Home Loans Hampered by Regulatory Burden

Eighty-six percent of the typical bank’s mortgage loans made last year were “qualified mortgages,” according to the American Bankers Association’s 23rd annual Real Estate Lending Survey. Despite an increase in non-QM lending, the survey results revealed that 72 percent of respondents expect the Consumer Financial Protection Bureau’s mortgage lending rules will continue to cause a reduction in credit availability.

The results, released at the ABA Real Estate Lending Conference in San Antonio, show that more than a quarter are restricting lending to within QM and about half are making non-QM loans only to targeted markets or with other restrictions.

The most likely reason for a mortgage loan not meeting QM standards was high debt-to-income levels followed by lack of required documentation.

“While banks continue to grapple with the overwhelming amount of new regulation in the mortgage space, we’re pleased that the market has shown some resiliency and adjustment,” says Robert Davis, ABA executive vice president. “Despite regulatory and economic headwinds, community banks have proven to be strongly committed to first-time homebuyers.”

The survey also revealed some positive results. The 159 respondents, 68 percent with assets less than $1 billion, reported the highest percentage of loans to first-time homebuyers in the survey’s 23 year history.

Foreclosure rates at surveyed banks continued to drop from 0.57 percent in 2014 to 0.37 percent in 2015, while the average delinquency rate for single family homes decreased from 1.76 percent to 1.27 percent.

The 30-year fixed-rate mortgage remains dominant in bank lending, holding steady at 47.4 percent of all loans in 2015 compared to 50.5 percent in 2014.

According to the survey, bankers are most concerned about increased regulatory burden, including TRID and other compliance concerns, followed by economic uncertainty and the interest rate environment.