Smart Borrower Blog

Mortgage Lending Fell to 16-Year Low in 2011

Sep 19th, 2012 @ 10:01 AM by Amber Nelson

The number of mortgage loans made last year dropped dramatically, reaching a 16-year low, a likely result of strict lending standards, according to new information from federal bank regulators this week.

In 2011, U.S. banks made a total of 7.1 million mortgage loans, a 10 percent decline from 2010. The total yearly count has not been that low since 1995 when it was 6.2 million.

Breaking down those numbers, refinance loans decreased 13 percent last year, while home purchase loans only dropped by 5 percent. (Although they are now 64 percent below the housing boom peak level in 2006.) The number of mortgage loans for owner-occupied homes – not bank-owned or rentals – declined 7.2 percent.

Declines varied by area, though, with regions most affected by the housing bust seeing the biggest drop in home loans. In those place, mortgage lending for owner-occupied homes fell 13.8 percent on average, while in not-so-hard-hit areas, the average was a decrease of only 3.3 percent.

The information was collected in a survey of 7,600 lenders, as part of the Home Mortgage Disclosure Act, and was conducted by bank regulators including The Federal Reserve, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corp. and the Department of Housing and Urban Development.

High credit standards seem to continue to be a roadblock to more mortgage lending. Lenders stepped way back from making subprime home loans in the wake of the housing bust as their books and investors took huge losses from those failed mortgages. Much higher credit scores have been the norm for the past several years. For example, the median credit score for approved loans is now up 40 percent since 2006.

Because of these tightened credit standards, “the impact of lower mortgage rates on housing is probably less powerful than normal,” said William Dudley, president of the Federal Reserve Bank of New York, in a speech on Tuesday in Florham Park, N.J. as quoted in a Wall Street Journal piece. “The difficulties of households with lower credit scores in obtaining mortgage credit warrants ongoing attention.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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