Total Lending Down in February But TARP Banks Increasing Pace

According to a report from the Treasury Department released Wednesday, the number of loans being made by all residential, commercial and industrial property lenders dipped in February although banks and lenders receiving emergency government funds saw an increase in loan originations.

Total lending dropped by a median 2 percent in February, with the Treasury reporting that in the commercial real estate market, “New loan demand remained low due to the lack of new construction activity.”

The Treasury added in its statement that  “uncertain economic conditions have resulted in borrowers reducing expenses, paying down debt, and delaying capital expenditure.”

Basically, the Treasury summarized, “many businesses are unwilling to expand their operations in this climate.”

The picture is a little rosier with the largest U.S. mortgage lenders who are receiving government subsidies through the Capital Purchase Program, a part of the larger Troubled Asset Relief Program (TARP) passed by Congress in October 2008.

Among the top 21 banks benefiting from that federal aid, there was a median increase of 35 percent in residential mortgage loan originations during February and refinance loans were up about 42 percent from the previous months.

“Banks have been extending credit to homeowners and have enabled them to access affordable loans and reduce their borrowing costs,” Treasury said.

Another report from the Mortgage Bankers Association was released Wednesday, showing that mortgage application volume fell in the latest week however. The MBA’s weekly application index registered a seasonally adjusted 11 percent decline during the week ended April 10 from the previous week.

The survey, which covers roughly half of all U.S. residential mortgage applications, found that refinance requests dropped 10.9 percent while home purchase applications were down 11.3 percent. Refinance applications made up 77.8 percent of all loan requests.

The MBA index readings were not adjusted for the Easter/Passover weekend, which may have affected the total volume, but overall applications were still up 45.6 percent in the latest week over the same week in 2008.