Servicing Income Rises For Banks and Thrifts

Residential mortgage lending and investments at banks and thrifts accounted for 42% of all asset growth in 2004 and 70% in the fourth quarter as federally insured depositories continue to bulk up on mortgage assets.

The most rapid growth occurred in home-equity lending, according to the Federal Deposit Insurance Corp.

Borrowings on home-equity lines of credit grew at a 41.8% annual rate at FDIC-insured institutions.

At commercial banks, HELOCs grew at a 40.2% annual rate in 2004, up from a 33% growth rate in 2003. FDIC data released last week show that borrowings on HELOCs rose from $284.5 billion in the fourth quarter of 2003 to $398.9 billion as of year-end 2004. In the fourth quarter, HELOC lending grew by $23.7 billion, or 6.7% from the third quarter.

Office of Thrift Supervision data show that home-equity lending at thrifts jumped by 62.5% in 2004 to $79.3 billion. HELOC outstandings grew by $11.4 billion in the fourth quarter, up 16.8% from the third quarter.

At a less dramatic rate, FDIC-insured institutions increased their investments in single-family loans and mortgage-backed securities.

Holdings of 1-to-4 family loans grew at an annual rate of 14% to $1.84 trillion and holdings of MBS grew at a 13.1% annual rate to $1.1 trillion as of Dec. 31.

FDIC's fourth-quarter report also shows that commercial banks held $1.48 trillion of 1-to-4 family mortgages at year-end and $876.4 billion in MBS.

Meanwhile, servicing fee income rose by 27.2% to $4.6 billion in the fourth quarter. Despite this $981 million quarterly gain, FDIC-insured institutions failed to post record profits for the fourth quarter because of merger expenses and lower gains on securities sales. Earnings fell by 2.1% to $31.8 billion, FDIC said.

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