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Data & Analysis

Financial Services - August 2010

According to the weekly Primary Mortgage Market Survey conducted by Freddie Mac, 30-year and 15-year fixed mortgage rates hit record lows for the week ending August 20.

  • The rate for 30-year fixed-rate mortgages for the week ending August 20, 2010, averaged 4.42 percent, 2 basis points lower than a week earlier. A year earlier, the rate averaged 5.12 percent. The current rate is the lowest since Freddie Mac began tracking it in April 1971.
  • The rate for 15-year fixed-rate mortgages declined to 3.90 percent, down 2 basis points from the previous week. A year earlier, the rate averaged 4.56 percent. The current rate is the lowest since Freddie Mac began tracking it in August 1991.

In its weekly survey of mortgage bankers, commercial banks, and thrifts for the week ending August 20, the Mortgage Bankers Association reported mortgage refinance applications increased over the previous week as rates continued to fall.

  • The seasonally adjusted refinance index increased 5.7 percent from the previous week and is at its highest level since May 1, 2009. The refinance share of mortgage activity currently represents 82.4 percent of total application volume.
  • The purchase applications index decreased slightly from one week earlier and is 38.8 percent lower than the same week last year.

The Federal Deposit Insurance Corporation press release listed two Sixth Federal Reserve District banks among the eight closed by regulators on August 20; the District total now stands at 35 for 2010.

  • Regulators closed Community National Bank at Bartow (Bartow, FL) and Independent National Bank (Ocala, FL) on Friday, August 20, 2010.
  • Four banks in Virginia, Illinois, and California were also closed, bringing the nationwide total of failed FDIC-insured institutions to 118 so far for the year.
  • Florida leads the nation with 22 bank failures during 2010, followed by Illinois with 15 and Georgia with 11.
  • District failures are ahead of the pace set last year, when a total of 42 District banks were closed.
  • The Federal Reserve Bank of St. Louis provides an interactive map of bank failures.

The latest Senior Loan Officer Opinion Survey from the Federal Reserve Board of Governors (covering Q2 2010 activity) marked the first time since late 2006 that banks reported easing standards on commercial and industrial (C&I) loans to small firms.

  • On net, domestic banks reported easing their pricing of C&I loans to firms of all sizes, in particular, reducing the spreads of loan rates over the bank's cost of funds and trimming the costs of credit lines.
  • Domestic banks also reported they had stopped reducing the size of existing credit lines for C&I firms, on net, for the first time since the question was added in January 2009.
  • Increased competition from other banks and nonbank lenders was an important factor behind the recent easing of terms and standards.
  • About half of the banks that eased standards cited a more favorable or less uncertain economic outlook; banks that tightened policies (primarily smaller banks) attributed their tightening to a less favorable or more uncertain economic outlook.

Banks reported little net change in the demand for C&I loans.

  • A shift in customer borrowing to banks from other credit sources and increased financing needs for inventory and receivables were the most common reasons cited by banks experiencing higher loan demand.

A few large banks reported easing standards on prime residential mortgage loans.

  • Fewer than half of the survey respondents indicated their bank originated nontraditional mortgage loans; most reported no change in standards for these loans.

More respondents reported an increase in demand for prime residential mortgage loans.

  • The number of banks reporting an increase in demand for nontraditional loans was offset by the number of banks reporting a decrease in demand for the same loans.

Most banks reported no change in their bank's commercial real estate (CRE) loan standards.

  • The net percentage of banks reporting that standards on CRE loans had tightened was small and dropped significantly from the April survey.

The net fraction of banks reporting that demand for CRE loans decreased remained small.


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