The National Association of Realtors
spent the month of January meeting with major lenders and regulators, pressuring them to loosen rigid underwriting standards that have contributed to the fall in mortgage originations during 2010.
The big-four banks, Wells Fargo (WFC)
, Bank of America (BAC)
, JPMorgan Chase (JPM)
and Citigroup (C)
combined to originate $916 billion in mortgage loans during 2010, down 12% from the more than $1.04 trillion lent in 2009, according to year-end financial statements.
The most came from Wells Fargo. The San Francisco-based bank originated $392.5 billion in mortgages in 2010, but that was down 10% from the year before. BofA's $306 billion in mortgage loans was a 27% drop, and Citi's $61.9 billion fell 13% from 2009.
Only JPMorgan Chase had an increase, up 3% to $155.6 billion in home loans.
Walter Molony, a spokesman for NAR, the largest trade group of real estate agents in the country, said the final data for home sales in 2010 will be "comparably low," but he did not blame a lack of demand. Instead, the banks under pressure from regulators, lawmakers and the recent collapse of loosely written mortgages, have tightened standards too tight, he said.
"Recent loan performance is better than before the housing boom, which demonstrates that credit has become overly restrictive," Molony said.
He cited data from Federal Housing Finance Agency
, the regulator of Fannie Mae
and Freddie Mac
. For loans written and bought by those agencies in 2009, the default rate after 18 months was slightly more than 1% for both companies. Loans originated in 2007 had a 28.7% 18-month default rate at Fannie and a 22.3% default rate at Freddie.
So, NAR went to work. On Jan. 25, 2011 NAR President Ron Phipps met with CitiMortgage lenders and servicers complaining that they were acting too slow on both sides of the process, whether it was to green light a mortgage application, a modification or even a foreclosure.
"Even if the faster answer is ‘no’, that is better than months of delay," Phipps told the executives. The meeting was the last in a series of conversations with the country's largest lenders.
In another meeting with FHFA Acting Director Edward DeMarco, Phipps and other NAR leaders raised concerns about rigid underwriting policies and increasing fees at Fannie Mae and Freddie Mac. Then, took that same lobbying effort to Jeffrey Goldstein, the Treasury Department
under secretary for domestic finance.
This campaign came at the same time the Financial Crisis Inquiry Commission released its report that blamed regulators and Wall Street
for ignoring early problems in mortgage lending that sparked the meltdown.
The prime example that the commission laid out was the Federal Reserve
's "pivotal failure" to set prudent mortgage-lending standards and stem the flow of toxic loans.
"The Federal Reserve was the one entity empowered to do so and it did not," the commission wrote.
Ron Dvari, CEO of New Oak Capital
, an advisory and investment services provider, said because of the government-sponsored enterprises' domination of the mortgage market, most loans fall under their well-defined underwriting standards. But, he disagreed with NAR, and instead blamed falling home prices for scaring away demand.
"The best explanation for the total size being down are home prices for these areas being down significantly," Dvari said.
Still, NAR Chief Economist Lawrence Yun said once the banks improve their balance sheets and shrug off the weight of those legacy assets, banks can begin easing credit restrictions. But, he said, it's happening at a slow pace.
In a conference call with reporters in June, NAR said the credit pendulum had swung from extremely lax during the housing boom to overly restrictive during the current fallout.
"If banks were to return to normal, sound underwriting standards, home sales could rise 15%," Yun said.
But regulators and lawmakers are still trying to determine what "normal" really is.
Write to Jon Prior
Follow him on Twitter: @JonAPrior