May 2015 Mortgage Originators Survey

Cover of the 2015 Q1 Survey of Mortgage Originators — Download PDF

The 1st quarter survey updates trends in production around the QM/ATR rule. Policy issues are covered including the 3% cap on points and fees under the QM rule. In addition, the impacts of TRID, FHA indemnification and FHA condo financing rules are explored. As in previous surveys, this quarter's panel of respondents includes members of Community Mortgage Lenders of America.

Key Findings

The non-QM share of originations shrank to just 1.2% of production in the 1st quarter from 1.8% in the 4th.

Bar graph: Share of production for safe harbor QM rebuttable presumption QM non-QM, Q1 2015

Willingness to originate non-QM loans rose for the first time in a year while a 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 nonQM loans surged to 37.5%.

Bar graph: Investor demand for non-QM loans, Q1 2015

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 investors for these same mortgages. Little change was expected for high-quality prime loans.

Bar graph: Outlook for access to credit and investor demand for mortgages, Q2 2014 to Q2 2015

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.

Pie chart: Primary reason for 3% cap in Q1 2015

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.

Pie chart: Effect of TRID implementation

While roughly half of lenders report being asked to indemnify the FHA for a loan 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 buybacks.