Magazine article American Banker

High Profits for Thrifts in Low-Income Housing

Magazine article American Banker

High Profits for Thrifts in Low-Income Housing

Article excerpt

A Danbury, Conn., thrift is generating up to 400 basis points per loan in income under state and federal housing programs for people with low or moderate incomes, its chief executive told a conference in New York.

Community Reinvestment Act lending "pays for itself," said Henry A. Bessel, president of Nutmeg Federal Savings and Loan Association, at an urban housing conference sponsored by the Office of Thrift Supervision.

Not only are the government-assisted loans more profitable than conventional mortgages in the current rate environment, they can also be coordinated with other profitable programs, Mr. Bessel said.

Some banks regard Community Reinvestment Act compliance as a burden. But Mr. Bessel and executives from other thrifts that have earned "outstanding" ratings say affordable housing is an attractive niche.

Thrifts' relatively small size means they are "closer to the actual needs of the community," said Ellen Seidman, director of the OTS. "The combination of their strong residential lending focus, the portfolio lending, and their relatively small size makes them particularly important in affordable-housing lending."

But even large thrifts can prosper in the market, said James P. Linnane, vice president and New York tristate district manager for Dime Savings Bank, the main operating unit of $22 billion-asset Dime Bancorp.

"Thrifts have a laser-type focus on the issue of first-time homeownership because the responsibility of lending falls on their shoulders," said Mr. Linnane.

Nutmeg, which has $111 million of assets and a $450 million servicing portfolio, devotes 25% of its business to low-to-moderate lending, which includes Connecticut Housing Finance Authority and federally guaranteed FHA and VA loans, said Mr. …

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