Commercial and Savings Bank Originations Increase

Despite a slowdown in the housing market, commercial banks and saving banks increased their originations of one-to-four family mortgages in the fourth quarter by 8.5%, according to the Federal Deposit Insurance Corp.Call report data filed by the largest 578 banks show they originated $358.2 billion in single-family loans during the fourth quarter, up from $330.1 billion in first quarter. Meanwhile, the FDIC reported net charge-offs on residential mortgages doubled from $410 million in third quarter to $888 million in the fourth. Even with the charge-offs, non-current mortgage loans jumped 15% during the quarter to $3.1 billion. FDIC chief economist Richard Brown noted that performance of subprime loans has deteriorating sharply in the second half of 2006. He expects the performance of subprime mortgages, particularly hybrids, will continue to get worse and it will take several quarters before there is an improvement. However, FDIC-insured banks and thrifts hold mostly prime loans in portfolio and he estimates that subprime loans make up only 10% to 12% of those portfolios.