Lenders appear at least moderately encouraged by new efforts on the part of Fannie Mae and FHA to lower the costs and increase the availability of mortgage financing.  Fannie Mae's most recent quarterly Mortgage Lender Sentiment Survey, conducted in February found about 2/3s of lenders thought the initiatives would be beneficial.

Fannie Mae introduced a new 97 percent home mortgage late last year and a similar program was unveiled by Freddie Mac starting this month.  In January FHA reduced its annual mortgage insurance premiums (MIP) by 0.5 percent on new loans.  Fannie Mae's Economic & Strategic Research Group surveyed senior mortgage executives in February to examine lenders' views about the expected impact of these initiatives.

Lenders had earlier told Fannie Mae that the top two causes of mortgage volume declines in 2014 were tighter credit underwriting standards and weak consumer demand.  This confirmed prior findings from Fannie Mae's National Housing SurveyTM (NHS) in which young renters said that gathering a down payment and affording the monthly mortgage payment are two of the top barriers to obtaining a mortgage. The GSE and FHA initiatives seek to address these lender and consumer concerns.

Fannie Mae said about two out of three lenders responding to the Lender Sentiment Survey expect that the GSEs' 97% LTV products and the FHA's MIP reduction will somewhat increase mortgage originations, while one-third of lenders surveyed do not expect those offerings to have much impact.  The majority of respondents think that these initiatives will be good for consumers and lenders.

Eighty-one percent of institutions surveyed reported planning to offer GSE-eligible 97% LTV loans sometime this year, though the expected impact on their own firm's origination volume is more muted than their expectations for the impact on the overall mortgage market in the future. Forty-four percent of those planning to offer GSE-eligible 97% LTV loans expect them to somewhat increase their firm's origination volume while 54 percent expect no change.  

The new 97 percent financing product requires consumers to first complete a homeownership counseling programs so the survey also asked lenders for their view on these programs.   Ninety-one percent of lenders reported offering or referring consumers to homeownership education and counseling programs, primarily to help them better manage their finances.  However opinions of the programs was mixed.  Only 33% say they have value, 36% say they do not, and 31% are neutral.

Mid-sized and smaller lenders are more likely than larger lenders to say there is less value in homeownership education and counseling programs.  Steve Deggendorf, Fannie Mae's Director Business Strategy, who reported on the survey results said that given these mixed perceptions "there appears to be an opportunity to investigate whether it is possible to enhance counseling strategies to generate, improve, and more clearly demonstrate consumer, lender, and investor benefits."