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Mortgage Lending Fell 10% in 2011 to Lowest Point in 16 Years
Data on lending activity during 2011</bat 7,632 financial institutions that are covered by the Home MortgagernDisclosure Act (HDMA) was released today and showed continued heavy reliance onrnFHA-backed mortgage loans. The data camernfrom the Federal Financial Institutions Examination Council (FFIEC) and coveredrnbanks, savings associations, credit unions, and mortgage companies. The activity monitored including mortgagernapplications, originations, purchases and sales of loans.</p
The total number of originated loansrnof all types and purposes reported fell by about 780,000, or 10 percent, fromrn2010, in part because of a 13 percent decline in refinancing. Home purchasernlending also fell, but by a more modest 5 percent. </p
The FHA-related lending thatrnincreased several years ago with the onset of problems in the mortgage industryrncontinued at higher than normal levels. rnFor home purchase lending, FHA’s share of first-lien loans, which was atrn7 percent in 2007 increased steadily to 37 percent in 2009 and 36 percent inrn2010. In 2011 that share fell to 31rnpercent, still well above historic levels for the agency </p
First lien lending for homernpurchases through the Veterans Administration has also increased in recentrnyears, although it represents a far smaller share of the market than FHAs. VA-guaranteed loans went from a 3 percentrnshare in 2007 to about 7 percent in 2009 and 2010. It increased again in 2011 to 8 percent.</p
The aggregate of reportedrnconventional, FHA, and VA-related refinancing diminished slightly from 2010,rnbut the VA component of this refinancing was up by 41 percent, partially offsettingrndeclines of 12 percent and 37 percent for conventional and FHA-relatedrnrefinancing respectively.</p
The number of covered institutionsrnreporting was down nearly 4 percent from 2010, continuing a downward trendrnsince 2006 when just over 8,900 institutions reported. FFIEC said this decrease reflects mergers,rnacquisitions, and some bank failures. rnThe data involves 11.7 million loan applications, 7.1 millionrnoriginations, and 2.9 million loan purchases. It also includes information on 186,000rnrequests for preapprovals that did not result in a loan. </p
The 2011 data reflect the secondrnfull year of reporting under revised loan pricing rules, which determinernwhether a loan is classified as “higher priced.” Lenders now report loans withrnannual percentage rates (APRs) that are 1.5 percentage points above the ratesrnreported by Freddie Mac in its Primary Mortgage Market Survey1</irate for first lien loans and 3.5 percentage points for junior liens. </p
The data show that a small minorityrnof first lien loans in 2011 have APRs that exceeded the loan price reportingrnthresholds. The principal exception was for conventional first lien loans usedrnto purchase manufactured homes; for which 82 percent exceeded the reportingrnthreshold in 2011. For conventional first lien loans used to purchasernsite-built properties, about 3.9 percent of the reported loans exceeded thernreporting threshold (up from 3.3 percent in 2010). The incidence ofrnhigher-priced lending for FHA-insured loans on site-built properties (3.8rnpercent in 2011) is virtually the same as for conventional loans. The incidencernof higher-priced lending for loans backed by VA guarantees is notably smallerrnthan for either conventional or FHA-insured loans; only about 0.4 percent ofrnVA-guaranteed loans were higher priced in 2011.</p
Data on the disposition ofrnapplications for conventional purchase loans in 2011 showed minority applicantsrnexperienced higher loan denial rates than the nearly identical rates for Asianrnand for non-Hispanic white applicants. rnThis data has changed little in recent years.</p
The report notes that the HMDA datarncannot be used in isolation to determine if a lender is complying with fairrnlending laws as they do not include many determinants of creditworthiness andrnloan pricing. When examiners conductrnfair lending examinations they analyze additional information such as creditrnhistory and loan-to-value ratios.</p
The FFIEC also provides data fromrnthe nation’s seven largest private mortgage insurance companies. The 2011rnprivate mortgage insurance data include information on nearly 409,000rnapplications for mortgage insurance, comprised of some 257,000 applications torninsure home purchase mortgages, and about 151,000 applications to insurernmortgages to refinance existing obligations. </p
All raw data is available at the FFIECrnwebsite (http://www.ffiec.gov/reports.htm).rn
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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