Banks seen less likely to rush their selloff of residential loans.

Banks are continuing to build their holdings of home loans at a rapid rate. But fears of widespread liquidations of these holdings in the near future seem to be moderating.

Banks may well reduce their mortgage holdings when better investment opportunities come along, banking analysts believe, but there is much less urgency than a year ago.

"There's still slow demand for loans, and earnings pressures are creating the need for more income," said Alden Toevs, a managing vice president at First Manhattan Consulting Group, New York.

"Fortunately, mortgage spreads have held well, and the mix of liabilities available to fund them is good."

Mr. Toevs said he remained worried about dumping of mortgages, but added that his concern had been "mitigated somewhat by the latest mark-to-market initiatives."

The accounting profession has recently reduced pressures to require that changes in the market value of mortgages flow through the income statement.

Mr. Toevs said that banks had built capital to the point where they now have a surplus rather than being undercapitalized, so capital considerations are no longer as urgent.

Bank holdings of residential mortgages climbed by 12% in the first half over the level a year earlier, despite a drain that was caused by heavy prepayments (see table).

[TABULAR DATA OMITTED]

Accelerated Expansion

In the first quarter, their holdings increased by 7.5% over the level in the year-earlier quarter.

The bigger pin for the half indicates that banks' expansion of home-loan holdings accelerated in the second quarter.

And while third-quarter figures are not yet available, all indications are that the growth has continued.

The strong buildup includes large amounts of riskier fixed-rate mortgages.

Analysts say that banks have little choice but to accumulate mortgages because of limited investment opportunities elsewhere.

Since mortgage portfolios are a relatively small proportion of most banks' assets, they are more willing to hold the riskier fixed-rate loans, a luxury the thrifts generally cannot afford.

In fact, there was a direct correlation between the percentage of bank assets that were mortgages and the percentage of mortgages that had adjustable rates.

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