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Six Federal Home Loan banks have dramatically increased home loan purchases from their members and are selling the loans to Fannie Mae, filling the gap created when large aggregators like Bank of America exited the correspondent business.
December 12 -
Rising home prices and the ongoing quest for new revenues are prompting lenders to take a second look at a product that fell out of fashion following the housing bust.
April 2
Community banks have upped their lending to first-time home buyers and more and more are making mortgage loans on their own without the help of wholesalers, according to
In a sign of improving consumer confidence, bankers surveyed said that 11% of loans originated in 2012 went to first-time buyers, up from 9% in 2011. Relatedly, the lenders also reported declines in requests for loan workouts and mortgage modifications.
Meanwhile, only 8% of loans were originated through wholesalers or correspondents, down from 9% in 2011 and 14% in 2010. Eighty-two percent of loans were originated through retail branches, up from 78% in 2010.
More than 260 banks responded to the survey, which was released at the ABA's real estate lending conference in New Orleans. Eighty-five percent of the respondents were banks with less than $1 billion of assets.
As in recent years, the bulk of the activity has been in refinancing, though purchase activity is starting to pick up. According to the survey, 62% of loans in 2012 were refis, down from 63% in 2011 and 66% in 2010.
Respondents said that 40.3% of mortgages are held in portfolios and that the rest are sold to a combination of government-sponsored enterprises, mortgage aggregators and securitizers and other banks. Notably, the Federal Home Loan banks are
Despite the generally positive trends, community banks say challenges remain. Asked what could be the primary impediment to residential mortgage growth, bankers pointed to regulation and its impact on both their costs and the availability of credit. They are also concerned about capital requirements on commercial real estate loans, which they say could constrain lending at a time when demand is rising in certain pockets. According to the survey, 47% of banks expect demand for CRE loans to remain the same in 2013 as in 2012 while 35% are predicting an increase. Just 18% said they expect demand to fall year over year.
"Compliance burden for residential mortgages, risk management and capital requirements for commercial real estate lending present the biggest threats to credit availability," said ABA Chairman Matt Williams. Williams is the chairman and president of the $123 million-asset Gothenburg State Bank in Nebraska.
