Financial Services - September 2010

The weekly Primary Mortgage Market Survey conducted by Freddie Mac showed that the 30-year and 15-year fixed mortgage rates were unchanged for the week ending Sept. 24.

  • The rate for 30-year fixed-rate mortgages for the week ending Sept. 24 held steady at 4.37 percent. The rate is up slightly from the record low rate of 4.32 percent set the week ending Sept. 3. A year earlier, the rate averaged 5.04 percent.
  • The rate for 15-year fixed-rate mortgages averaged 3.82 percent. A year earlier, the rate averaged 4.52 percent. The current rate remains at its lowest point since Freddie Mac began tracking it in August 1991.

In its weekly survey of mortgage bankers, commercial banks, and thrifts for the week ending Sept. 17, the Mortgage Bankers Association reported mortgage refinance applications decreased for the third straight week.

  • The seasonally adjusted refinance index decreased 0.9 percent from the previous week but remains 51.2 percent higher than a year earlier. The refinance share of mortgage activity currently represents 81.1 percent of total application volume.
  • The purchase applications index decreased 3.3 percent from one week earlier and is 38.4 percent lower than the same week last year.

The Federal Deposit Insurance Corporation press release listed one Sixth Federal Reserve District bank among the two closed by regulators on September 24; the District total of closed banks now stands at 40 for 2010.

  • Regulators closed Haven Trust Bank Florida (Ponte Vedra Beach, FL) on Sept. 24.
  • One bank in Washington state was also closed, bringing the nationwide total of failed FDIC-insured institutions to 127 so far for the year.
  • Florida leads the nation with 24 bank failures during 2010, followed by Illinois with 15 and Georgia with 14.
  • The number of District failures thus far exceeds the number of failures during the same period last year. By the end of 2009, 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 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.