Community Banks – Meeting Your Mortgage Needs

Community Banks – Meeting Your Mortgage Needs

Subprime mortgage lending has been a train wreck — shattering hopes of economic progress for millions of families and triggering a devastating chain reaction of losses for the mortgage banking industry. Throughout 2007, foreclosures on subprime loans continued to mount to the highest levels ever recorded in the modern mortgage market.

Subprime mortgages are loans targeting borrowers with less than perfect credit history. Subprime does not refer to the interest rate, but rather the quality of the borrower’s credit. Subprime loans, in fact, carry interest rates that are generally higher than overall market rates. While many different types of lenders make mortgage loans, most of the subprime lending is done outside of community banks and is often done by mortgage brokers and mortgage companies that may not be subject to the same scrutiny as federally insured community banks such as First Exchange Bank.

Many are calling on Congress to restore sensible lending practices, which community banks have always used, and to assist homeowners struggling with abusive subprime loans today.

About eighty subprime mortgage lenders have gone out of business since December 2006, and other major lenders are also cutting back on lending, withdrawing mortgage products and generally raising credit standards for all. All of this reduces the availability of mortgage credit, thus reducing the demand for homes.

Recent news stories like the preceding would lead you to believe that money for mortgages has dried up. The fact is: community banks have money to lend to homeowners for new purchases and to refinance existing mortgages. At First Exchange Bank, we offer the same mortgages we always have. First Exchange Bank and other community banks are weathering the credit storm because we adhere to the fundamentals of safety and soundness, sound underwriting standards, due diligence and capital standards.

As a matter of fact, the Independent Community Bankers of America (ICBA), the national trade association that represents 5,000 community banks of all sizes and charter types throughout the country, reports that nearly 90 percent of mortgages made through community banks that do business with ICBA Mortgage (an ICBA affiliate) are owner-occupied and have a delinquency rate that is below the national rate for one-to-four-unit residential properties.

That is because community banks are conservative lenders. While in recent years, some lenders have been more concerned with which loan was best for them, community banks like First Exchange Bank have always been concerned with which loan is best for our customer. We don’t just want to get you into a home, we want to get you into a home that you can afford to buy and afford to keep. Our goal is to find a solution for our customer’s financial needs. In addition we want to build a relationship with our customers, allowing them to have direct contact with a bank officer. Simply put community bankers look for the best options for your situation because we are interested in customer relationships that will last.

While we currently are hearing a lot about woes of the largest financial institutions on Wall Street and many non-bank lenders, there are 8,600 community banks and savings institutions meeting the credit needs of the typical borrower on Main Street every day. Despite talk of a potential credit crunch, community banks like First Exchange Bank are open for business and ready to meet your mortgage needs.

There is a lot of confusion about mortgages and home buying right now. ICBA and community banks nationwide want to help clear up some of the confusion, so ICBA is sponsoring the ICBA National Community Bank Mortgage Week November 5-9. Please help them make this week a success by providing your mortgage documents to a community bank. They would appreciate the opportunity to discuss financing options with you. In addition, they would appreciate the opportunity to discuss financing options with first time homebuyers who see an opportunity to own a home, and help current homeowners looking to purchase new homes or to refinance existing mortgages. ICBA National Community Bank Mortgage Week is a great time for current homeowners and prospective homebuyers to visit their participating local community bank, such as First Exchange Bank, and discuss financing options. Please help us make this week a success.

Bill Goettel, CPA


First Exchange Bank