ABA Breaks Down Mortgage Lending in 2011

The American Banking Association (ABA) has found that real estate lending
conditions at the end of 2011 were little changed from those at the end of 2010
despite increasing regulations, compliance costs and a lack of clarity about
rules.  ABA reported the results of its
19th annual Real Estate Lending Survey on Tuesday.

The survey involved 185 banks, 86 percent of which were smaller community
banks with assets under $1 billion. 
Fifty-six percent of the participants were commercial banks and 68
percent were stockholder-owned.

The banks reported that refinancing made up 63 percent of mortgage
activity in 2011 compared to 66 percent in 2010 but about the same percentage
as in 2009.  Fixed rate loans represented
80 percent or originations compared to 81 percent the year before and 30-year
loans made up 47 percent of all originations, down 1 percentage point from the
year before.

Banks retained 41 percent of the
one-to-four family mortgages they originated during the year, an increase of 3
percentage points, and sold 27 percent directly to one of the government
sponsored enterprises (GSEs), unchanged from 2010 but triple the volume in
2006.  Sales
to aggregators fell from 21.7 percent in 2010 to 17.3 percent in 2011, while
sales to the Federal Home Loan Bank programs increased from 4.7 percent to 7.0

made up 72.0 percent of production, down from 72.0 while non-conforming
loans increased from 11.6 to 14.0 percent. 
FHA loans were down from 6.5 percent to 5.0 percent and Jumbo
originations increased slightly to 9.0 percent from 8.7 percent.  Mortgage features such as piggy-backs, low
documentation loans and pre-payment penalties have virtually disappeared in
recent years.  The only loan feature surveyed
that had a greater than 5 percent reported occurrence was balloon payments.

to first-time homebuyers represented 9 percent of originations, virtually
unchanged over the last two years.  The
percentage of loans written with loan-to-value ratios of 60-80 percent rose
slightly from 48 percent in 2010 to 51 percent with the difference made up by
very slight decreases in several higher LTV categories.

of the banks surveyed used some type of automatic loan underwriting system with
Desktop underwriter being the most popular type.  A majority, 55 percent, reported that they do
not scan or image loan documents for transmittal but 61 percent said imaging
was a priority for 2012.

said that their major concerns regarding the mortgage market in 2012 were:

  • Regulatory
    burden and compliance costs
  • Falling
    home prices and drops in appraisal values
  • Continued
    high unemployment, slowdown in economy, increase in foreclosures
  • The future
    of the government sponsored enterprises
  • Loan
    demand and other credit challenges.

“Continued concern about forthcoming mortgage rules and the
unknown future of Fannie Mae and Freddie Mac have increased lending uncertainty
in an already sluggish market,” said ABA’s Executive Vice President Bob Davis.
“Clarity through well-constructed rules that ensure credit availability for
qualified borrowers is essential for the housing recovery.”

…(read more)

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