Financial Services - October 2010

The weekly Primary Mortgage Market Survey conducted by Freddie Mac showed that the 30-year and 15-year fixed mortgage rates increased slightly for the week ending Oct. 22.

  • The rate for 30-year fixed-rate mortgages increased by 2 basis points to 4.21 percent for the week ending Oct. 22. The rate is up slightly from the record low rate of 4.19 percent set the week ending Oct. 15. A year earlier, the rate averaged 5.00 percent.
  • The rate for 15-year fixed-rate mortgages averaged 3.64 percent, up 2 basis points from the record low rate of 3.62 percent set the previous week. A year earlier, the rate averaged 4.43 percent.

In its weekly survey of mortgage bankers, commercial banks, and thrifts, the Mortgage Bankers Association reported a decline in mortgage applications for the week ending Oct. 15.

  • The seasonally adjusted refinance index decreased 11.2 percent from the previous week but remains 59.9 percent higher than a year earlier. The refinance share of mortgage activity currently represents 82.4 percent of total application volume.
  • The purchase applications index declined 6.7 percent from a week earlier and fell to its lowest level in two months. The purchase applications index is 36.9 percent lower than the same week last year.

The Federal Deposit Insurance Corporation press release listed four Sixth Federal Reserve District banks among the seven closed by regulators on Oct. 22; the District total of closed banks now stands at 45 for 2010.

  • Regulators closed four district banks on Oct. 22: First Bank of Jacksonville (Jacksonville, FL), Progress Bank of Florida (Tampa, FL), the Gordon Bank (Gordon, GA), and the First National Bank of Barnesville (Barnesville, GA).
  • One bank each in Illinois, Kansas, and Arizona was also closed, bringing the nationwide total of failed FDIC-insured institutions to 139 so far for the year.
  • Florida leads the nation with 27 bank failures during 2010, followed by Georgia and Illinois with 16 each.
  • The number of District failures in 2010 has already surpassed 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 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 banks' cost of funds and trimming the costs of credit lines.
  • Domestic banks also reported that they had stopped reducing the size of existing credit lines for C&I firms, on net, for the first time since the survey 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 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.