Although new mortgage regulations continue to hamper home lending at the country’s banks, a growing share are willing to step out of the box. The share of originations from third parties diminished.
Seven percent of last year’s residential loan production at banks was generated through wholesale or correspondent, retreating compared to 2014, when 10 percent of production came from third parties.
Conduits and wholesalers were the destination of 12 percent of 2015’s production, tumbling from 19 percent a year earlier. Fannie Mae picked up 10 percent, while Freddie Mac acquired 14 percent.
Another 8 percent went to Federal Home Loan Banks.
Those were just some of the details included in the American Bankers Association’s 23rd Annual ABA Residential Real Estate Survey Report.
There were 159 banks that participated in the survey, which was conducted from Feb. 3 through March 18. Less than a third of the participating financial institutions had more than $1 billion in assets.
Average production at surveyed banks was $0.490 billion in 2015. In addition, the average bank originated $0.024 billion in home-equity lines of credit and $0.004 billion in closed-end second mortgages.
Wells Fargo & Co. was the biggest aggregator of loans, followed by U.S. Bank, N.A.; BB&T; Franklin American; and the FHLB.
Roughly 86 percent of home loans originated
by banks in 2015 met Qualified Mortgage requirements, easing from 90 percent in 2014.
ABA suggested that more
banks are adjusting underwriting criteria to target selected non-QM loan opportunities.
But even though QM activity has risen, nearly three-quarters of banks expect the QM-Ability to Repay regulations will continue to restrict credit availability — though that’s a smaller share than the 80 percent the previous year.
Just over a quarter of banks limit originations to QM loans, down from a third.
The most frequent reason for loans not meeting QM guidelines was high debt-to-income ratios — which was cited by two-thirds of the banks.
With 40 percent of banks citing documentation requirements that prevented consideration of all income and/or assets, it was the second-most cited reason for loans not meeting QM requirements.
Of the banks that originate QM loans, 79 percent hold the mortgages in their portfolio.
Nearly a quarter of respondents indicated that regulations are having an extremely negative impact on business.
The report said that 14 percent of banks are considering selling mortgage servicing rights due to new regulatory requirements or capital treatment. The share was the same as in 2014.
