FDIC issues its quarterly report, looking at real estate and employment.

Home sales in Virginia fell 24 percent during the second quarter of this year compared with a 7 percent decline nationwide, the Federal Deposit Insurance Corporation reported Thursday.

The rate of home price appreciation statewide also has declined, although it continued to be better than the national average, the agency said in its quarterly report that examines states' economic and banking conditions. For April, May and June, home prices statewide rose 14.2 percent over the same period of 2005, compared to a 10.1 percent increase nationally.

And for Hampton Roads, home price appreciation was even higher -- 17.4 percent year-over-year. So-called innovative mortgages, which the agency defined as interest-only and certain adjustable rate mortgages that allow borrowers to choose one of several possible payments, made up almost half of mortgages that were given to nonprime borrowers. That's compared with 31 percent in North Carolina and 37 percent in South Carolina.

Virginia has seen greater price appreciation over the past few years, so borrowers have been driven to more unconventional mortgage products. Nonprime borrowers include mortgage applicants who have credit scores lower than 660 as well as those who might have slightly better credit scores but are not as secure as a conventional borrower who can make a 20 percent down payment.

Do such borrowers expose lenders to heightened risk? Not necessarily, said Marlon Cook, acting regional manager for the division of insurance and research in FDIC's Atlanta regional office. Most of the loans are bundled and sold to investors who assume the risk.

The Federal Reserve, FDIC, National Credit Union Administration and other regulatory agencies this month put out an advisory to lenders telling them borrowers need more information about how non-traditional mortgages work, because the can contain risks.

The report also shows:

Statewide job growth rose 1.8 percent in the second quarter compared to 1.4 percent nationally.

The state's jobless rate stood at 3.1 percent in the second quarter, below the national average.

_______________________________________________________________

BY NOVELDA SOMMERS
Daily Press

Copyright ©2006 Daily Press