Cost-Cutting Is Lenders’ Priority: Fannie Mae

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Cost-Cutting Is Lenders’ Priority: Fannie Mae

Jul 27, 2023 | News | 0 comments

Lenders identify cost-cutting as their primary focus in response to numerous challenges confronting the mortgage industry, such as soaring home prices, limited housing inventory, and rising interest rates.

Roughly 35% of the 253 mortgage executives who participated in Fannie Mae’s mortgage lender sentiment survey (MLSS) indicated that cost-cutting remained the paramount factor in their business operations, securing the top spot for the second consecutive year.

The market continues to face overcapacity, and as lenders pursue cost-cutting measures, Fannie Mae anticipates an increase in industry layoffs.

As lenders strive to decrease costs through process optimization, reducing manual tasks, and enhancing accuracy, “business process streamlining” secured the second position (32%). “Consumer-facing technology” and “talent management & leadership” both claimed the third spot (24%), aiming to elevate customer experience and boost sales.

Fannie Mae conducted a 10-question online survey for senior executives, including CEOs and CFOs, from its lending institution partners.

Out of a randomly chosen pool of 3,000 senior executives, 253 of them participated in the survey between May 2 and May 15, representing 232 lending institutions. These institutions encompassed mortgage banks, depository institutions, and credit unions.

The lending executives who were surveyed exhibited a pessimistic outlook regarding the economy.

Approximately 73% of the respondents expressed the belief that the U.S. economy is moving in an unfavorable direction.

Around 93% of lenders hold the belief that the U.S. economy is highly probable (57%) or somewhat probable (37%) to enter a recession within the next two years. Within this group, 68% of lenders anticipate the recession to commence either in Q3 (24%) or Q4 of the current year (44%).

In their July commentary, Fannie Mae’s Economic & Strategic Research (ESR) group forecasted that any potential recession would be relatively mild, with a likelihood of commencing in either Q4 2023 or Q1 2024.

The economy witnessed a robust pace of growth, supported by resilience in the labor market and ongoing new home construction, exceeding Fannie Mae’s earlier projections.