ABA Banking Journal - August 2008 - (Page 26)

COVER STORY almost surreal mix of conditions in the last six months or so: ■ Capital firefighting. Washington has been working, in fits and starts for much of the time, on ways to “fix” the mortgage markets and to help borrowers who found themselves over their heads, or with the waters rising. ■ Good intentions with little payoff. Private efforts, notably through the work of the “Hope Now” coalition, have been underway, since late last year, even as Congress and the Administration (and presidential candidates) tussled over the governmental responses. The biggest share of the publicity that has made headlines about private-sector efforts has been government figures taking mortgage investors and related parties to task for not moving fast enough, and not generating big numbers. Yet Hope Now estimates the program has helped about 1.7 million homeowners stay in their homes. ■ Disappointments in refis. Meanwhile, bankers interviewed indicate that early hopes that conventional lenders like banks and thrifts could step in to refinance borrowers in bad loan types into mainstream products haven’t panned out. “We’ve seen a handful,” says Deb Bochain, executive vice-president-retail banking, at Liberty Bank, a $2.8 billionassets thrift headquartered in Middletown, Conn. “But some never had the income to support a mortgage.” “We’re doing as much of it as we can. But the challenge we are facing is that in some markets, the borrowers are really upside down,” says Margaret Bond, vicepresident and retail lending manager at $8.4 billion-assets Rabobank, N.A., which serves mortgage borrowers in central and southern California. At Chicago’s $744.1 million-assets Liberty Bank for Savings, Bill Smigiel, chairman and CEO, says, “we’ll look at everything we possibly can, but often the people have such large prepayment penalties, it is hard for them to get out.” ■ Specters that nag and worry. “Everybody’s been trying to find their bearings, and then you have news like the stories about Fannie Mae and Freddie Mac, and I could just cry,” says Jacqueline Amato, president of TowneBank Mortgage, Virginia Beach, Va., a division of $2.6 billion-assets TowneBank, Portsmouth. News reports questioning the viability of the mortgage giants, and efforts to help, have some in 26 AUGUST 2008/ABA BANKING JOURNAL the mortgage field in mental turmoil. The shuttering and reopening of $32 billionassets IndyMac Bank, F.S.B., generated still more tremors. ■ Economic distress and concern. The old real estate adage of “location, location, location” takes on negative meaning when fuel prices factor into an already worrisome picture. Some lenders have already been seeing some impact. This is an overlay in states, such as Ohio and Michigan, that were already experiencing economic angst. “There isn’t much mortgage market out there,” says Howard Boyle, president and CEO, Home Savings Bank, a $108.3 million-asset stock savings institution in Kent, Ohio. ■ Private mortgage insurance impact. Private mortgage insurers, already feeling their own pain as a result of troubles in subprime and more, have become more reluctant to provide coverage, some lenders say. This has led to growing interest in, and reliance on, Federal Housing Administration and similar federal and state governmental insurance and guaranty programs. In some markets, it appears to be the only way that low-down-payment loans can be made. Energy costs driving changes W hile it is hard to call it a trend just yet, lenders here and there indicate what looks like the beginning of a pattern. The high, and rising, price of gas, already rewriting some basic features of the economy, may come to shape where some home buyers choose to live, and where, and how much, lenders will find opportunity to make home loans. “The areas that are hurting the most are newly developed parts of the suburbs,” says Sacramento, Calif., banker James Pons. “More established areas are Slices of the mortgage pie As ABA Banking Journal canvassed nearly two dozen lenders around the country, three broad groupings emerged: Gainers at the edges Most of lenders who reported increasing volume were on the east and west coasts. “Much of the media attention that the mortgage industry has gotten over the last four or five months has benefited the banks,” says Chad Neiss. “We’ve seen more activity from the markets, as mortgage brokers have folded.” Neiss is vicepresident, sales, for consumer and residential lending at Susquehanna Bancshares, Inc., Lititz, Pa. Susquehanna, a $13.1 billion-assets holding company that makes mortgages in Pennsylvania, New Jersey, and Maryland, has enjoyed its share of a shift to local bank lenders over the last six months. Neiss says volume is up over last year by about 20%. “We’re picking up market share as the mortgage brokers go away,” says still holding their values.” As an example, Pons, of Merchants National Bank, points out that condo lofts and apartments in Sacramento city limits are doing well. “They’ve been selling beautifully,” he says, and the bank has been actively making loans on them. “Downtown is kind of revitalizing.” Sometimes lenders aren’t in a position to see such shifts because their markets are wholly or mostly rural. For example, Rob Barrett, president and CEO at $100 million-assets Heritage State Bank, Nevada, Mo., says that “$4 fuel is going to impact us, without a doubt.” For Barrett, a threat even closer to home is a major plant closing. Unfortunately, transportation isn’t the only place where some lenders see impact from rising crude oil prices. Take the Northeast, where many homes are heated with fuel oil. Prices have been running up there, and promise to rise. From his own head office, Connecticut savings executive Dennis Cardello can see very large homes that have been unsold for 18 months. As home oil prices continue to rise, he says, such large homes are being seen as too large to heat affordably. “The top end of the market has pretty much dropped out,” says Cardello, of Collinsville Savings Society. “We never did have a lot of jumbo lending here, but what we had has been disappearing.” Subscribe at www.ababj.com http://www.hopenow.com http://www.homesavingsbnk.com http://www.merchantsnational.com http://www.merchantsnational.com http://www.liberty-bank.com http://www.heritagestatebank.com http://www.heritagestatebank.com http://www.libertybank.com http://www.susquehanna.net http://www.susquehanna.net https://www.townebankmortgage.com http://www.collinsvillesavings.com http://townebank.com http://www.ababj.com

Table of Contents Feed for the Digital Edition of ABA Banking Journal - August 2008

ABA Banking Journal - August 2008 Contents Editor’s Column Banks Could Win or Lose with Barcode Mandate Snapshot: Residential Lending, a Few Bright Spots Fair Value Accounting: Not Fit for Banks Past ABA Chair Heads to the Fed 100th Anniversary: Then & Now ABA Resources ABA Chairman’s Position Have Your Branch, and Sell It Too Pass the Aspirin Cover Story: Filling the Gap, but Carefully What Inspires Most? Ten Tips from Today's Designers Guided By Feedback: Measuring Customer Engagement In Brief Avoiding Being the "Banker Who Knew Too Much" Mailbox Banker’s Mart White Papers To Advertise/Index of Advertisers The Economy

ABA Banking Journal - August 2008

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