Fed\'s loan officer survey shows stronger purchase loan demand
By MortgageDaily.com staff
8/16/2005

Demand for nontraditional mortgage products at banks picked up over the past year, although few institutions retained these loans in their portfolios.

Those were some of the findings outlined in the Federal Reserve Board's July 2005 Senior Loan Officer Opinion Survey on Bank Lending Practices announced Monday.

The quarterly analysis, which included responses from 54 domestic banking institutions, addressed changes in the supply and demand of bank loans over the past three months.

Overall credit standards on residential mortgages remained basically unchanged, but one-fifth of the respondents reported "stronger demand" for purchase loans over the past three months, the Fed said.

The share of originations and portfolio holdings of nontraditional mortgage products, which include adjustable-rate mortgages with multiple payment options, interest-only loans and Alt-A products, grew -- with more than half of the respondents reporting a higher share of nontraditional originations than in the previous twelve-month period, according to the report, and 12 percent noting a substantially higher share. Domestic banks generally reported that such loans accounted for less than a quarter of their residential mortgage originations and of the loans on their books over the past year, the announcement said.

And while a large majority of banks were less likely to securitize nontraditional mortgages than traditional, the Fed said there were three large institutions -- accounting for almost 40 percent of respondents' residential mortgages outstanding -- that indicated their share of securitized nontraditional mortgage originations exceeded 75 percent.

A substantial majority of banks indicated that the share of nonowner occupied purchase loans in their books was less than 10 percent and one-fourth of respondents noted that their origination share of such loans was moderately higher than in previous twelve-month period, according to the announcement.

Banks with larger mortgage portfolios generally reported higher proportions of nonowner occupied purchase mortgages in their books and were more likely to report an increase in this share of such originations, the Fed reported.

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