Mortgages on the Move


Top lenders see a breakout year for home sales and lending

By Cheryl Winokur Munk

Afew years ago, homebuyers seemed to be cautious or even running scared. But now consumer confidence has returned in many areas of the country, and mortgage loan officers are seeing renewed home purchase activity. More technology also is being adopted in the mortgage-lending process, several community bankers say.

Unlike several years back when mortgage refinancing was all the rage, the home purchase market has become more stable in the past year, according to Arlene Schwerzler, a vice president in the mortgage loan department at Merchants Bank, a $1.5 billion-asset community bank in Winona, Minn. Situated about 46 miles east of Rochester, Minn., overlooking scenic bluffs of the Mississippi River, the city has nearly 30,000 people and about 10,500 households.

Four years ago, the housing sales market there was largely made up of first-time buyers, but now Merchants Bank has been extending more loans to people who are upsizing or buying a second home, Schwerzler says. People also aren’t sitting on the fence for months regarding their home-buying decisions, she adds. They’re much more willing to close deals.

“It’s not crazy like it was before the housing crisis. It’s very slow [growth], and it’s very methodical,” says Schwerzler who believes 2015 was a turning point and expects to see similar solid growth in 2016.

“TRID is affecting our customers in that it is slowing the entire process on how quickly we can get them to the settlement-closing table.”
—Allen R. Kramer, Phoenixville Federal Bank & Trust

Schwerzler is among the top consumer and mortgage lenders at community banks across the country that Independent Banker has identified in the past. IB touched base with several top industry lenders for insights on emerging retail lending trends. The lenders say they are encouraged by what they see.

Confidence grows

Mortgage and consumer loan officers at community banks have experienced similarly steady home-buying growth across the country. Their observations align with national surveys conducted by the National Association of Realtors, which recently found that 82 percent of homeowners and 68 percent of renters believe now is a good time to buy a home.

Allen R. Kramer, senior vice president and manager of retail lending at Phoenixville Federal Bank & Trust, a $385 million-asset community bank in Phoenixville, Pa., expects this spring’s home-selling season to be particularly busy. Homebuyers in the Chester County borough, which has about 16,500 residents and is located about 28 miles northwest of Philadelphia, want to act before interest rates and home prices rise to a significant degree, Kramer says.

To gear up for increased mortgage sales, Phoenixville Federal is offering a special promotion for customers who pre-qualify for a home loan and then use the bank as their mortgage lender. The bank, serving a marketplace of about 7,600 households, is giving these customers $500 toward their closing costs.

In some areas of the country, consumers are also increasingly seeking home equity lines of credit. In Santa Barbara, Calif., for example, there’s extremely low housing inventory in part because the homes are so pricey. The average sales price for a Santa Barbara home is $1.5 million, and the median is $1.06 million, says Lori Murray, vice president of mortgage lending at American Riviera Bank, a $400 million-asset community bank.

As housing prices in Santa Barbara have risen over the past three years, however, people have more equity in the homes and are taking out home equity lines for college, home improvement, buying a new car or other purposes, Murray says. Last year, American Riviera saw a 31 percent increase in the number of home equity lines it booked compared with 2014, and 2016 is starting off strong in new line requests, she says.

Technology spreading

Technology also is continuing to change the mortgage business. More community banks are processing applications online, and others are dabbling in the area of electronic signatures and electronic document sharing.

Royal Bank, a $346 million-asset bank in Elroy, Wis., a community of nearly 600 households, began using an online loan origination system in 2009, which allows customers to apply online for loans. Initially the bank wasn’t sure what customer reception would be, but online mortgage application has mushroomed for the bank, particularly in the past two years, says Dan Ravenscroft, regional vice president and a loan officer at the bank.

“This application option is critical for the bank to provide the highest level of service,” he says. “Borrowers find great value in it.”

Commercial Trending
Read about commercial lending trends from more top community bank lenders in the Lender Life story “Business Trend Lines” in the March issue of Independent Banker.

For some community banks, electronic documents and signatures also have become more important as a way to shorten the closing process time, made longer by the TILA-RESPA Integrated Disclosure rules implemented last year. Since the TRID regulations took effect in October, more community banks have been exploring the use of technology to cope with the compliance complexity of the new disclosures. Using electronic signatures on closing disclosures has been a significant part of the trend.

At Merchants Bank, for example, about 90 percent of these disclosures are signed electronically, which saves significant time and makes it more convenient for buyers, Schwerzler says.

Nevertheless, many community banks are still adapting to the TRID rules, and struggling with their customers, Kramer points out. “We think that’s going to continue all the way through 2016,” he says. “TRID is affecting our customers in that it is slowing the entire process on how quickly we can get them to the settlement-closing table.”

Cheryl Winokur Munk is a financial freelance writer in New Jersey.