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Historic Lending Lows Hamper Housing Activity

Mortgage lenders across the country have reported layoffs and substantial downsizing, a consequence of heightened regulatory scrutiny, weak job growth, and brittle markets slumbering in the wake of diminishing consumer confidence.
[IMAGE] Despite a small spurt in refinancing measures and a drop in lending rates to their lowest ebb since the turn of the century, origination loan volume remains low, according to several national assessments.

Lenders are coming to terms with the fact that they will be financing fewer mortgages over a longer-than-expected period, dashing hopes for a prompt recovery boosted by sales and activity in the housing markets.

A combination of these and other factors create ""a perfect storm,"" said Mick Rizzo, a VP at ""Marshall & Ilsley Bank's"":http://wwwmibank.com mortgage unit. He attributed the slowdown in mortgage lending to both sluggish recovery and new regulations, including the Dodd-Frank Act.

""We're wickedly over-regulated,"" Rizzo said. ""The regulation is supposed to be making disclosure to the consumer easier but consumers are getting pelted with multiple disclosures. We're not making a lot of money per deal"" as a result, and that rolls over onto mortgage businesses, affecting growth and performance, he said.

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""This market really is very bleak,"" Rizzo said.

Confirming the uneasy feeling, ""iEmergent"":http://www.iemergent.com issued a forecast in May projecting that residential mortgage lending volume will fall short of the $900 billion threshold this year.

The company's forecast reflects an approximate 38 percent decrease in total originated dollars from 2010 volume levels, ascribing the drop to a 34 percent decline in overall refinance volume.

The data hews close to an October 2010 statement released by the ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA), which forecasted that residential loan production would bottom out at a mere $1 trillion in 2011 ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the lowest level for originations from 1997 onward.

MBA predicated its projection on growth and contraction rates in the broader economy and employment numbers.

""The sluggish economy, weak private demand for debt financing, and low inflation are keeping downward pressure on rates,"" Jay Brinkmann, MBA's chief economist and SVP, said in the statement. ""Households remain cautious given the weak job market.""

The bad news comes on the heels of several other national assessments and reports that predict ongoing weakness in the housing markets.

The release of the ""Federal Reserve's Beige Book"":https://themreport.com/articles/index/fed-residential-real-estate-weak-commercial-market-improving-2011-06-08 coincided with the news, holding that weak job growth continued to drive homebuyers away from real estate and mortgage rates at historic lows. A story in the _Wall Street Journal_ tied the dearth of activity to a tight credit supply and sluggish job growth.

This followed a ""study issued by MBA"":https://themreport.com/articles/survey-mortgage-applications-down-nationwide-2011-06-08 last week that reported yet another drop in fixed and adjustable mortgage rates juxtaposed with a decline of 0.4 percent in weekly mortgage application volume.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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