Banks Keep Loans Close
to Home
The share of mortgages held on lender balance sheets accounted for 27 percent of 2014 originations, the highest level in a decade, according to new data from the Urban Institute’s Housing Finance Policy Center. Several things appear to be driving the increase in the amount of loans banks hold for their own portfolios. The Urban Institute cites the growth of jumbo loans to 19 percent of all originations from 14 percent in 2013. Increased Fannie Mae and Freddie Mac guarantee fees are also viewed as drivers of banks’ increased proclivity to hold new loans. These fees have risen from roughly 0.2 percent of the loan amount pre-2008 to more than 0.5 percent now. That makes it much more profitable for lenders to self-insure the mortgages they make. Despite the rising share of home loans held for banks’ own portfolios, the total dollar amount of residential mortgages held by federally insured banks at the end of 2014 is actually 2.7 percent below where it stood at the end of 2012. During that period, overall bank assets have grown 7.6 percent, meaning that mortgages are falling as a share of bank assets.
From "Banks Keep Loans Close to Home"
Wall Street Journal (03/23/15) Carney, John
The share of mortgages held on lender balance sheets accounted for 27 percent of 2014 originations, the highest level in a decade, according to new data from the Urban Institute’s Housing Finance Policy Center. Several things appear to be driving the increase in the amount of loans banks hold for their own portfolios. The Urban Institute cites the growth of jumbo loans to 19 percent of all originations from 14 percent in 2013. Increased Fannie Mae and Freddie Mac guarantee fees are also viewed as drivers of banks’ increased proclivity to hold new loans. These fees have risen from roughly 0.2 percent of the loan amount pre-2008 to more than 0.5 percent now. That makes it much more profitable for lenders to self-insure the mortgages they make. Despite the rising share of home loans held for banks’ own portfolios, the total dollar amount of residential mortgages held by federally insured banks at the end of 2014 is actually 2.7 percent below where it stood at the end of 2012. During that period, overall bank assets have grown 7.6 percent, meaning that mortgages are falling as a share of bank assets.
From "Banks Keep Loans Close to Home"
Wall Street Journal (03/23/15) Carney, John
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