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.

Share of Portfolio Lending Hits New Low in 2007

Lenders securitized a record share of their originations in 2007, according to a new analysis of data in the Inside Mortgage Finance MBS Database. Portfolio lending accounted for 25.9 percent of the $2.43 trillion in total mortgage production last year, the lowest share on record. The government-sponsored enterprises increased their share of mortgage origination funding in 2007, accounting for 43.7 percent of production, up from 27.6 percent the previous year.