Banks have been cutting their home loan portfolios back, that is for sure, but the careful borrower can still find a mortgage.
Many local banks never got involved in the credit mess and are actively lending. This should not exactly be a surprise. The origin of the mortgage business was small, regionally focused “building societies”, who took in deposits from local citizens to lend out to local homebuyers. These banks ar perhaps no longer be called by the same name, but they are doing the same thing, staying local, and this has protected them from many problems.
They are actively granting loans to their customary clients and even expanding to pick up the slack where other lenders are no longer active.
The large, stamdard banks are cutting back on mortgages across the board, but local, community based banks are predicting continued stability in their loans, although with not much growth.
Community lenders such as this, which may include credit unions and development banks, have had great success in lending to the so-called sub prime borrower, because they stay close to the customer they are lending to. These lenders are not only staying in business, they are making a profit on their loans.
A good example is Shorebank of Chicago, a $2.3billion asset bank which serves the low income community of this city and, in contrast to the national average of delinquencies of 18.7%, has only 3.1%. They do lend at higher rates than for prime rate customers, but they are careful about their risk. And their goal is merely to be profitable, not profit maximizing, a fine point made by Mark Pinsky, the head of Opportunity Finance Network, an umbrella group for these kinds of banks. Reading between the lines, profit maximizing may be understood to represent the greed that has been one of the causes of the financial markets’ current woes.
For example, Douglas Bystry, of Clearinghouse CDFI, had a salary in 2007 of $190,000, in comparison to Angelo Mozilo of Countrywide Financial’s $22.1million salary in 2007. Besides salaries, another example might be everyday decisions; Shorebank has its headquarters in a renovated building, not a new corporate high rise.
This is a group of lenders who are worlds away from the big lenders, but close to the mortgages they originate, continuing to service them and therefore keeping in touch with the economic health of their borrowers. Shorebank, for instance, runs an energy conservation program because they realize that the mortgage is more likely to be paid if the homeowner can afford to pay his electric or heating bill.
Tags: home, Home equity loans, insurance, life insurance, mortgage, mortgage life insurance, real estate