WASHINGTON — Banks that retain residential real estate loans rather than sell them in the secondary market are required to carry too much capital to back them, a recent Office of Thrift Supervision study asserts.

“Our research suggests that residential loans are generally subject to a disproportionately high capital burden relative to other types of loans,” OTS Director Ellen Seidman said in a news release.

Ms. Seidman’s comments on the study were issued simultaneously with a proposed rule that would reduce certain real estate-related capital requirements for thrifts. The proposal, which is expected to be published in the Federal Register soon, would lower the so-called risk weight of some mortgage loans.

Under current rules, loans for 80% or less of the total value of a residence are eligible for a 50% risk weight. This means that instead of carrying the full 8% capital required of most consumer loans, the lenders could hold only 4% of the loan’s value in capital.

According to the Federal Housing Finance Board, 64% of conventional single-family home loans in 2000 were made for 80% or less of the property’s value, 14% were made for between 80% and 90% of value, and 22% mere made for more than 90% of value.

Under the OTS proposal, thrift loans for up to 90% of a residence’s value are eligible for the reduced capital charge — a benefit already afforded banks. The agency’s proposal would make other changes to thrift capital rules to bring them in line with federal banking regulators’ requirements.

But it is possible that the OTS may go further, because the staff study, written by OTS senior financial economist Mark D. Flood, suggests that capital levels for residential mortgages ought to be even lower than 4%.

The study evaluated the performance of six types of loans between 1984 and 1999, using consolidated data from all U.S. depository institutions. It found that real estate loans in general and one- to four-family mortgages in particular, “consistently pose the least credit risk of the six loan categories considered.”

Current capital requirements for residential real estate loans are grounded in the Basel Capital Accord, negotiated in 1988, which mandates a 50% risk weight for most residential mortgage loans. A proposal to update the accord, released in January, retains that weighting.

The OTS study cites several examples to illustrate excessive levels of capital currently required for real estate loans. In 1996, for instance, of all institutions that based capital for real estate portfolios on the accord’s requirements, just 0.21% had chargeoffs in excess of capital. By contrast, 2.84% of commercial loan portfolios capitalized under the Basel system charged off more than they set aside.

The results came as no surprise to industry advocates.

“Our feeling is that the weights that currently exist have always overstated the credit risk that actually exists in mortgage loan portfolios,” said Robert R. Davis, managing director of government relations for America’s Community Bankers. “Any institution that has significant amounts of mortgage loans on their books has the benefit of very low credit risk. There needs to be an adjustment so that the credit risk component of risk-based capital truly reflects the risks that the institutions have.”

Ms. Seidman was expected to comment on the study in a speech Wednesday night before the Greenlining Institute, a fair-housing advocacy in Sacramento, Calif.

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