September 18, 2012 / 4:05 PM / in 7 years

Home lending hit 16-year low in 2011: regulators

WASHINGTON (Reuters) - The volume of home lending dropped 10 percent last year to the lowest level since 1995, highlighting the government’s uphill battle to prop up the still-struggling housing sector.

Homes that are valued at over $1 million, sit along Bersano Lane in Los Gatos, California September 6, 2012. REUTERS/Norbert von der Groeben

The Federal Financial Institutions Examination Council, a group of regulators, published data on Tuesday showing 7.1 million home loans were made in 2011, down from 7.9 million the previous year.

The data, which includes mortgages, refinancing and home improvement loans, showed that loans to purchase a home, as well as refinancings, fell.

Refinancing of home loans dropped 13 percent during the year, while new mortgages dropped 5 percent, the FFIEC said in a statement.

However, the Federal Reserve, one of the regulators involved in collecting the data, noted that refinancing activity surged late in the year as interest rates fell.

The Fed’s analysis highlighted the government’s struggle to prop up the still-depressed housing market, which has held back the economy’s recovery from the 2007-2009 recession.

The U.S. government currently guarantees most new U.S. mortgages and government support has increased dramatically since a collapsed housing bubble helped trigger the recession. The government is also trying to make it easier for homeowners to refinance at lower interest rates.

The Fed has tried to help the sector by lowering interest rates. Last week the central bank unveiled a bond-buying plan that aims to lower costs for home buyers and other borrowers.

The Fed noted on Tuesday that a key measure of lending conditions nevertheless tightened last year, showing banks required higher credit scores to qualify for loans. It said the median score for home buyers had risen about 40 points since the end of 2006.

“Despite the surge in the government-backed share of home purchase loans... credit scores of home-purchase borrowers are considerably higher now than at any point in the past 12 years,” the Fed said.

The data released on Tuesday is collected by regulators under the federal Home Mortgage Disclosure Act. It consists of loan information reported by more than 7,600 lenders, including all of the nation’s largest mortgage originators.

The HMDA data is collected to help regulators determine how consumers are faring in credit markets, and whether any discriminatory lending patterns are emerging.

In 2011, conventional mortgage applications by blacks and Hispanics were rejected more than those submitted by non-Hispanic whites, although the differences between rejection rates were similar to those found in previous years, the FFIEC said.

The Fed said the data does not include enough information “to determine the extent to which these differences reflect illegal discrimination.”

Reporting by Jason Lange; Editing by Dan Grebler and Andrew Hay

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