Home Purchase Loans Down Among Top TARP Recipients

The majority of 21 top financial institutions that have received government funds through the Troubled Asset Relief Program overall lent more in January than they did a month earlier, according to a survey released this week by the U.S. Treasury Department. The reported data show that mortgage originations “rose significantly in January, as lower interest rates fueled a strong demand to refinance home mortgages,” the U.S. Treasury Department said in a media statement. Many of the banks studied in the survey reported a volume of refinance loans that had more than doubled in a month and sometimes more than tripled in the last two months. Along with the refi popularity, however, many banks also posted a corresponding drop in mortgage loan volume for new purchases, declining as much as half since November in many cases. The median 110 percent increase in refinancing over December’s data “translates to lower mortgage payments for families across the U.S.,” Treasury said in an effort to shed light on the positive side of the numbers while not mentioning the declining home purchase loan volume. After all, “given the dramatically worsening economic conditions during January…lending  levels would likely have been lower without the capital provided to banks through the [Capital Purchase Program],” Treasury officials said. Almost 500 banks in 48 states have participated in the CPP, receiving a combined $198.5 billion as of March 13. Total mortgage originations at Bank of America Corp. (BAC) — which has received $25 billion through the CPP — increased to $22.9 billion in January, from $15.4 billion a month earlier. While refinance loans at the bank more than doubled to $16.5 billion in January from $7.7 billion, new purchase loans eased to $6.3 billion from $7.7 billion a month earlier. As late in 2008 as November, refis accounted for less than $5 billion in originations, while new purchases accounted for $6.6 billion. The reversal of the refi-to-purchase ratio in recent months illustrates the surge in refi popularity as mortgage rates held at historic lows and borrowers found themselves increasingly underwater on their current mortgages. “Bank of America lent $23 billion through its mortgage unit ($4.4 billion of that to low? and moderate-income borrowers), helping more than 100,000 Americans purchase a home or save money on the home they already own in the month of January alone,” bank officials said in the detailed survey of bank lending. Citigroup Inc. (C), despite its negative media exposure in recent weeks, reported mortgage originations were up to $7.8 billion in January from $5.5 billion in December. The bank followed the popular trend of ballooning refinance loan volume and declining new purchase loan volume from recent months. Citi posted $1.3 billion in refi originations in January from $858 million, and $278 million in new purchase mortgages in January from $489 million a month earlier. Mortgage originations at Bank of New York Mellon Corp. (BK) — which received $3 billion fromt he CPP — increased to $97 million in January from $69 million a month earlier, with refinance volume having more than doubled from $25 million in December. Although the bank’s overall data have recovered from recent monthly declines from its October levels, the volume of mortgage originations for new purchases slipped to $29 million in January from $44 million the month before, $37 million in November and $52 million in October. The data would suggest borrowers looking to purchase homes have shopped around for lenders other than BoNY Mellon. Of course, as bank officials pointed out in the detailed survey, BoNY Mellon’s business model differs from that of other major TARP fund recipients in that it does  not focus on retail or mortgage banking, and has instead taken up the fight against frozen capital on other grounds. “Specifically, we have purchased mortgage-backed securities and debentures issued by U.S. government-sponsored agencies to support efforts to increase the amount of money available to lend to qualified borrowers in the residential housing market,” the bank said. Write to Diana Golobay at Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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