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16 GRIM NEAR-TERM OUTLOOK FOR HOUSING INDUSTRY Many housing and mortgage industry professionals believe that the overall outlook for their business in the next six months is "grim," according to the Collingwood Group Mortgage Industry Outlook Report. e report, which was published on Tuesday, was the first-ever such report published by the Collingwood Group. e Washington, D.C.-based advisory firm will be conducting a monthly survey of mortgage and housing industry professionals to report on the state of the business. Only 30 percent of mortgage industry professionals surveyed for the report believe that business conditions will be better in the next six months, while 41 percent said conditions will stay the same and 29 percent said they believe conditions will be worse. Fifty-nine percent of respondents said their current business conditions were worse in September than they were at the same time last year. Only 2 percent of respondents said they believe it is extremely likely that the housing market will improve in the next six months. One reason for the bleak outlook is the effect of regulation on the housing and mortgage industries, which has been increasing since 2010 and especially in the last year, forcing businesses to devote more and more resources toward compliance, the Collingwood Group report said. "e implementation of the Consumer Financial Protection Bureau (CFPB) origination and servicing rules have exposed lenders to a host of new compliance demands and risks," the report said. "e challenges lenders are managing are exasperated by the increased level of federal, state, and local government enforcement activities. e results of the survey suggest that this is having a strong impact on businesses' bottom lines." Only 9 percent of respondents reported that the pace of regulation has had little or no effect on their business, while 19 percent said the pace of regulation has had an extreme impact. In all, 78 percent of housing and mortgage professionals surveyed said that increased regulation has hurt their business in some way. "e results of our first survey indicate a pretty grim outlook for the next six months," Collingwood Group Chairman Tim Rood said. "e fast pace of regulatory enforcement is a 1-2 punch for many lenders." e effect of increased regulation has spilled over into consumers. In many cases consumers have been prevented from obtaining a mortgage loan, since the increased regulation has forced the industry in general to tighten credit availability. Seventy percent of survey respondents said they believe there is a high to extremely high correlation between regulation and the need to tighten mortgage credit. "Many lenders are torn between making credit available to lower credit score borrowers and mitigating exposure to regulatory risk," said Brian Montgomery, Collingwood Vice Chairman and former Acting United States Secretary of Housing and Urban Development and Commissioner of the Federal Housing Administration. As far as the need to strike a delicate balance between maximizing loan volume and minimizing risk, brought on by increased regulation, many lenders have chosen minimizing risk. irty-seven percent of respondents ranked their likelihood of lowering credit score requirements to obtain a mortgage either a five or six on a scale of one to 10, indicating a neutral opinion. SERIOUS DELINQUENCY RATE HITS LOWEST LEVEL IN SIX YEARS According to reports by both Fannie Mae and Freddie Mac, e nation's serious delinquency rate on single-family mortgage loans for August was the lowest it has been in six years, according to Fannie Mae's August 2014 Monthly Summary released earlier this month. Seriously delinquent mortgage loans are defined as those that are either three months or more behind on their payments or are in foreclosure. Fannie Mae reported the serious delinquency rate for August to be 1.99 percent, which is its lowest level since October 2008–a month after Fannie Mae's conservatorship under the Federal Housing Finance Agency (FHFA) began. e August rate was down slightly from the 2.00 percent that was reported for July and down from 2.61 percent that was reported in August 2013. e serious delinquency rate reached its peak of 5.59 percent in February 2010. Since the serious delinquency rate has fallen by 0.62 percentage points in the last year, analysts say the rate could fall below the "normal" level of 1.0 percent by 2016, although declines have come at a slower pace in recent months. e report also stated that in August, Fannie Mae's Book of Business decreased at a compound annualized rate of 4.0 percent, while the GSE's Gross Mortgage Portfolio declined at a compound annualized rate of 16.7 percent for the month. Freddie Mac followed the lead of its sister government-sponsored enterprise, Fannie Mae, and also reported a serious delinquency rate of less than 2 percent for August in its recently released August 2014 Monthly Summary. In an additional positive sign, the multi- family serious delinquency rate is also on the decline, dropping from 0.5 percent in July to 0.4 percent in August. Freddie Mac noted that there were 5,374 mortgage loan modifications in August 2014 and there have been 47,356 such modifications year-to-date for the period ending August 31, 2014. Overall, Freddie Mac's total mortgage portfolio decreased at an annualized rate of 0.4 percent for August.