WASHINGTON — Ninety-five percent of respondents to the American Bankers Association’s 24th annual Real Estate Lending Surveydescribed regulation as having a negative impact on business production and consumer credit availability. The survey, released today at ABA’s Real Estate Lending Conference in Orlando, revealed that 91 percent of the typical bank’s mortgage loans made last year were qualified mortgages. This finding indicates a sharp decline in the extension of non-qualified mortgages, with the average percentage of non-QM loans falling from 14 percent in 2015 to 9 percent in 2016.
The results also show that more than 30 percent of banks are restricting lending to QM segments only, and 45 percent are making non-QM loans only to target markets or with other restrictions.
According to the survey, high debt-to-income levels in addition to insufficient documentation continue to be the most common factors prohibiting mortgage loans from meeting QM standards.
“Non-qualified mortgage loans have been subject to heightened regulatory requirements and risk, reducing the willingness of banks to extend these loans to even the most creditworthy borrowers,” said Robert Davis, ABA executive vice president. “Despite ongoing regulatory hurdles, community banks remain resilient in their ability to manage risk levels, increase productivity and introduce more first-time homebuyers into the market.”
Despite the regulatory challenges, banks have managed to show positive trends in loan production.
The survey revealed that single family mortgage loans for first-time homebuyers increased from 15 percent in 2015 to 16 percent in 2016, a record high in the survey’s history.
Foreclosure rates at surveyed banks dropped more than a quarter percent from 0.63 percent in 2015 back down to the 2014 average of 0.37 percent.
According to the survey, heightened regulation remains a major concern for bankers followed by rising interest rates, TRID compliance requirements, and insufficient inventory in the housing market.
Click here for a complete report: 2017 ABA Real Estate Survey.