Banks See Mortgage Opportunity - Well, Big Ones Do

(MoneyWatch)  When a troubled market comes back, the news is usually not good for everyone. Such is the case for mortgage lending, according to American Banker, a banking trade publication. This time, though, the big banks are seeing the gains.

The publication, working with research firm Greenwich Associates, conducts a regular survey of financial executives. According to the survey, there are more executives saying, for the first time in more than three years, that they are not planning to expand overall consumer lending this year than there are saying they will do so.

But when broken down among size of banks, there is a discrepancy in forecasts. More than half - 51 percent - of small financial companies said they don't plan to do more consumer loans, especially mortgages and home-equity loans. While only 33 percent of big companies said they won't.

American Banker quotes analysts and banking executives as saying that the lenders who were more aggressive in making ill-advised sub-prime loans had already dropped out of the market, and that some well-capitalized banks are finding mortgage lending a potentially attractive area again.

Mortgages, though seen as most negatively affected by the recent credit and economic environment, surpassed home equity lines of credit as the consumer finance product most likely to fuel growth.

This year, 34% of companies surveyed said that mortgages were their best opportunity for consumer lending growth; 20% gave that ranking to home equity lines, which had been by far the most popular growth vehicle in previous years' surveys.

For anyone looking for signs of a market bottom, this is encouraging. It's often the case that the earliest signals of such bottoms are misleading, so it's easy to read too much into this. It's important to weigh it against other evidence, and watch for signs that this is indeed a trend.