originate lower FICO loans and that their concern about indemnifications is on par with their concern about GSE buy backs.