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The Wall Street Journal: Housing Slump Hits New Mortgage Loans
Mortgage lending declined last year amid weak demand and tight credit standards, with particularly sharp credit contractions in neighborhoods with many foreclosures, according to the Federal Reserve.
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.
The report found that declines in lending were "notably larger" in neighborhoods that have been hardest-hit by foreclosures and price declines. Many of those neighborhoods saw high concentrations of subprime and other exotic mortgages during the housing boom.
The 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.
The changing income pattern in the hardest-hit areas could further hamper the economic recovery of communities that have seen big price declines and a high level of foreclosures.
The analysis also underscored the difficulties that Americans are having refinancing their mortgages. Many homeowners haven't been able take advantage of ultralow rates because they don't have enough equity and because lending standards are much tighter than when they initially took out their loan.
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