Banks Anticipate Handling More Home Equity Products this Year

Banks and thrifts are expecting to see a big jump in home equity lending this year, according to a real estate lending survey by America's Community Bankers.

The 11th annual real estate survey found that 56% of the 403 respondents expect loan volumes to decline in 2004 as refinancings slow, while 64% expect consumers will turn to home equity loans.

As interest rates rise, "people will use home equity loans to tap into the equity in the their homes," ACB executive vice president Robert Davis said.

The ACB survey also shows the respondents equally divided their loan sales between Fannie Mae (33%) and Freddie Mac (32%). Conduits and wholesalers captured 22% of secondary market sales, while the Federal Home Loan Banks netted a 7% share and Ginnie Mae 3%.

Only 36% of the respondents expect to reduce their secondary market sales in 2004. Mr. Davis expects the FHLBanks will increase their market share this year as purchase mortgages, as opposed to refis, dominate originations. The ACB survey breaks down the loan originations and loan sales by institution size. The results show that that depositories ranging from $200 million to $1 billion in assets make twice as many loans to first-time homebuyers than the multibillion banks.

Community banks put effort into borrower education for immigrants, Mr. Davis pointed out. The survey also shows that the GSEs are finally doing business with the smallest banks.

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