Banks Report Decrease in Florida Home Mortgage Demand
Need an obvious sign that the local and national housing market is weakening? Consider a Federal Reserve study released Monday. According to domestic banks, demand for Florida mortgage loans has waned in recent months.
“In line with other evidence of a slowdown in housing activity this year, domestic institutions reported that demand for mortgages to purchase homes had continued to weaken over the previous three months,” the Fed said in its latest quarterly survey of banks’ senior loan officers.
The Fed survey shows a net fraction of about 60% of domestic lenders reported weaker demand for Florida home mortgages and other loans to purchase homes across the nation, “a significantly larger net fraction than in the April survey.”
The overall Fed survey, conducted in July, included responses from 56 domestic banks, as well as from 17 foreign banks.
More Florida home mortgage/banking findings
Other findings from the study include the following: about 10% of domestic banks said they had eased credit standards for residential mortgages, unchanged from the previous survey period. They’re attempting to draw in lower-income buyers that couldn’t consider a Florida home loan until standards changed.
The July survey also addressed banks’ holdings of subprime and non-traditional loans. On the subprime front, banks’ holdings were “generally small.” For example, of the 30 domestic banks with subprime mortgages on the books, almost three-fourths said that subprime Florida home loans accounted for less than 5% of their residential mortgages.
Another one-fifth of banks holding subprime loans said their share of such products was between 5% and 15%, while the remainder of the banks reported that subprime loans represented more than 20% of their residential mortgages.
“A modest net fraction of respondents indicated that the quality of their subprime residential real estate portfolios - as measured by delinquencies and charge-offs - had deteriorated somewhat over the past 12 months,” the Fed survey said.
Meanwhile, banks held more non-traditional mortgages - such as adjustable rate mortgages and interest-only Florida home mortgage loans - than subprime loans.
Of the 48 banks that responded to a question about non-traditional mortgages, about 45% of respondents said nontraditional products represented less than 5% of their holdings. About 20% of respondents said their share of non-traditional products was between 5% and 15%.
Seven banks, however, said that more than 30% of the mortgages on their books were non-traditional products.
“Looking forward, nearly 30% of banks, on net, indicated that they expect the quality of the non-traditional residential mortgages currently on their books will deteriorate somewhat over the next 12 months,” the Fed survey said.
Despite these figures, experts expect the Florida housing market to rebound. Expect stabilization in the near future and a return to a normal level of mortgage demand.
