Roughly 52% of lenders believe their margins will decrease in Q1 of 2021, up from 48% in Q4, according to Fannie Mae's latest survey.
Hello, LOs!
The bean-counters have some somber news to report. Roughly 52% of lenders believe their margins will decrease in the first quarter of 2021, up from 48% in the fourth quarter, according to Fannie Mae's latest survey.
"This quarter, the largest net percentage of lenders in the survey history are expecting a decrease in their profit margin outlook," Doug Duncan, Fannie Mae's top economist, said in a statement.
Before the New York Stock Exchange opened this morning, Home Point Capital disclosed that margins in the fourth quarter were 176 basis points, down from 278 basis points in Q3. Profits also fell to $184.5 million in Q4 from $264 million the prior quarter. Interestingly, the lender refused to offer guidance for the first quarter, even though it's ending in like, 2.5 weeks.
It's no secret that margins are compressing – UWM, Rocket and others have forecasted lower margins in Q1 as interest rates inch up and refis fall – but what's noteworthy lately is pricing and competition.
There is a lot of competition right now. In the wholesale space, the war between UWM and Rocket Pro TPO has resulted in reduced pricing as they jostle for broker business. Of course, the other lenders in the channel follow suit. This could be why Home Point execs were shy about forecasting Q1 for analysts, even if they are able to win new broker business as a result.
So here's my question to the LOs out there: What are your expectations for the first and second quarters? Where do you see pricing and profitability? As always, you can reach me anonymously at jkleimann@housingwire.com.
I've spent years asking top mortgage lending execs this question: who's your primary customer, loan officers or consumers? Most answer LOs because most industry market share is still LO-driven. But let's go deeper to see if this answer holds up for execs and LOs over full market cycles. And let's frame it in the context of today's top wholesaler asking LOs to limit the options they have for consumer clients.
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