The Federal Reserve’s housing policies have helped steer the four largest home loan lenders back to recovery, Bloomberg News reported.
Wells Fargo, JPMorgan Chase, Bank of America and U.S. Bancorp reported $24.4 billion in revenues from home lending in 2012 and expenses of just over $21.7 billion for settlements and loan repurchases, according to Bloomberg News data. Total loan originations for the year were $1.75 trillion, the highest levels since 2009, according to the Mortgage Bankers Association.
The increased activity was spurred by the Fed’s policy of pressing interest rates down, which led to lower borrowing costs and a spur of refinancing activity. Banks were able to cash in on the activity by lending at much higher rates than the bonds they received from the Fed and post higher profits, which economists say somewhat thwarts the Fed’s quantitative easing efforts to stimulate the housing market.
But experts say that as long as the Fed pushes interest rates down, the trend will continue. “The large banks are making a lot of money off of the Fed, and have been basically since it started buying mortgage backed securities,” Walt Schmidt, a mortgage strategist at FTN Financial, told the Journal. “As long as the Fed continues to buy them in current volumes, there’s no way around it.” [Bloomberg News] —Hiten Samtani