Are record-low interest rates masking high-cost mortgage lending?

Are record-low interest rates masking high-cost mortgage lending?

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Lending

Where are lenders driving mortgage traffic?

Lending standards tighten across most spectrums

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Lending standards have shifted over the past three months following the recent implementation of the Consumer Financial Protection Bureau Qualified Mortgage rule, according to the Federal Reserve Senior January Loan Officer Opinion Survey on Bank Lending Practices.

While there has been a lot of hype around the new compliance rules, the survey found that roughly 9% of all respondents said that credit standards on mortgage loans categorized as prime residential mortgages tightened somewhat.

Although 17% of large banks said that credit standards on mortgage loans that the bank categorizes at prime residential eased somewhat, 14% of all other respondents said that standards have tightened somewhat. 

Meanwhile, 6% of respondents said credit standards on mortgage loans categorized as nontraditional residential mortgages have tightened. However, out of the 72 respondents, 37 said that they do not originate nontraditional residential mortgages.

But the biggest change was seen in home equity lines of credit.

As HousingWire reported at the beginning of November, rising home prices helped bolster lender confidence, giving them a greater margin of cushion and fueling demand for home equity lines of credit.

Out of 71 respondents, 16% reported moderately stronger demand, 18% posted moderately weaker and 63% posted about the same.  

Yet over the past three months, banks' credit standards for approving applications for revolving home equity lines of credit remained fairly frozen.

About 89% of respondents said standards remained basically unchanged, while 4% said it tightened somewhat and 7% said it eased somewhat.     

But regardless of the variations in residential lending, commercial and multifamily lending is projected to witness a strong year.

Commercial and multifamily mortgage originations are expected to grow to $300 billion in 2014, rising 7% from 2013 volumes and will continue to rise to $333 billion in 2016, as HousingWire posted Monday.

“This year will once again see fewer loans coming up against their maturities. But with still low interest rates, improving property fundamentals, a rebound in property prices and higher loan maturity volumes on the horizon, we anticipate mortgage originations will continue to increase in 2014,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. 

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