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 5, 2003 #03-05
E-mail: [email protected]

ACB REAL ESTATE LENDING SURVEY SHOWS MORE COMMUNITY BANKS USING SECONDARY MARKET

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WASHINGTON, D.C. — A growing number of community banks sold residential mortgages into the secondary mortgage market, reflecting the low interest-rate environment and increased loan production in 2002, according to America’s Community Bankers 10th annual Real Estate Lending Survey. Most bankers expect sales to increase, or at least remain the same, in 2003.

The survey found that 72 percent of the community banks responding to the survey sold mortgages into the secondary market in 2002, compared to 55 percent in 2001 and 49 percent in 2000. “Lower mortgage rates not only supported the growth in mortgage origination volume, but also created a favorable environment for sales into the secondary market,” according to an analysis by Steven Davidson, ACB’s senior financial economist.

In terms of dollar volume, community banks selling into the secondary market sold 45 percent of their originations in 2002, compared to 41 percent in 2001 and 17 percent in 2000. (The percentages exclude two very large survey respondents whose data would have tended to distort the results. If all respondents are included, the “average” community bank sold 39 percent of originations).

“Community banks are becoming more comfortable selling their loans, and ACB’s mortgage alliance programs have obviously contributed to that evolution,” said Ron Haynie, director of mortgage solutions, America’s Community Banking Partners, Inc., ACB’s business solutions subsidiary. “While low-interest, fixed-rate loans were driving increased sales to the secondary market, that trend is consistent with increased participation in ACB’s mortgage programs.”

About one-third of ACB’s members are participating in one or more of ACB’s mortgage programs, with more than 10 percent new to the secondary market. Participants in ACB’s programs with Fannie Mae, Countrywide Home Loans, Principal Residential Mortgage and Freddie Mac delivered $22 billion in loans, Haynie said.

The use of technology has become an important part of residential mortgage underwriting and origination. According to the survey, the use of automated underwriting has grown significantly over the last several years, with 52 percent of respondents using automated systems in 2002, up from 41 percent in 2001 and 38 percent in 2000.

The survey also found that 63 percent of respondents used an automated home mortgage loan origination system, an increase of 1 percentage point over last year’s survey and 2 percentage points over 2000. Some 53 percent said they link the underwriting and origination software.

The survey found that 10 percent of community banks’ loan customers were first-time homebuyers. Sixty-four percent of respondents either required or recommended education and counseling for at least one mortgage or consumer lending product.

Looking ahead, 30 percent of respondents said they expect to sell more of their loan production to the secondary market in 2003, while 43 percent expect no change. Some 63 percent said demand for home equity lines of credit would rise in 2003. Forty-one percent predicted an increase in commercial real estate lending, compared to 11 percent expecting a decline.

Responding to a question posed for the first time asking bankers about their biggest challenge in mortgage lending, the top three were: competition from Fannie and Freddie, mortgage bankers, large lenders and unregulated lenders; mortgage pricing and profitability; and staffing to meet demand.

The survey was compiled from responses by 320 community banks, broadly reflecting community banking and including 139 commercial banks. The questionnaire was mailed in the fourth quarter of 2002, requesting information as of Sept. 30. The margin of error was 5.5 percent. The survey included all ownership types, charters, asset sizes and regions of the country. The survey is available at $125 for members, $195 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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