Thrifts and small banks are originating and securitizing more nonconventional loans than ever, a new study finds.
So-called B and C loans and jumbo loans are making their way with greater frequency to private conduits that sell them into the secondary market on behalf of mortgage banks, according to the study, released Tuesday by America's Community Bankers.
Private conduits are companies that act as liaisons between lenders and Wall Street. They deal with loans that do not conform to the requirements of Fannie Mae and Freddie Mac, the government-sponsored secondary market agencies.
The study found that respondents sold 33% of their originations into the secondary market, either to private conduits or to Fannie Mae and Freddie Mac. Private conduits processed 11% of the volume, surpassing Freddie Mac, the Federal National Mortgage Corp., for the first time. Freddie handled 10.1%, and Fannie Mae, the Federal National Mortgage Association, held the lead, with 12.3%.
While Freddie Mac and Fannie Mae attract a large amount of loans from thrifts - both companies had very strong years in 1995 - the findings showed the growing appeal to banks and thrifts of nontraditional products.
"Many savings institutions are now engaging in special-product lending," such as B and C loans, said Robert R. Davis, economics director at America's Community Bankers.
The appeal of these products is "a higher margin in a lower-volume market," he said.
America's Community Bankers polled its 424 members - savings banks and some smaller commercial banks - during the last quarter of 1995. The banks had originated a total of $22.2 billion of single-family mortgages in the preceding 12 months.
Of the amount originated, one-third was securitized, compared to one- quarter in 1994. Neither figure comes close to the 45% of loans securitized in 1993, when originations hit a record.
Mr. Davis said 1996 would, however, give the record a run for its money. He said as much as 40% of origination volume could be headed for the secondary market.