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 January 29, 2004 #04-05
E-mail: [email protected]

ACB REAL ESTATE LENDING SURVEY SHOWS INCREASE IN LOAN SALES TO SECONDARY MARKET

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WASHINGTON, D.C. — An increasing number of smaller community banks sold home loans into the secondary mortgage market in 2003 and made greater use of technology in mortgage lending, according to America’s Community Bankers 11th annual Real Estate Lending Survey.

Although lower dollar volumes are anticipated in residential mortgages in 2004, bankers are expecting an increase in the volume of home equity, commercial real estate and construction loans.

The survey found that the number of community bank respondents selling mortgages into the secondary market in 2003 remained about the same at 73 percent. The survey also found that secondary market participants sold about 50 percent of loan originations, a modest increase from 44 percent in 2002.

The survey indicated that banks were continuing to use a variety of secondary market participants. Shares of sales based on dollar amounts were as follows: Fannie Mae, 33 percent; Freddie Mac, 32 percent; conduits and wholesalers, 22 percent; the Federal Home Loan Banks, 7 percent; Ginnie Mae, 3 percent share; and other financial institutions, 2 percent. The use of the FHLBank programs was strongest among banks with assets between $200 million to $300 million.

The survey reflected a significant increase in the number of community banks with assets of less than $50 million selling mortgages into the secondary market. Forty-two percent sold mortgages in 2003, compared to 23 percent in the previous year. In 2003, one in five respondents selling into the secondary markets sold loans to Fannie or Freddie, up from virtually none in previous surveys.

ACB’s mortgage solutions program continued in 2003 to help member banks of all sizes, especially small institutions that have traditionally retained mortgages, participate in the secondary market. About one-third of ACB’s members use ACB’s programs with Fannie Mae, Freddie Mac, Countrywide Home Loans, Principal Residential Mortgage and Financial Freedom. Since program inception in 2001, participants have delivered about $50 billion in mortgages.

The use of technology in the underwriting and origination of home loans has steadily increased over the past few years with more small banks using these tools. Automated underwriting systems were used by 68 percent of respondents in 2003, up from 52 percent the previous year. Use by banks with $50 million in assets or less jumped to 47 percent in 2003 from 8 percent the previous year.

Similarly, use of automated origination technology also increased, with use by 69 percent in 2003, compared to 63 percent the previous year. The percentage for banks with less than $50 million in assets using the technology jumped to 51 percent in 2003, from 31 percent the previous year. Some 58 percent of all respondents link both systems.

Looking ahead, 77 percent of respondents said they expect to sell the same or less percentage of their single family loan production in 2004, while 24 percent expect an increase. Some 64 percent said demand for home equity loans would rise in 2004, 45 percent predicted an increase in commercial real estate lending and 38 percent expected more construction lending.

The survey was compiled from responses by 403 community banks, broadly reflecting community banking. The questionnaire was mailed in the fourth quarter of 2003, requesting information as of Sept. 30. The margin of error was 5 percent. The survey included all ownership types, charters, asset sizes and regions of the country. The survey is available at $50 for members, $75 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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