Community Banks Adopting Mortgage Innovations

Community bank and thrifts are adopting new mortgage products, practices, and technology even though they continue to retain two-thirds of their loan volume in portfolio, according to a survey by America's Community Bankers.ACB's 13th annual real estate survey shows that 8% of 200 community banks (less than $1 billion in assets) originated interest-only ARMs in 2005, up from 1% in 2004. Nearly 40% of community banks made no-document loans and 63% made no-downpayment loans, although the actual loan volume is small. Meanwhile, 37% of community banks accept mortgage applications online and 17% approve and reject applications online. When selling in the secondary market, small banks generally sell half those loans to private conduits/wholesalers and the other half to Fannie Mae and Freddie Mac. The most frequently cited conduit/wholesalers in the ACB survey are Countrywide, CitiMortgage, Washington Mutual, SunTrust, and Wells Fargo.