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Data & Analysis

Financial Services - January 2011

The weekly Primary Mortgage Market Survey conducted by Freddie Mac showed that 30-year fixed mortgage rates increased slightly while 15-year fixed mortgage rates decreased slightly for the week ending Jan. 21.

  • The rate for 30-year fixed-rate mortgages increased 3 basis points to 4.74 percent for the week ending Jan. 21. The rate is up from the record low of 4.17 percent set the week ending Nov. 12. The rate averaged 4.99 percent a year earlier.
  • The rate for 15-year fixed-rate mortgages averaged 4.05 percent, down 3 basis point from the previous week. The record low rate of 3.57 percent was set the week of Nov. 12. The rate averaged 4.40 percent a year earlier.

In its weekly survey of mortgage bankers, commercial banks, and thrifts, the Mortgage Bankers Association reported an increase in mortgage applications for the week ending Jan. 14.

  • The seasonally adjusted purchase applications index declined 1.9 percent from a week earlier, declining for the third consecutive week even as mortgage rates are relatively low.
  • The seasonally adjusted refinance index increased 7.7 percent from the previous week and is at its highest level in five weeks. The refinance share of mortgage activity currently represents 73 percent of total application volume.

The Federal Deposit Insurance Corporation press releases list three Sixth Federal Reserve District banks among the seven closed by regulators through Jan. 21, 2011; 52 District banks were closed during 2010.

  • Regulators closed one district bank on Jan. 21: Enterprise Banking Company (McDonough, Ga.). The bank, with $100.9 million in assets, was closed without a buyer.
  • One bank each in Colorado, North Carolina, and South Carolina was also closed, bringing the nationwide total of failed FDIC-insured institutions to seven so far for the year.
  • Georgia leads the nation with two bank failures during 2011.
  • The District ended 2010 with 52 failures, surpassing the number of District failures that occurred during 2009, 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 Q3 2010 activity) indicated that banks eased standards on some categories of loans to both households and businesses.

  • On net, domestic banks reported easing standards on commercial and industrial (C&I) loans to firms of all sizesâ??in particular, reducing the spreads of loan rates over the banksâ?? cost of funds and trimming the costs of credit lines.
  • A more favorable or less uncertain economic outlook and increased competition from other banks and nonbank lenders were cited as important factors behind the recent easing of terms and standards.
  • Only two domestic banks reported tightening standards on C&I loans.
  • The banks that tightened policies attributed their tightening to a reduced tolerance for risk, a less favorable or more uncertain economic outlook, or increased concerns about the effects of legislative changes, supervisory actions, or changes in accounting standards. Some also cited deterioration in their current or expected liquidity or capital positions as an important reason.

Domestic banks reported weaker demand for C&I loans.

  • Banks cited reduced financing needs by customers for inventories and accounts receivable, reduced investment in plants and equipment, and increases in internally generated funds as reasons for the decrease in demand for C&I loans.
  • The number of inquiries regarding new or increased lines of credit continued to rise, signaling that demand might pick up in the future.

On net, domestic banks reported tightening standards on both prime and nontraditional mortgage loans.

  • The tightening of standards on prime mortgage loans marked a reversal from the July survey that indicated a slight net easing. Smaller banks accounted for most of the tightening of standards while larger banks, on net, reported no change in standards for these loans.
  • Large and small banks reported a net tightening of standards on nontraditional mortgage loans; fewer than half of the respondents indicated having made nontraditional mortgage loans during the survey period.

A small net fraction of respondents reported weakening demand for both prime and nontraditional mortgage loans.

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

  • Similar to the results from the July survey, the net percentage of banks reporting that standards on CRE loans had tightened was small.

On net, domestic banks reported little change in the demand for CRE loans.

  • Larger banks reported stronger demand while smaller banks tended to report weaker demand.


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