There is no doubt that mortgage originations are lower than they have been in a long time, but there are still many lenders that are making mortgage loans.
Smaller, community based banks are still very active in the home loan business. This is not startling. The beginning of the mortgage business was really small building and loan associations that funded local expansion with local deposits. Of course, they go by different names nowadays, but banks that focused on their core business and area have largely avoided many of the problems in banking.
They are still able to not only make home loans available, but are even growing their mortgage portfolios to fill some of the gap created by the big players who have been forced out of the market because of rapid expansion in low quality loans.
Big commercial banks have cut back dramatically in mortgage lending, but the small community banks are continuing their mission, even if their growth has slowed.
These financial institutions, which include development banks and credit unions and may even be non-profit entities, have been very successful lending to poor risk borrowers because they are involved with the customer. These banks are not just managing, they are thriving.
Take, for example, Shorebank, a small community bank serving that city's poorer community; its delinquency rate is 3.1%, compared to a national average of 18.7%. These lenders charge market rates which are higher than those available to prime borrowers, and manage their risk carefully. They do have profit as a goal, but they do not aim for "profit maximization" in the words of Mark Pinsky, the head of Opportunity Finance Network. Should we read profit maximizing as "greedy", a term that has been used with most of the mainstream lending institutions that are now reeling from the sub prime mortgage problems?
For example, Douglas Bystry, of Clearinghouse CDFI, had a salary in 2007 of $190,000, as compared to Angelo Mozilo of Countrywide Financial's $22.1million package in 2007. The location of Shorebank is a modest renovated movie theatre, not an expensively built corporate complex.
This is a group of financiers who are worlds away from the big lenders, but close to the mortgages they originate, continuing to service them and therefore keeping in touch with the economic health of their borrowers. Shorebank, for instance, runs an energy conservation program since they realize that the mortgage is more likely to be paid if the homeowner can afford to pay his electric or heating bill.
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