Community bankers reported the share of fixed-rate mortgage production increased while secondary activity fell. The outlook is optimistic for home equity fundings.
Such data was derived from the America's Community Bankers' 14th annual Real Estate Lending Survey.
The survey, conducted during the fourth quarter 2006, analyzed the responses given by 215 community banks utilizing data from the first three quarters of 2006, according to an announcement.
"For the second year in a row, expectations of increased production were down in all five categories of real estate lending," but lenders remain optimistic, ACB said in the announcement.
In the home equity category, 86 percent of the respondents said they expected 2006 to be as good or better as 2005, edging down from 90 percent in the previous survey, ACB said.
Meanwhile, 39 percent of bankers reportedly expected their single-family loan origination volume to increase in 2006 and 34 percent anticipated stability in this type of originations, off slightly from 41 percent and 37 percent in the prior year's survey, respectively.
Multifamily lenders expected volume to increase by 18 percent, while a year earlier they forecasted a 25 percent upturn.
Fixed-rate loans made up 65 percent of respondents' loan production, up from 58 percent the previous year. Meanwhile, the hybrid 5/1 continued to be the most popular adjustable-rate product, accounting for nearly 15 percent of originations, off from 18 percent the year before. The share of interest-only loans fell to 2 percent over the year from 8 percent.
Purchase money loans for first-time borrowers accounted for 13 percent of respondents' mortgages. ACB said.
Eleven percent of banks reportedly offered reverse mortgages last year, with total median volume of $400,000.
"As has been the trend in recent surveys, banks in the survey are diversifying their product offerings while continuing to move online in providing convenience to customers in search of financing," ACB said.
The percentage of banks that accepted mortgage applications online was 47 percent, versus 37 percent a year earlier. Additionally, responses showed that 18 percent, or 1 percent more than a year earlier, could render decisions online, and that 1 percent offered online closings.
The volume of loans sold into the secondary market dropped to 24 percent from 34 percent the previous year, ACB said. The share of banks that sold loans edged down to 65 percent, and 35 percent retained all loans in portfolio.
For the third consecutive year, banks sold more of their home loans, or 10 percent as a percentage of originations, to aggregators or conduits than to the government-sponsored enterprises, according to the announcement. Countrywide, Wells Fargo, IndyMac Bank, CitiMortgage, ABN AMRO, SunTrust and Washington Mutual were the most frequently used conduits. Six percent of sales were to Freddie Mac, 3 percent to Fannie Mae, 2 percent to Federal Home Loan Banks and 2 percent went to other financial institutions.