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 8, 2005 #05-03
E-mail: [email protected]

ACB ISSUES ANNUAL REAL ESTATE LENDING SURVEY

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WASHINGTON, D.C. — Nearly half of community banks expect their dollar volume of single-family loans to increase in 2005 after a year of declines in volume caused by rising interest rates and the fall-off in mortgage loan refinances, according to America’s Community Bankers 12th annual Real Estate Lending Survey. Only 21 percent forecast a shrinkage in volume this year.

Lenders were also optimistic about increases in dollar volume of home equity loans (68 percent), commercial real estate loans (60 percent), construction loans (54 percent) and multifamily loans (29 percent).

With interest rates remaining near historically low levels in 2004, fixed-rate mortgages for single-family loans were the most popular at 70 percent of originations. With rates even lower in 2003, fixed-rate loans comprised 79 percent of production.

In 2003, 30-year and 15-year loans were almost even in popularity, but as interest rates began to rise in 2004 and the ratio of refinances to purchase mortgages declined, there was a shift back to lower monthly payment 30-year loans (36 percent) over 15-year loans (23 percent). Adjustable-rate loans accounted for 30 percent of originations in 2004, compared with 21 percent the year before.

Sales into the secondary market as a percentage of originations remained stable in 2004, with 34 percent sold versus 36 percent sold in 2003 by the average bank. Secondary market sales of total originations by all banks were 43 percent in 2004, down from 50 percent in 2003, as larger banks retained more loans.

As a percent of originations, banks sold a greater percentage of their home loans to conduits/wholesalers, the Federal Home Loan Banks and other financial institutions (24 percent) in 2004 than in the previous year (15 percent). Loan sales to Fannie Mae (8 percent) and Freddie Mac (10 percent) declined from 16 percent each in 2003.

The most often used conduits were identified by respondents as Washington Mutual, Countrywide, CitiMortgage (which acquired Principal Residential Mortgage), ABN AMRO, Chase Manhattan and Wells Fargo. The use of the FHLBank programs remained consistent with the level reported the previous year, and was strongest among banks with assets between $301 million to $500 million.

ACB Business Partners’ mortgage solutions program continued in 2004 to help member banks of all sizes, especially small institutions that have traditionally retained mortgages, participate in the secondary market. About half of ACB’s members use special programs with Fannie Mae, Freddie Mac, Countrywide Home Loans, CitiMortgage and Financial Freedom. Since the program began in 2001, participants have delivered nearly $60 billion in mortgages.

The use of technology in the underwriting and origination of home loans stabilized after years of growth. Automated underwriting systems and automated origination technology were each used by 66 percent of respondents in 2004. Two-thirds of the banks using both automated underwriting and originating systems reported linking them. Only 6 percent of banks using automated underwriting systems did not use Desktop Underwriter or Loan Prospector.

Three-quarters of respondents (76 percent) reported offering general mortgage-related information on the Internet, a significant increase over 57 percent the previous year. Half (52 percent) offer mortgage interest rates and product information online, 21 percent accept applications online and 9 percent give approval or rejection online.

The survey was compiled from responses by 553 community banks, broadly reflecting community banking. The questionnaire was mailed in the fourth quarter of 2004, requesting information as of Sept. 30. The margin of error was 4.25 percent. The survey included all ownership types, charters, asset sizes and regions of the country. The survey is available at $60 for members, $85 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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