Monday, July 6, 2009

Renewed bank mortgage lending

Some bank commercial banks, which had begun to curtail their mortgage lending in 1973and1974, resumed considerable interest in this type of lending in the late 1970s. Certainly there was a wariness on the part of the banks in making an excessive amount of loans on condominiums or townhouses, because of their earlier difficulties in this loan market, but the single family detached dwelling (usually built or purchased by higher income families who were better credit risks) again became an attractive outlet for banks with more funds to lend.
Some growth in the relative importance of commercial banks in the mortgage loan market in the decade from the mid-1960s to the mid-1970s, which accounted for only 14.3 per cent of nationwide aggregate mortgage loans outstanding on one- to four-family non farm homes in 1965, increased their participation rate in this market to 17.2 per cent by 1975. On the other hand, the three other major types of private financial intermediaries-savings and loans, mutual savings banks, and life insurance companies-all had some slippage in their relative importance. The really big growth in mortgage lending was by federally supported agencies, which rose from only 3per cent in 1965 to a significant 12.8 per cent in 1975.
in some cases, large commercial banks would make federal housing Administration (FHA), veterans administration (VA), or conventional mortgage loans with the intention of reselling them in the secondary market, e.g., to Fannie Mae (federal National mortgage Association) or Ginnie Mae (Government national mortgage Association). By selling such mortgage originated by the bank, the bank could reinvest in additional mortgage loans. the advantage of this arrangement were that the bank collected on servicing loans, had a continued availability of money, and could develop additional income through origination fees. Furthermore, servicing of such accounts kept the bank in contact with these mortgage customers and could lead to selling these customers additional services, such as checking and savings accounts, automobile loans, home improvement loans, and trust business

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