Home equity lending by banks and savings institutions is slowing after two years of rapid growth, according to first-quarter data released by the Federal Deposit Insurance Corp.The FDIC reported that borrowings against home equity lines of credit grew by only 3.5% during the first quarter, compared with 6.7% in the fourth quarter. During 2004, HELOC borrowings grew at a 41.8% annual rate. That slowed to a 34.9% annual rate in the first quarter. As of March 31, commercial banks and thrifts held $508.0 billion in outstanding HELOCs, up from $376.5 billion at the end of the first quarter of 2004. Federal regulators recently cracked down on home equity lending, warning banks to review their lending practices and the quality of their HELOC portfolios. Meanwhile, financial institutions increased their holdings of one- to four-family loans by 2.7% in the first quarter, to $1.89 trillion, and their holdings of mortgage-backed securities by 2.8%, to $1.14 trillion. The FDIC also reported that FDIC-insured institutions posted record first-quarter earnings of $34.3 billion despite a decline in revenues. "The lack of revenue growth shows the industry faces challenges in sustaining a high level of performance," FDIC Chairman Don Powell said.

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