Private Banking Emerges as Major Source of Mortgage Money
Brooks, Andree, THE JOURNAL RECORD
By Andree Brooks
N.Y. Times News Service
Shrouded in a patrician image of mahogany, Persian rugs and hushed voices, private banking is a service that most people think is strictly for old-money families or people of exalted net worth.
True. But it's changing. Private banking as a source of mortgage money for a personal residence _ and certainly for investment property _ is increasingly being offered to a broader range of people.
This results in part from a more aggressive chase for affluent customers.
"In the last few years we've seen much greater competition for the jumbo and super-jumbo mortgage loans," said Harry McCormick, director of mortgage financing for the private division of the Bank of Boston. "And the ability to write these loans quickly and easily is more likely in a private banking environment."
A jumbo loan starts at $203,000, a super-jumbo at $500,000.
Traditionally, a private bank or the private banking section of a major lending institution offers a range of customized services in a more elegant setting to people of higher net worth, say $500,000 and up. These services may include more flexible terms, a more sophisticated response to someone's financial circumstances, greater discretion by the personal banker concerning the level of credit and an ability to respond more quickly.
A mortgage obtained through the private banking division of a major lending institution can be more convenient and less costly. For example, Margaret S. Scott, president of Mortgage Advisory Services of Manhattan, said she recently got a variable rate mortgage for a client at 5 percent compared with 6 percent on a standard application.
Clients are also coddled. They may be offered a house call, tickets to a Broadway opening or reservations at an exclusive restaurant.
As its name implies, private banking is still a very personal arrangement and many private bankers will see only people who are referred, so some prior networking may be needed. However, many institutions permit referrals to come from the real estate broker or even a mortgage broker. Ms. Scott said she regularly contacted private bankers whenever it seemed appropriate.
Even this may not even be necessary. J.P Morgan, U.S. Trust and Chemical Bank of New York are among a growing number of lenders offering private banking services that openly solicit inquiries through carefully placed advertisements.
Brian Lincoln, a vice president at Chemical, said that initial encounters normally took place by phone. The caller is given details about the criteria that apply. At Chemical eligibility remains daunting: a net worth of $1.5 million and an income in excess of $250,000.
Criteria differ widely from lender to lender. Scott said she recently used private banking for a man in his late 20s buying a first home on the Upper West Side of Manhattan. He had an income of $100,000 a year and a net worth of $450,000 _ not small change but not millionaire status either.
At the Bank of Boston, a six-figure income is not needed, though a net worth of at least $1 million is. The bank also has no minimum size for a private loan. McCormick said this was because many clients were interested in buying modest houses despite their wealth or wanted to use private banking to finance a small vacation home. …