The American Bankers Association’s (ABA) 24th annual Real Estate Lending Survey showed that 95 percent of respondents believe regulation has a negative impact on business production and consumer credit availability.
“[H]eightened regulation remains a major concern for bankers followed by rising interest rates, TRID compliance requirements and insufficient inventory in the housing market,” according to an ABA press release. The survey was released during ABA’s Real Estate Lending Conference in Orlando.
The survey shows that 91 percent of mortgage loans issued by typical banks last year were for qualified mortgages (QM). It also indicates a significant decline in non-qualified mortgages offered from 2015 to 2016, during which time the average percentage of non-QM loans issued dropped from 14 percent to 9 percent.
More than 30 percent of banks are restricting lending to QM segments only, according to the survey, and approximately 45 percent are limiting non-QM loans to target markets or employing other restrictions. The most common factors prohibiting mortgage loans from meeting QM standards are high debt-to-income levels and insufficient documentation, the survey indicates.
“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,” ABA Executive Vice President Robert Davis said in the release. “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.”
The survey showcases some positive news for banks, such as the fact that the rate of single-family mortgage loans issued for first-time homebuyers has increased by 1 percent each year since 2013 and was 16 percent in 2016, representing a record high for the survey.
Also, foreclosure rates at surveyed banks dropped from 0.63 percent in 2015 to the 2014 average of 0.37 percent.
Other survey findings include the following:
- “Approximately 44 percent of respondents cite ‘loans exceeding the debt-to-income ratio’ as the most frequent reason why non-QM loans do not meet QM standards;
- “Approximately 55 percent of respondents state that regulations are having a moderately negative impact on business and 22 percent characterize the impact as extremely negative. Only 5 percent state that regulations are having no negative impact; and
- “Mortgage-specific compliance costs have increased for 97 percent of institutions as a result of recent regulatory reforms and 75 percent of institutions have had to hire additional staff to cope with these new regulations.”