2014_RealEstateSurvey

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21st Annual

ABA Real EstateLending Survey Report

2014


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Contents

Acknowledgements 1

Summary of Key Survey Findings 2

Survey Participant Profile 3

Loan Production 5

Loan Destination 9

Mortgage Products and Features 15

Escrow Services 23

Delinquencies and Foreclosures 26

Regulatory Impact 27

Automated Underwriting, Systems, Imaging and Quality Control 34

Commercial Real Estate 37

Mortgage Market Outlook and Concerns 41

2014 American Bankers Association, Washington, D.C. All rights reserved.

21st Annual

ABA Real EstateLending Survey Report

2014


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21st Annual ABA Real Estate Lending Survey Report | 1

The American Bankers Association extends its appreciation to the bankers whocontributed essential information to the 21st edition of the Real Estate LendingSurvey. Their participation in this extensive study, despite already heavy reportingburdens, ensured the success of this research project.

ABA Staff

Bob Davis, Executive Vice President, American Bankers Association

Rod Alba, VP, Sr. Regulatory Counsel, American Bankers Association

Joe Pigg, VP, Sr. Counsel II, American Bankers Association

Krista Shonk, VP, Sr. Regulatory Counsel, American Bankers Association

Debbie Whiteside, SVP Mortgage Solutions, American Bankers Association

Alex Maroulis-Cronmiller, VP, American Bankers Association

Data Processing and Analysis

Michael Mazur, Senior Manager, American Bankers Association

If you have a question regarding the survey, please contact:Michael Mazur at [email protected] or 1-800-BANKERS

Acknowledgements


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Summary of Key Survey Findings

The 21st Real Estate Lending Survey had the participation of 208 banks. The datawas collected from January 25 to February 28, 2014, and in most cases reportscalendar year or year-end results. In other cases, data reflect current activities andexpectations at the time of data collection. Of the survey participants, 65 percent ofrespondents were commercial banks and 35 percent were savings institutions. About76 percent of the participating institutions had assets of less than $1 billion.

Following the January effective dates of new Dodd-Frankregulations, about two-thirds of respondents will be restrictinglending to Qualified Mortgages, or to QM loans plus non-QM loansthat are restricted to targeted markets or products.

About 80 percent of respondents expect that the new regulationswill have a measurable reduction in credit availability, andtwo-thirds of respondents characterize the impact as moderate.

The percentage of single family mortgage loans made to first timehome buyers increased from 11 percent in 2012 to 13 percent in2013, the highest percentage since 2007.

The average delinquency rate for single family mortgage loansat surveyed banks decreased from 2.40 percent in 2012 to 1.87percent in 2013, while foreclosure rates dropped from .98 percentto .73 percent.

The 30-year fixed-rate mortgage remains dominant in bank

lending, growing from 46.3 percent to 50.3 percent of allmortgages in 2013, and the purchase market increased from39 percent to 44 percent of mortgage originations.

Commercial real estate (CRE) loan delinquency was reportedat 3.3 percent for non-farm, nonresidential properties, and1.8 percent each for multifamily and ADC lending.

CRE loan demand is trending higher among 26 percent ofsurvey respondents compared to 2012, while it remains thesame for approximately 51 percent of respondents.

The delinquency rate was 3.32 percent in 2013 for CRE loans

secured by non-farm, non-residential properties, little changedfrom 3.31 percent in 2012.

Top concerns for bankers are regulatory burden andcompliance cost.


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Survey Participant Profile

4%9%

13%

16%

17%

17%

21%

2%1%

Bank Asset Sizes

Up to $50 million $51-$100 million$101-$200 million $201-300 million

$301-$500 million $501 million-$1 billion

$1 billion-$10 billion $10 billion-$20 billion

Over $20 billion

65%Commercial

Bank

35%Savings Bank/

Institution

Bank Charter Type Bank Ownership Type

77%Stock

23%Mutual/MHC


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Survey Participant Profile

Participant Profile Breakdown by Region

1%

3%

4%

20%

9%

29%

4%

4%

16%

10%

New England

Mid-Atlantic

Middle Southeast

Lower Southeast

Great Lakes

South

Plains

Mountain

Southwest

Northwest

New England Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island,

Vermont

Mid-Atlantic Washington D.C., Delaware, Maryland, New Jersey, New York,

Pennsylvania, Virginia

Middle Southeast Kentucky, North Carolina, South Carolina, Tennessee, West Virginia

Lower Southeast Alabama, Florida, Georgia, Mississippi

Great Lakes Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin

South Louisiana, New Mexico, Oklahoma, Texas, Arkansas

Plains Iowa, Kansas, Missouri, North Dakota, Nebraska, South Dakota

Mountain Colorado, Idaho, Montana, Utah, Wyoming

Southwest Arizona, California, Nevada

Northwest Alaska, Oregon, Washington


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Loan Production

Chart 1Total Dollar Volume Originated for 2013

$183,525,713

$16,699,759

$9,431,842

$29,833,754

$43,590,390

$2,820,295

$1,675,000

$4,500,000

1-4 Family Mortgage

Home Equity (drawn lines)

Second Trusts (closed-end)

Multifamily Mortgages

Average

Median


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Loan Production

Ranking Loan Origination System

1 Encompass(Ellie Mae)

2 Laser Pro(Harland);EasyLender(Fiserv)

3 Mortgagebot(D+H)

4 ARTA Lending(Wolters Kluwer)

5

Calyx Point (Calyx Software);

Compliance One(WoltersKluwer)

Chart 2Top Loan Origination Systems


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Loan Production

Chart 314 Family Mortgage Loan Production

Year-to-Year Origination Comparison

44%

56%

2013

38%

62%

2012

Purchase Refinance

37%

63%

2011


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Loan Production

Chart 4Origination Sources at a Glance

82%

9%

6%

3%2013

82%

9%

5%4%

2012

81%

9%

6%

4%2011

Retail

Internet

Wholesale/Correspondent

Other


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Loan Destination

Chart 5Selling Mortgage Loans with Servicing Released

vs. Servicing Retained, 2013

Servicing

released

33%

Servicing

retained

33%

Both

34%


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Loan Destination

Chart 614 Family Mortgage Originations (dollar volume)

Retained and/or Sold to Buyers, 2013 and 2012

2013

2012

39.2%

14.2%

15.1%.9%

17.6%

4.3% 8.7%

40.6%

12.0%

15.0%.1%

17.5%

5.6% 9.3%

Loans retained in

portfolio

Sold to Fannie Mae

Sold to Freddie Mac

Securitized by lender

through Ginnie Mae

Sold to private

mortgage conduits or

aggregators

Sold to other financial

institutions as portfolio

investment

Sold through FHLB

MPF/MPP Program


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Loan Destination

Chart 7Where is Volume Going? A Historical Perspective

Percentage of originations sold to each of the following buyers

2013 2012 2011 2010 2009 2008 2007 2006 2005

Conduits/Wholesalers 18% 18% 17% 22% 19% 10% 15% 10% 14%

Fannie Mae 14% 12% 15% 13% 12% 5% 4% 3% 7%

Freddie Mac 15% 15% 13% 15% 17% 5% 8% 6% 7%

FHLB MPF/MPP 9% 9% 7% 5% 5% 4% 2% 2% 4%

Other 4% 6% 7% 8% 4% 2% 3% 2% 1%


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Loan Destination

Chart 8Ranking of Most Used Aggregators, Top Outlets

Ranking Aggregator

1 U.S. Bank

2 Wells Fargo

3 FHLB

4 BB&T5 Frank American

2013

2012

2011

Ranking Aggregator

1 Wells Fargo

2 U.S. Bank

3 Franklin American

4 Bankers Bank, PHH Mortgage

BB&T, FHLB, and SunTrust

Ranking Aggregator

1 US Bank

2 Bank of America

3 GMAC

4 JPMorgan Chase

5 BB&T


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Loan Destination

Chart 9For your servicing operations, do you use a

subservicer or component servicer?

Subservicer

8%

Component

servicer

2%Both

3%

Neither

87%


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Loan Destination

Chart 10Are you contemplating selling servicing rights

due to new regulatory requirements or capital treatmentof mortgage servicing rights?

Yes

11%

No

89%


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Mortgage Product Features

Chart 11Family Mortgage Mix at a Glance

Breakdown of fixed-rate and adjustable-rate mortgage production, by dollar volume

2013

2012

50.3%

22.7%

9.7%

.1%1.5% 2.5% 6.1%

2.0%.2%

4.9%

46.3%

25.1%

11.9%

.9%

2.6% 6.2%

1.3% .8%

5.0%

Fixed Rate

(30- Year)

Fixed Rate

(15- Year)

Other Fixed

Rate

6-Month ARM

1-Year ARM

3/1 ARM

5/1 ARM

7/1 ARM

Interest-Only

ARM

Other ARM


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Chart 12A Closer Look at Mortgage Loan Features

Average Percentage of Loans Originated (Dollar Volumes) by Features

3.1% 3.1%

1.1%

9.3%

2.1%

3.8% 4.6%

8.6%

2.7%

1.1%

2.5%

8.9%

Low Documentation

Mortgages

Piggyback

Mortgages

(simultaneous first

and second

mortgages)

Prepayment

Penalties

Balloon Payments

2013 2012 2011


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Chart 1314 Family Mortgage Loan Production

(Percentage of Dollar Volume)

9.0

5.0

14.0

72.0

6.4

3.8

13.7

76.1

6.4

3.8

15.0

74.8

Jumbo

FHA

Non-Conforming

Conforming

2013 2012 2011


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Chart 14Servicing Portfolios

Data as of year-end 2013

By Asset Size

Serviced for Bank

(averages in millions,

unless otherwise noted)

Serviced for Others

(averages in millions,

unless otherwise noted)

Over $20 Billion

$11 - $20 Billion $2,265.6

$1 - $10 Billion $529.6 $366.4

$501 Million - $1 Billion $195.6 $151.0

$301 - $500 Million $87.8

$201 - $300 Million $74.9 $42.5

$101 - $200 Million $31.9

$51 - $100 Million $12.7

Up to $50 Million $11.4



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Chart 15Average Percentage of 14 Family Loans

Made to First-Time Home Buyers


13%

11%

9%

2013 2012 2011


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Chart 16Loan-to-Value Ratios

for 14 Family Mortgage Loans Originated


2013

2012

18%

49%

14%

7%

6%6%

19%

51%

14%

6%5%

5%

60% or less

60% - 80%

80% - 85%

85% - 90%

90% - 95%

95% and

greater


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Yes

81%

No

19%

Chart 17For 14 family mortgage loans with LTV Above 80%:Do you require private mortgage insurance?



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Chart 18Percentage of 14 Family Mortgage Loans

by FICO Categories


2.5

16.6

32.9

48.0

Below 620

620 and 679

680 and 719

720 and above


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Chart 19Does your bank provide escrow services

for its mortgage customers?

Are escrow accounts mandatoryfor mortgage customers?

Escrow Services

Yes

88%

No

12%

Yes

27%

No

73%


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Chart 20Reasons for Not Providing Escrow Services

Escrow Services

57%

46%

3%

26%

3%

29%

Lack of escrow capabilities/adequate staff

It is cost prohibitive

Lack of third-party service provider

Customer preference

Difficulty obtaining tax information for certain

dwellings classified as personal property

Other

Other reasons listedinclude excessive

regulatory

requirements and high

compliance risk, as well

as not servicing


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Chart 21Monthly vs. Annual Escrow Account Statements, 2013

Escrow Services

9%

95%

Monthly Annual


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Chart 22Average Delinquency Rates (60-Days or More Past Due)

and Foreclosure Rates, 14 Family Mortgage Loans

Delinquencies and Foreclosures

1.87%

0.73%

2.40%

0.98%

Delinquency rate Foreclosure rate

2013 2012


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Chart 23Percentage of 2013 Production

QM Compliant and Non QM Compliant (Average)

Regulatory Impact

84%

16%

QM Compliant Non-QM Compliant


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Chart 24What do you expect will be the overall impact of theAbility-to-Repay/QM rules on your lending in 2014?

Regulatory Impact

33%

29%

36%

2%

Bank will restrict lending to QM segments

Bank will originate primarily QM loans, and

non-QM loans will be restricted to targeted

markets only

Bank will make no changes fromcurrent/historical underwriting practices,

including those loans now classified as non-QM

Bank will cease offering mortgage loans


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Chart 25If you plan to originate non-QM loans, will you:

Regulatory Impact

95%

5%

1%

2%

Hold as portfolio investments

Sell to secondary market investors

Sell directly to other investors

All the above


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Chart 26What do you expect will be the impact of the

Ability-to-Repay/QM rules on credit availabilityin the market generally?

Regulatory Impact

20%

40%

41%

There will be no measurable impact on

mortgage lending levels, regardless of QM or

non-QM classification.

There will be a measurable reduction in credit

availability in the non-QM lending segmentsonly.

There will be a measurable reduction in credit

availability across all mortgage lending

segments.


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Chart 27What do you expect will be the overall impact of the

Ability-to-Repay/QM rules on credit availability?

Regulatory Impact

Negligible

24%

Moderate

66%

Severe

10%


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Chart 28Have the new Dodd-Frank mortgage regulations caused your

bank to reconsider its commitment to mortgage lending?

Regulatory Impact

Yes

38%

No

62%


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Chart 29Has FEMA remapping or any other issue related toNational Flood Insurance Program pricing affected

affordability for loans in your market?

Regulatory Impact

Yes

47%No

53%


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Chart 30Which of the following automated 14 family mortgage

loan underwriting systems do you use?

Automated Underwriting, Systems,Imaging and Quality Control

Both Desktop

Underwriter and

Loan Prospector

34%

Desktop

Underwriter

27%

Loan Prospector

16%

None17%

Other

6%


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Chart 31Do you scan/image loan documentation for investor delivery?

If not currently imaging, is it a priority in 2014?


Yes

62%

No

38%

Yes

44%

No56%


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Chart 32Do you outsource your quality control function

or perform it in-house?


Outsource

40.5%

In-house

59.5%


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Chart 33Percentage of total capital represented by Commercial RealEstate (CRE) loans for construction, land development and

other land (excluding owner occupied properties)

Commercial Real Estate

13%

55%

15%

13%

6%

11%

56%

18%

8%

7%

0%

1 to 25%

26 to 49%

50 to 99%

100% and Over

2013 2012


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Chart 34Percentage of total capital represented by CRE loans secured

by multifamily and nonfarm nonresidential properties andloans for construction, land development, and other land

(excluding owner occupied properties)


6%

58%

23%

10%

3%

7%

68%

16%

7%

2%

0%

1 to 99%

100 to 199%

200 to 299%

300% and Over

2013 2012


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Chart 35CRE Loan Delinquency

30 Days or More Delinquent, 2013


1.82

1.84

3.32

ADC Lending (including 1-4 family residential

construction loans)

CRE loans secured by multifamily (5 or more)

residential properties

CRE loans secured by non-farm,

nonresidential properties


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Chart 36How does demand for CRE loans compare

with demand a year ago?

Biggest Challenges in Making CRE Loans?


Higher

26%

Lower

23%

About

thesame

51%

53%

59%

2%

10%

12%

Low demand for credit

Fewer credit-worthy

projects

Inability to obtain funding

Hard caps on CRE imposed

by the regulators

Other supervisory

requirements


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Chart 37Looking Forward Primary Concerns Regarding the

Residential Mortgage Market in 2014

Mortgage Market Outlook Concerns

Five Most Frequent Concerns

Cost of compliance

Regulatory burden

Continuing impact of Dodd-Frank

Lack of loan volume/demand

QM/ATR impact


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Documents

2014_RealEstateSurvey