Portfolio Lending Jumps in 2008 As Agencies Dominate MBS Arena

Boosted by an ongoing credit crunch in the secondary mortgage market, portfolio lending by banks and thrifts has surged to the highest level seen in years. According to numbers compiled by Inside Mortgage Finance, portfolio lending accounted for a huge 39 percent of total mortgage originations in the first quarter of 2008. That compared to just 26 percent for all of 2007 and was the highest level seen since at least the early years of this decade.

The rise in portfolio lending has been driven by the fact that the mortgage securities market for nonconforming loans - particularly jumbo product - has dried up this year. Securitization of nonconforming mortgages plummeted to just 2 percent of total MBS activity in the first quarter - the lowest level seen since the early 1980s.

Home-Equity Lending Activity Tumbles in Early 2008

Home-equity lending, hard hit by declining home prices, tumbled in early 2008. According to numbers compiled by Inside Mortgage Finance, home-equity lending - both lines of credits and closed-end seconds - fell a hefty 53 percent in the first three months of 2008 when compared to the same period of 2007.

As a share of total mortgage activity, HELs fell from 14 percent in all of 2007 to 9 percent in 1Q08. As of March 31, Bank of America was by far the largest HEL lender as measured by portfolio holdings with more than $121 billion in volume. JPMorgan Chase and Wells Fargo came in second and third place with $85 billion and $84 billion in HEL volume, respectively.

Conforming Jumbo Activity Surges in FHA Program

Although lending in so-called conforming jumbo mortgages - those between $418,000 and $729,750 - has gotten off to a slow start since Congress authorized Fannie Mae, Freddie Mac and FHA to start doing business in the higher balance loans, things may be changing.

Data compiled by Inside Mortgage Finance reveal that a sizeable $1.24 billion in newly minted FHA conforming jumbo loans are slated for Ginnie Mae securities during the month of July. This is way up from the $592 million in conforming jumbo loans that have shown up from Fannie, Freddie or Ginnie Mae since April. You can get an inside look at the emerging market for conforming jumbo mortgage loans at an upcoming audio conference offered by Inside Mortgage Finance. Click here for more info.

Mortgage Lenders in “Passive” Origination Mode

The top mortgage originators in the country are doing little to capitalize on the ongoing mortgage credit crunch, according to Inside Mortgage Finance Publisher Guy Cecala. Speaking at the 2008 National Settlement Services Summit in Cleveland on Tuesday, Cecala said most lenders are in “survival mode” and not looking to aggressively increase their mortgage business or market share this year.

While he predicted that the credit crunch could start to ease by the end of this year, Cecala said rising energy costs and inflation would likely delay any meaningful mortgage market recovery until 2010. The publisher reported that nearly half of the top 30 mortgage originators have vanished over the past year. Click here for a copy of a PowerPoint presentation of Guy Cecala’s remarks.

Appraisal Code Opponents Are Not Looking to Compromise

Despite a move by the Office of Federal Housing Enterprise Oversight to broker an acceptable compromise to the tough new appraisal standards unveiled by Fannie Mae and Freddie Mac, opponents say they will only accept a total elimination of the controversial rules.

Legal critics of the Home Valuation Code of Conduct proposed by the GSEs at the urging of NY Attorney General Andrew Cuomo say they will continue fighting for a withdrawal of the proposed standards. They contend the code represents an unacceptable precedent that the mortgage industry can’t allow to stand. Hear firsthand about the ongoing battle surrounding the appraisal code at a special Inside Mortgage Finance audio conference tomorrow, June 19, at 3 pm ET. Click here for more info.

Alternative Mortgage Share of Originations Tumbles in 1Q08

The share of U.S. mortgage originations associated with alternative or non-traditional mortgage products tumbled in early 2008 as the ongoing mortgage credit crisis forced both lenders and borrowers into conventional mortgage financing.

According to numbers compiled by Inside Mortgage Finance, just 9 percent of mortgage originations in the first quarter were interest-only, payment-option ARMs, 40-year balloon loans, or some other type of Alt A mortgage product. This compared with a 30 percent share for all of 2007 and a record high 32 percent share in 2006. The most popular alternative mortgage product in early 2008 was the interest-only ARM and most of these loans were sold to either Fannie Mae or Freddie Mac.