ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release February 7, 2006 #06-08
E-mail: [email protected]

ACB REAL ESTATE LENDING SURVEY FINDS MORTGAGE LENDERS OPTIMISTIC ABOUT 2006

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WASHINGTON, D.C. — Community banks are adjusting to lower levels of mortgage originations, but are optimistic about mortgage lending in 2006, according to America’s Community Bankers 13th annual Real Estate Lending Survey.

“While other players come and go, these community banks are in the mortgage business to stay,” said Debra Cope, ACB’s senior vice president for publishing. “Community banks are making an array of residential loan products available to consumers, expanding online mortgage services and capturing significant jumbo loan business,” she said in describing the key findings of the survey.

While expectations of increased volume are lower in all categories, optimism remains among lenders, said Cope. In the single-family loan category, 41 percent expect to increase their total dollar volume of loans originated, down from 48 percent in the 2005 survey. But 37 percent anticipated stability in single-family originations, up from 31 percent the previous survey.

Lenders remained relatively optimistic about dollar volume of home equity loans and commercial real estate loans. Ninety percent of survey participants expect to do as much or more home equity business in 2006, compared with 97 percent in the previous survey. Ninety-two percent foresee doing as much or more commercial real estate lending in 2006.

The survey found that for the first time in several years purchase loans accounted for a majority of originations (63 percent versus 37 percent for financings). Twelve percent of loans went to first time homebuyers, about the same as previous years.

Sales into the secondary market as a percentage of originations remained stable in 2005, with 34 percent sold, the same as the previous year. However, 67 percent of banks were active sellers in the secondary market in 2005, down slightly from 2004. One-third retained all loans in portfolio.

As a percent of originations, banks sold a greater percentage of their home loans to conduits/wholesalers (14 percent), followed by Freddie Mac and Fannie Mae (7 percent each), the Federal Home Loan Banks (4 percent) and other financial institutions (1 percent). The most often used conduits were identified by survey participants as Countrywide, CitiMortgage, Washington Mutual, SunTrust and Wells Fargo.

ACB Business Partners’ mortgage solutions program continued in 2005 to help member banks of all sizes, especially smaller institutions that have traditionally retained mortgages, participate in the secondary market. Since the program began in 2001, participants have delivered more than $70 billion in mortgages.

Jumbo and other nonconforming loans made up a growing portion of community banks’ mortgage output in 2005, according to the survey. The percentage of conforming loans was 75 percent of originations, down from 81 percent in the previous survey. Rising home prices helped to fuel a surge in jumbo mortgages, accounting for 13 percent of loan originations. In dollar terms, jumbos accounted for 23 percent of home mortgage production. Alt-A loans, underwritten for persons with strong credit, represented 3 percent of originations; subprime loans, 1 percent.

Fixed-rate mortgages accounted for 58 percent of loan production, down from 70 percent the year before. But 30-year loans picked up market share, rising to 40 percent from 36 percent. Fifteen-year loans dropped to 13 percent from 23 percent the year before. They were outpaced by 5/1 ARMs with an 18 percent share. Interest-only loans comprised 8 percent of originations.

Online mortgage transactions continued to grow at community banks. Thirty-seven percent versus 21 percent a year ago accepted mortgage applications online and 17 percent could render decisions online, up from 9 percent a year earlier. One percent offered online closings.

The survey was compiled from responses by 239 community banks. It was conducted in the fourth quarter of 2005, with information from Jan. 1-Sept. 30, 2005. The margin of error was 6 percent. The survey included all ownership types, charters, asset sizes and regions of the country. The survey is available at $40 for members, $50 for nonmembers by calling (888) 872-0568.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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