Tags: home | lending | volume | low

Regulators: Home Lending Hit 16-Year Low in 2011

Tuesday, 18 Sep 2012 11:57 AM

 

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The volume of U.S. home lending dropped 10 percent last year to the lowest level since 1995, highlighting the government's uphill battle to prop up the still-struggling housing sector.

The Federal Financial Institutions Examination Council, a group of U.S. regulators, published data on Tuesday showing 7.1 million home loans were made in 2011, down from 7.9 million the previous year.

The data, which includes mortgages, refinancing and home improvement loans, showed that loans to purchase a home, as well as refinancings, fell.

Refinancing of home loans dropped 13 percent during the year, while new mortgages dropped 5 percent, the FFIEC said in a statement.

However, the Federal Reserve, one of the regulators involved in collecting the data, noted that refinancing activity surged late in the year as interest rates fell.

The Fed's analysis highlighted the government's struggle to prop up the still-depressed housing market, which has held back the economy's recovery from the 2007-2009 recession.

The U.S. government currently guarantees most new U.S. mortgages and government support has increased dramatically since a collapsed housing bubble helped trigger the recession. The government is also trying to make it easier for homeowners to refinance at lower interest rates.

The Fed has tried to help the sector by lowering interest rates. Last week the central bank unveiled a bond-buying plan that aims to lower costs for homebuyers and other borrowers.

But the Fed noted on Tuesday that a key measure of lending conditions nevertheless tightened last year, showing banks required higher credit scores to qualify for loans. It said the median score for homebuyers had risen about 40 points since the end of 2006.

"Despite the surge in the government-backed share of home purchase loans... credit scores of home-purchase borrowers are considerably higher now than at any point in the past 12 years," the Fed said.

The data released on Tuesday is collected by regulators under the federal Home Mortgage Disclosure Act. It consists of loan information reported by more than 7,600 lenders, including all of the nation's largest mortgage originators. 

© 2014 Thomson/Reuters. All rights reserved.

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