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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 25, 2002 #02-12
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ACB REAL ESTATE LENDING SURVEY SHOWS SALES TO SECONDARY MORTGAGE MARKET NEARLY DOUBLING IN 2001

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WASHINGTON, D.C. — Community banks sold a higher percentage of their loans in the secondary mortgage market than in previous years and the trend may continue in 2002, according to America’s Community Bankers ninth annual Real Estate Lending Survey.

“The survey found community banks selling a significantly larger percentage of mortgage loan production than in 2000,” according to an analysis by Steven Davidson, ACB’s senior financial economist. The survey has been expanded to include details on portfolio credit quality, wholesalers and conduits, refinancing and home purchase volume and homeowner counseling services.

According to the survey, community banks sold about 41 percent of the home loans they produced in 2001, compared with about 22 percent in 2000. In terms of dollar volume, about 40 percent of loan production was sold in 2001, compared with 17 percent in 2000. (The percentages exclude very large survey respondents, whose data would have tended to distort the results).

The marked increase in secondary market sales reflected declining interest rates in 2001, said Davidson, similar to the pattern in periods of rate declines in the 1990s. “As rates may increase as the economy comes out of the recession, we could expect that sales activity may remain at current levels or even subside,” he said.

Anita Gentle Newcomb, president and CEO, ACB Partners, Inc., the business subsidiary of ACB, said, “The survey confirms the great opportunities for community banks to enter into secondary market relationships.” ACB recently announced enhancements to its ACB/Fannie Mae

Affinity Partnership, and alliances with Freddie Mac, Countrywide and Principal Residential Mortgage to provide members with additional secondary market options and bottom line benefits.

The percentage of community banks selling to Fannie Mae in 2001 increased to 19 percent from 13 percent the year before. The percentage selling to Freddie Mac was 23 percent, up from 19 percent the year before. These increases “reflected the strong secondary market compared to 2000 as well as the GSEs’ strategies to reach the community bank market,” said Davidson.

The survey also highlights the increasing importance of conduits and wholesalers, with 26 percent of community banks reporting sales to those entities, up from 22 percent in 2000.

The survey found that 49 percent of respondents were seller/servicers for Fannie Mae and 57 percent for Freddie Mac. For the first time, the survey asked about use of the Federal Home Loan Bank System’s mortgage partnership finance and mortgage partnership program, which involve direct sale of residential mortgages. In 2001, 20 percent said they sold loans through those programs. About 41 percent said they planned to participate in the future.

Industry-wide, some two-thirds of loan production came through banks’ traditional retail networks, but the Internet channel has become a more significant source, accounting for 21 percent of origination volume. That’s an exponential increase over the previous survey, when Internet originations were negligible, Davidson said.

The survey found that 41 percent of respondents require homeowner education and counseling for at least one mortgage or consumer lending product. Of those that do not impose such requirements, more than half (53 percent) recommend these programs to customers.

The survey was compiled from responses by 124 community banks to a questionnaire mailed in the fourth quarter of 2001, requesting information as of Sept. 30. The margin of error is 8.8 percent. The responding community banks represented all ownership types, charters and regions of the country. The asset-size distribution generally reflects the community banking industry.

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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