Total mortgage origination activity among the nation's thrifts fell by 20 percent during the first quarter while troubled assets continued their rapid ascent, the Office of Thrift Supervision said Tuesday afternoon
Mortgage originations, including multifamily and nonresidential mortgages, were $133.7 billion in the first quarter, down 21 percent from $169.2 billion in the first quarter a year ago and down 20 percent from $166.6 billion in the prior quarter.
Concurrent with a drop in loan production, most of the nation's thrifts absorbed continued hits to earnings as the number of bad loans on their books kept its upward pressure. The OTS said that the nation’s thrift industry posted a $617 million loss during the first quarter of 2008 after setting aside record provisions for loan losses during the quarter; the first quarter loss contrasts to an $8.75 billion loss industry-wide during the fourth quarter of 2007, but is well below the $3.61 billion in earnings thrifts posted one year ago.
"I have been urging managers of OTS-regulated thrift institutions to be aggressive in setting aside provisions for expected loan losses," said OTS Director John Reich. "This forceful response to the housing market crisis continues to depress industry earnings, but it also strengthens institutions to withstand future challenges."
Thrifts have set aside a total of $16.6 billion in loan loss provisions over the most recent three quarters. First quarter loan loss provisions were an all-time industry high of $7.6 billion, up from $5.5 billion in the previous quarter and $3.5 billion in the third quarter 2007, the OTS said. One year ago, provisions were $1.2 billion.
Asset quality remains problematic
The increase in reserves appears to be needed, with delinquencies for most loan types higher both on a linked-quarter and annual basis: non-performing assets rose 40 basis points within one quarter
to 2.06 percent of industry assets, the OTS said. First quarter's total is nearly three times the NPA levels recorded one year ago, reflecting the level of distress in the nation's mortgage market.
The number of repossessions (most REO) on thrifts' books also skyrocketed during the quarter, up from 0.10 percent one year ago to 0.27 percent of assets and the end of the first quarter.
Distressed assets -- specifically, those likely to end up non-performing -- also rose, signaling more rough times ahead. Severe delinquencies on single-family mortgages mortgages over 90 days in arrears rose by an astounding 182 basis points year-over-year, to 2.85 percent of all residential mortgages; that number was 50 basis points higher than in the fourth quarter, the OTS said.
For more information, visit http://www.ots.treas.gov