You Can Still Find a Bank for a Mortgage
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 crunch and are actively lending. That small banks are doing this should not be that much of a surprise. Home loans originated with the old building societies, like we see each year on “It’s a Wonderful Life”- taking Joe’s money to build Bob’s house. Though they may no longer be called building societies, this center of attention has protected them in the recent mortgage market market turmoil.
They are still lending in an around their local area, the community they know, and in many areas are filling the gap left open by the big lenders who are now gone.
Big commercial lenders have cut back dramatically in mortgage lending, but the small community banks have continued their mission, even if their growth has slowed.
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 remain close to the customer they are lending to. These companies are not only staying in business, they are earning a profit on their loans.
Organizations such as Chicago’s Shorebank, which has $2.3 billion in assets and mostly serves low income communities has a delinquent loan rate of 3.1% of assets, compared to the national average of 18.7%. They do lend at higher rates than for prime rate borrowers, but they are careful about the risks they take. And their goal is only 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 foundations of the financial markets’ current woes.
If you look at the salary of a CEO of one of these small community based institutes, such as that of Douglas Bystry of Clearinghouse CDFI, at $190,000 in comparison to that of Angelo Mozilo, CEO of Countrywide Financial at $22.1million, you can realize the problem. ShoreBank is located in an abandoned 1920’s movie house, not a multilevel steel and granite structure in a suburban corporate park.
This is a group of financiers who are worlds away from the big lenders, but close to the loans they originate, continuing to service them and therefore keeping in touch with the economic health of their borrowers. For example, Shorebank has an interesting energy program that assists and encourages bank clients to lower their heating bills, making money available to pay the mortgage!
