With LendingPatterns™ you can measure the volume of mortgages done in all of the country’s metropolitan statistical areas. But what if the rural parts of the country interest you as much as the urban parts?
There is a good bit of information I’ve been able to glean from the database on rural lending. You can sort by Rural Housing Service/Farm Service Agency volume. You can see how much share Farmer Mac has in the secondary market. You can look at counties you know to be rural. And, you can look at mortgages to Native Americans on reservations, which are almost exclusively rural.
Looking at RHS/FSA volumes, lenders in LP’s Early Look database for 2016 had reported 20,000 originations as of Aug. 27. (More than 50,000 were included in the mortgages purchased category, which I won’t be considering this time.) More than four out of five were made to white borrowers, with Hispanics being the minority with the highest volume, at seven percent.
These borrowers were looking for purchase money, overwhelmingly. Less than three percent of this share went to refinancings, and only one home improvement mortgage was extended. Not much investment money here as well, as only four loans went to non-owner-occupied properties. Not much jumbo lending either, just 12 of the 20,000 mortgages.
This category is one of the few I’ve looked at where upper-income borrowers don’t dominate. In fact, just 11 percent went to the richest borrowers. More than 80 percent went to the combined categories of moderate- and middle-class borrowers.
First lien mortgages dominated as well, with the average loan amount being $149,000, well below other categories I have looked at.
It would be interesting to have the breakouts on how much was RHS lending and how much FSA. Farm mortgages are an interesting lot, since they are a hybrid of real estate and equipment lending. Farm mortgages also tend to be unlike residential loans in that the value of the land is often more than the value of the improvements.
In the secondary market, Farmer Mac hasn’t made much of a dent into the share of the big three of Fannie Mae, Freddie Mac and Ginnie Mae. In fact, the 66 mortgages reported to date through Farmer Mac represent a zero share of the total early look universe of 2.7 million mortgages, statistically. The farm mortgage market also is supported by its own GSE, however, the Farm Credit System, whose financing arm issues securities to help fund their loans, leases and operations.
Indian mortgages are a bit of an outlier. While a significant percentage of the nation’s Indians live on reservations, lenders have not had a big footprint on these homelands due to trust land and other issues. So it is impossible to extrapolate how many Indian mortgages were rural based on percentages living on reservations, since the number of those mortgages is so low.
My research indicates about 4,000 mortgages have been extended on reservations in the last 20 years through the Housing and Urban development section 184 guarantee program, another 1,000 through the Department of Veterans Affairs Native American Direct Loan, and 350 or so through the U.S. Department of Agriculture’s Rural Housing Serving section 502 direct loan. That comes to about 200 mortgages a year over twenty years, a quite small number.
(Mark Fogarty is a journalist and analyst who has been covering the mortgage industry for more than 30 years.)