Loans that didn’t meet Qualified Mortgage requirements accounted for a much smaller share of bank originations last year. But third-party and first-time homebuyer share widened.
Banks originated 81 percent of their residential loan production through the retail channel during 2016. Retail share was more narrow than 83 percent the prior year.
Wholesale-correspondent lending share widened
to 11 percent last year from just 7 percent in 2015. The Internet origination channel share slipped to 6 percent from 7 percent.
The findings were described
by the American Bankers Association in its 24th Annual ABA Residential Real Estate Survey Report. There were 159 banks that participated in the survey. More than three-quarters of the participants had assets of less than $1 billion.
QM loans accounted for 91 percent of the typical bank’s 2016 mortgage production.
That left just 9 percent of residential loan originations that were non-QM loans. The non-QM share tumbled from 14 percent in 2015 and was lower than any year since the QM designations became effective. The non-QM share had been as high as 16 percent in 2013.
In fact, 30 percent of banks limit their offerings to QM programs. In addition, 45 percent of banks are only making non-QM loans to target markets or with other restrictions.
Among loans that don’t meet QM standards, high debt-to-income ratios and insufficient documentation were the biggest factors.
“Non-qualified mortgage loans have been subject to heightened regulatory requirements and risk, reducing the willingness of banks to extend these loans to even the most creditworthy borrowers,” ABA Executive Vice President Robert Davis stated in an accompanying statement. “Despite ongoing regulatory hurdles, community banks remain resilient in their ability to manage risk levels, increase productivity and introduce more first-time homebuyers into the market.”
Regulations have had
a negative impact on originations and consumer credit availability, according to 95 percent of the respondents. Also concerning bankers are interest rates, TRID compliance and insufficient housing inventory.
“Mortgage-specific compliance costs have increased for 97 percent of institutions as a result of recent regulatory reforms, and 75 percent of institutions have had to hire additional staff to cope with these new regulations,” the report said.
But the good news is that single-family loans to first-time homebuyers rose to 16 percent last year from 15 percent in 2015. It was the highest share on record.
Refinance share widened to 47 percent in 2016 from 45 percent a year earlier.
Servicing was retained on new mortgage originations by 37 percent of banks, a bigger share than 30 percent in 2015. Servicing-released origination share fell to 29 percent from a third. The share of banks that originated loans both servicing-retained and servicing-related fell to a third from 37 percent.
Conforming loans accounted for 79 percent of 2016 originations. Another 9 percent were jumbo mortgages, 8 percent were non-conforming, and 4 percent were either insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.
Loans retained for banks’ portfolios accounted for 43 percent of 2016 production. Another 15 percent were sold to Freddie Mac, 14 percent were securitized through Ginnie Mae and 12 percent were sold to Fannie Mae. The rest were sold to private mortgage conduits and aggregators, other financial institutions, or through the Federal Home Loan Banks.
Among aggregators, the FHLB was the No. 1, followed by Wells Fargo, U.S. Bank, PennyMac and Franklin American.
