Academic journal article ABA Banking Journal

Succeeding amid a Sea of Change: What Lies Ahead Nobody Knows for Certain, but Some Mortgage Lenders Keep Doing What Always Worked, and Still Does

Academic journal article ABA Banking Journal

Succeeding amid a Sea of Change: What Lies Ahead Nobody Knows for Certain, but Some Mortgage Lenders Keep Doing What Always Worked, and Still Does

Article excerpt


The mortgage business has experienced more than a few challenges in recent years. Some competitors have exited the industry. Others have adapted to change on a number of fronts--many of them regulatory, with more to come. The Consumer Financial Protection Bureau's long-awaited decision on what constitutes a "Qualified Mortgage" probably being the most important change ahead. While reports on national housing trends have reflected mixed results, one message is clear: The economy remains a critical focal point.

Bankers are tuned in. In addition to regulatory burden and compliance costs, issues such as home prices, appraisal values, and unemployment were among the primary concerns for the mortgage market in 2012, according to ABA's 19th annual Real Estate Lending Survey. Released this spring, it also reported on 2011 trends based on input from 185 respondents, the majority of which were institutions with assets less than $1 billion. Other concerns: foreclosures, the future of Government-Sponsored Enterprises, loan demand, and other credit challenges. More than mid-way through 2012, these issues are still top-of-mind, according to ABA Executive Vice-President Bob Davis.

Media coverage citing figures on existing-home sales, new home sales, and unemployment also provide a backdrop for some of the economic issues bankers face. For example, sales of previously owned homes in May posted gains from a year ago, but were down from April. Sales of new single-family homes rose in May, but not all regions experienced gains. June's unemployment rate was steady, but subsequent commentary on job-growth figures surmised that this growth represented a slowdown from job-growth averages seen in the first quarter.

Among other key findings of ABA's survey:

* Fixed-rate mortgages made up 80% of originations in 2011--down slightly from 2010.

* Refinancings comprised 63% of mortgage originations--a decrease from the previous year.

* Surveyed banks retained 41% of one-to-four family mortgages originated in 2011--an increase from 2010.

(Full survey results can be found on, under "Solutions," "Mortgage.")

While such national surveys provide an overview of what banks are doing, it is also important to ask bankers what's happening in their individual regions. Economic and competitive conditions vary widely, but bankers assert that basics such as knowledge of local markets and the ability to attract and retain quality people are essential elements. What follows are snapshots of mortgage lending in three geographically diverse markets.

Upstate New York: You've got to stay informed

Michael Shaughnessy, executive vice-president and chief lending officer at Ulster Savings Bank, Kingston, N.Y., agrees that from a broad perspective, the competitive climate is different from what it was, with fewer mortgage-related competitors than there were five years ago.

The $720 million-asset mutual savings bank focuses on retail mortgage lending and has 13 mortgage-loan originators who are commissioned, but are bank employees. In addition to 14 branches in three semirural counties north of New York City, Ulster Savings Bank has three residential lending offices in suburban markets. Shaughnessy says they service about $2 billion, including the bank's own loan portfolio, with about $1.3 billion serviced for Freddie Mac and Fannie Mae.

An active first-time home buyer lender, Shaughnessy says Ulster Savings Bank frequently works with local housing-related agencies on educational and informational programs. It is active with the Federal Home Loan Bank first-time home buyer program and originates and services for the State of New York Mortgage Agency.

Involvement in professional associations and committees is essential, says Shaughnessy, who serves on ABA's Mortgage Markets Committee and Freddie Mac's Community Lenders Advisory Committee. …

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