Despite increased regulation, rising costs, and a general lack of understanding about the rules governing the market, real estate lending conditions changed relatively little from 2010 to 2011.
That's the news coming from the American Banking Association, reporting the results of their 19th annual Real Estate Lending Survey, released at the end of March.
Surveyed banks reported little change in the types of mortgage activity making up their business in 2011. The lack of change may be from a sluggish and stagnant situation created by concern about the market and Fannie Mae and Freddie Mac.
Respondents also noted new concerns about the mortgage market in 2012. New mortgage rules that may affect regulatory burden and compliance costs is a big one, along with falling home prices and drops in appraisal values. General economic woes are also troublesome, including continued high unemployment and increased foreclosures. Finally, loan demand and varying challenges with consumer credit also pose a threat.
In addition to noting concerns, respondents also suggested one major act could help alleviate problems and push the market towards recovery: Clear rules and information.
Overall, the survey involved 185 banks. Commercial banks represented 56% of respondents, and stockholder-owned banks assumed 68%. Smaller community banks with assets under $1 billion took up 86% of the respondents.
Key findings included:
Refinancing represented 63% of mortgage activity in 2011 compared to 66% in 2010.
Fixed rate loans made up 80% of originations, down 1 percentage point from the year before. 30-year loans made up 47% of all originations, down from 46% in 2010.
Conforming loans made up 72% of loans in both years.
Non-conforming loans increased from 11.6 to 14.0%.
FHA loans decreased from 6.5% to 5.0%.
Jumbo loans increased to 9.0% from 8.7%.
Mortgages to first-time homebuyers represented 9% of originations. Over the last two years, that figure has remained steady.
Loan-to-value ratios of 60-80% rose slightly, from 48% in 2010 to 51%.
Once popular mortgage features such as piggy-backs, low documentation loans and pre-payment penalties continued to decrease. Balloon payments were the only feature with a greater than 5% occurrence, respondents reported.
A frequent contributor to ERATE® since 2006, Amy Lillard is a freelance writer specializing in turning complex information into useful tips and tricks for readers. For questions or topic suggestions, contact Amy at [email protected]
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