Cost-cutting is a rising priority for mortgage lenders, according to Fannie Mae’s Chief Economist Doug Duncan. Faced with declining profits, mortgage lenders are looking to court more business to make up for the lower share of homeowners who are refinancing. Mortgage rates are up about 80 basis points since last September, which has decreased the incentive for homeowners to refinance. Further, existing- and new-home sales were both down in April, and mortgage applications for home purchases have fallen 2.9 percent from April to May.
“The rise of cost-cutting as a competitiveness priority should not come as a surprise,” Duncan notes in a column at Fannie Mae. “Today, lenders are facing an increasingly difficult market environment.”
Among the top business priorities identified, lenders named cost-cutting as the third most important move for them—up from its spot near the bottom of the list a year ago. “Consumer-facing technology” and “business process streamlining” were the two priorities ahead of cost-cutting.
Tight margins will likely persist for lenders in the coming months. Fannie Mae predicts mortgage rates to keep rising and housing inventories to remain tight, which will continue to limit the number of buyers and borrowers.
Source:
“Cost Cutting Has Emerged as a Focus of Lender Competitiveness,” Fannie Mae (June 21, 2018)
