Fannie Mae's 2025 forecast turns bearish
National Mortgage News
In-depth analysis, strategy and data spanning the entire residential mortgage industry. An Arizent brand.
The increase in mortgage rates since the September Federal Open Market Committee meeting left Fannie Mae economists more cautious about the housing market in 2025. Fannie Mae significantly slashed its existing home sales forecast to a gain of just 4% next year from the previous 11%. Furthermore, it no longer expects mortgage rates to sink below 6% next year. Its outlook for this year's fourth quarter is for an average of 6.6%, up from 6.5% in October. That is a significant revision in comparison to October's call for rates to be at 6% in the final three months of the year. The 30-year fixed rate average will moderate over the next four quarters, but only drop to 6.3% by year-end 2025, and to 6.1% by the final quarter of 2026. It previously expected rates to average 5.7% next year.
READ MORE: Fannie Mae's 2025 forecast turns bearish
Nonbanks with servicing portfolios saw earnings dip, while expenses for most shot up in anticipation of more origination volume. United Wholesale Mortgage saw a 32% rise in expenses, totaling $328 million for the three months ended Sept. 30, according to its third-quarter earnings. The increase was largely driven by a $46.1 million, or 34.1%, rise in salaries, commissions, and benefits compared to the same quarter the year before. Meanwhile, Rocket Mortgage’s total expenses for the period were $1.1 billion, rising by $58.7 million, or 5%, from the same period in 2023.
Recommended by LinkedIn
A small group of larger players is dominating in the mortgage servicing rights market and they are paying prices for MSRs that vary increasingly widely by participant and loan type. The relatively less-efficient cost structures of more moderate-sized players have made it tough for them to compete, noted Ken Adler, a managing director at Annaly. Despite the recent return of profitability to mortgage bankers overall, more moderate-sized mortgage companies' strains persist as a concern not only for them but also for MSR purchasers subject to counterparty risk from their sellers, Adler said
Mortgage application rejections surged in 2024, with refinance borrowers experiencing the highest rate of "no" in over 10 years, according to research by the Federal Reserve. The average rejection rate for refinances jumped by over 10 percentage points to a high of 25.6% in 2024 from 15.5% in 2023, a consumer expectations survey from the Federal Reserve Bank of New York found. While the rising denial rate occurred as the number of applications fell, the steep increase combined with sentiment among certain homeowners show signs of continued economic stress that a segment of borrowers continues to face.
Sign up here to receive the National Mortgage News complete newsletter — delivered to your inbox daily.
Real Estate Residential and Commercial Appraisal Company
1moLet’s hope they are taken out of conservatorship.
Expert Mortgage Banker
1moNothing happens until 1/21/25. The popcorn machine is ready!
I’d like to hear the theory behind the increase in denials. As a seasoned Underwriter and career mortgage professional I have my own theory. I personally know underwriters all over the country that have spent 10years or more, honing their craft. Common sense underwriting is not something you can teach in a crash course to new employees just starting out in the industry. I worked in this industry for 20 years before I became an underwriter. Beginning at the end of the loan cycle and learning everything from selling closed loans on the secondary market, maintaining the warehouse line, closing , processing and eventually underwriting. Common sense in lending is acquired over time from experience not a 90 day crash course. I spent 5 years underwriting USDA and Conventional loans before becoming a DE Underwriter. I understand the need to reduce overhead costs but personally, I wouldn’t sever my head to stop a nose bleed. In my 30+ years in this industry, I have never seen so many seasoned mortgage professionals forced to leave the industry. AI is not “new” in our industry. AUS programs have been around for well over a decade but removing the common sense interpreter creates excessive denials. Compliance deficiencies are next.
What does Jim Cramer say? I hope he agrees with this assessment. :) Serious Note - Forecasts are just that forecasts...our Federal Reserve issues new one of three months and they are all over the place. I'm a simple guy and hope more people revise their forecast bearishly like this - that means you can bet on the opposite happening - contrarian theory. What no one is talking about is a shift in fiscal policy that could dramatically change the outlook of builder and consumers. For the record - Im on the other side of this bet - especially if we are able to get some new fiscal policy that people and markets embrace