ABA Survey: Non-QM Lending Fell in 2016 as Banks Grapple with Reg Burden

An overwhelming 95 percent of bankers agreed that regulation has had a negative impact on business production and consumer credit availability, according to the American Bankers Association’s Real Estate Lending Survey released today during the association’s annual Real Estate Lending Conference in Orlando, Fla. A majority of respondents said they have seen increased compliance costs and have had to hire additional compliance staff to keep pace with new regulations, particularly in the mortgage area.

In addition, lenders reported making fewer non-qualified mortgages last year; the share of banks’ non-Qualified Mortgage loans fell from 14 percent in 2015 to 9 percent in 2016. More than 30 percent said they have stopped making non-QM loans altogether. “Non-QM loans have been subject to heightened regulatory requirements and risk, reducing the willingness of banks to extend these loans to even the most creditworthy borrowers,” said ABA EVP Bob Davis. “Despite ongoing regulatory hurdles, community banks remain resilient in their ability to manage risk levels, increase productivity and introduce more first-time homebuyers into the market.”

The survey showed that single-family mortgage lending to first-homebuyers was up in 2016, rising to 16 percent — a record high in the survey’s 24-year history. The foreclosure rate fell from 0.63 percent in 2015 to 0.37 percent in 2016, while the single-family delinquency rate ticked up from 1.27 percent to 1.42 percent. The 30-year fixed-rate mortgage remained the most popular loan type on the market, at 47.7 percent.

Looking ahead to 2017, bankers said they were most concerned about increased regulatory burden — including compliance with the TILA-RESPA integrated disclosure rule — rising interest rates, inventory in the housing market and increased operating costs. A total of 159 banks participated in the survey, 76 percent from institutions with less than $1 billion in assets.

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