ABA: Survey Shows that Regulatory Burden Continues to Restrict Mortgage Lending

Seventy-seven percent of respondents to the American Bankers Association’s 25th annual Re​al Estate Lending Survey described mortgage regulation as having a negative impact on business production and consumer credit availability.
In the survey released today, nearly 3 in 4 bankers said that Qualified Mortgage (QM) rules – which impose stringent rules that exceed “ability to repay” standards for borrowers – have reduced credit availability.
The survey also revealed that 90 percent of the typical bank’s mortgage loans made last year were qualified mortgages. This finding indicates the continually limited extension of non-qualified mortgages, with the average percentage of non-QM loans falling from 16 percent in 2013 to 10 percent in 2017.
The results also show that more than 28 percent of banks are restricting lending to QM segments only, and 52 percent are making non-QM loans only to target markets or with other restrictions, even though these loans meet ability to repay regulations.
“The survey shows how the current rules are making it difficult for banks to fully serve their communities,” said Robert Davis,
ABA executive vice president in charge of mortgage markets. “The good news is Congress is currently considering legislative changes that would allow a greater portion of creditworthy borrowers access to mortgages.”
According to the survey, higher debt-to-income levels in addition to less complete documentation continue to be the most common factors prohibiting mortgage loans from meeting QM standards.
Banks have managed to show positive trends in loan production despite regulatory challenges.
“In the face of those regulatory barriers, single family mortgage loans for first-time homebuyers still accounted for a record 17 percent of all loans in our survey” Davis said. “That shows how banks are trying to help all creditworthy borrowers share in the American dream. “
Single family mortgage loans for first-time homebuyers stood at 16 percent in 2016.
Foreclosure rates at surveyed banks rose slightly from 0.37 percent in 2016 to .57 percent in 2017. However, delinquency rates fell from 1.42 percent in 2016 to 1.29 percent in 2017.
According to the survey, rising interest rates are a major concern for bankers followed by regulatory burdens, insufficient housing inventory and increased cost of doing business and providing consumer services.
The survey was conducted from February 14, 2018 to March 30, 2018 and includes data from 161 banks.  Of the survey participants, 65 percent of respondents were commercial banks and 35 percent were savings institutions. About 73 percent of the participating institutions had assets of less than $1 billion.
Click here for a complete report: 2018 ABA Real E​state Survey.​
The American Bankers Association is the voice of the nation’s $17 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $13 trillion in deposits and extend nearly $10 trillion in loans.

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