In its annual analysis of mortgage data provided by thousands of financial institutions, the Fed found that lenders originated 7.9 million mortgages in 2010, down 12% from 2009. The only year they were lower in the past decade was 2008, when they hit 7.2 million. The Fed analyzed data from more than 7,900 mortgage lenders that are reported to regulators under the Home Mortgage Disclosure Act
AndThe lending drop in distressed areas stems in part from declines in loans to borrowers who don't use the homes as their primary residences, often investors. But the report also found a rising concentration of lower-income borrowers in those communities. Higher-income borrowers accounted for just 29% of all loans in those distressed neighborhoods last year, compared with 52% of loans in those neighborhoods in 2005. In less-distressed neighborhoods, higher-income borrowers accounted for half of all loans in 2005 and 43% of loans last year.
And this is the incredible part. Traditionally, FHA were no more than 2% to 5% of the home loans for purchases.Refinancing has been particularly limited in five states that have seen the biggest home-price declines: Arizona, California, Florida, Michigan and Nevada. In those states, some 6.4% of borrowers with credit scores between 680 and 719 refinanced last year, compared with 9.7% of borrowers in the remaining 45 states
Any increase in FHA down payment requirements or the privatization of Fannie or Freddie means that these borrowers will have to tougher standards to get a loan. The long term goal is to privatize the government agencies and FHA is in financial trouble.The study illustrates the mortgage market's continued heavy reliance on government-backed mortgages. Federal agencies such as the Federal Housing Administration, which allows borrowers to make down payments of just 3.5%, accounted for more than half of all loans for home purchases in 2010. Fannie Mae and Freddie Mac accounted for nearly one-quarter of purchase loans and more than half of refinances.
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