February 2015 Mortgage Originators Survey

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

This survey highlights the impact of the QM rule, a year after its inception. The New Year also brought a slew of regulatory changes that impact the GSEs, FHA, VA, and the market in general. As in previous surveys, this quarter's panel of respondents includes members of Community Mortgage Lenders of America.

Key Findings

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.

Pie chart: Impact of QM rule on cost and availability of credit in initial year

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%.

Bar graph: Share of production for safe harbor QM, rebuttable presumption QM, and non-QM in 2014

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.

Bar graph: Ability to close mortgages in light of new QM rule

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.

Bar graph: Net willingness to lend in Q4 2014 vs Q3 2014

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.

Bar graph: Outlook for access to credit and investor demand for mortgages over six months

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%.

Bar graph: Expectation of results of FHA allowing GSEs to finance mortgages with 3% down payment

50% of originators indicated an increase in formerly distressed sellers seeking credit.

Pie chart: Incidence of 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.

Pie chart: Characterization of CFPB guidance on RESPA/TILA changes

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.