Local Banks Talk Lending Practices

Brandon Krueger, regional manager for PNC Mortgage in Greater Washington, said that he sees a lot more confidence among lenders and borrowers across the industry. (Photo: Patricia Leslie/News-Press)
Brandon Krueger, regional manager for PNC Mortgage in Greater Washington, said that he sees a lot more confidence among lenders and borrowers across the industry. (Photo: Patricia Leslie/News-Press)

or first time home buyers, now is the time to “jump in” the housing market before the Federal Reserve hikes its interest rate like it’s been hinting for weeks it’s going to do. Once the Fed raises its rate, it’s only a quick matter of time before many financial institutions follow suit.

It’s “better to lock into a lower rate now than in a year from now,” according to Bruce Whitehurst, the president and CEO of the Virginia Bankers Association.

Local financial institutions are racing to court qualified buyers who are slowly returning to the market, after the 2008-2009 recession which hit many of them hard, with loss of jobs, confidence, and for homeowners, depressed home values.

The unemployment rate is lower than in recession days, and confidence is rising, factors which contribute to an increase in housing sales. “More are employed and able to demonstrate an ability to repay a loan,” Whitehurst said.

“I think they have more confidence about the economy.”

Brandon Krueger, the regional sales manager for PNC Mortgage in Greater Washington, said “across the industry,” he sees a lot more confidence among lenders and borrowers, too. It’s a “great” market, especially for first time home buyers. “Rates are extremely, extremely competitive” and “it’s a good time for a home buyer to possibly jump into the market.”

Dave Skaff is the group vice-president of the residential mortgage department for the Mid-Atlantic region for M & T Bank. He said the interest rate now is about 4 percent when it was about 3.5 percent and 3.75 percent earlier this year.

Now, there is “a very competitive market for borrowers. The interest rate is still extremely low,” and borrowers have “more opportunities” to get a good loan, Whitehurst said. He has not seen any “wild fluctuations in underwriting standards. I don’t really think mortgage requirements have changed,” which other bankers affirmed.

Since the Great Recession, federal guidelines established to avoid the recession debacles have not “loosened up,” and although it’s not “easier” now to get a loan, “I will say it’s a more fair environment for consumers,” said Bryan Moran, the Wells Fargo mortgage area sales manager in northern Virginia.

Financial reform laws of 2014 “set a level playing field for the entire industry. After the crisis of 2007, 2008, the industry as a whole tightened up which made it hard for consumers,” according to Moran. At the Arlington Community Federal Credit Union, Suzie Cook, the director of marketing and business development, said her credit union did make some changes on underwriting “in view of the recession.

“Because we know our community so well, and knew something was wrong, we did make some changes so we could get our people in their [new] homes.”

Arlington was able to do this and keep its “stellar ratings” without compromising credit union principles, because, for one reason, “we are not a cookie cutter lender,” unlike the “big box banks.”

Relationships with members and how the credit union can help them are critical to its success.

Coming out of the recession, M & T’s Skaff said buyers were “one, nervous,” and “two, upside down” since many homeowners owed more than their homes were worth. Northern Virginia properties have mostly held their values, and have seen appreciated prices, unlike many places in the U.S.

The standards banks use to approve loans are not more relaxed than during the peak of the recession, but “today we may make a different decision and not require as much down payment,” said PNC’s Krueger.

Borrowers have “a shyness toward taking a risk,” according to Whitehurst.

Once unemployed, and depending upon how long it takes someone to find a new job, “it’s human nature to leverage themselves financially and feel more secure. It’s a natural psychological thing” to resist taking on debt, Whitehurst said, and what’s good for the economy (for consumers to spend) is not so good for consumers (who are better off saving).

“It’s a paradox.”

He compared the millennials to those who grew up in the Great Depression who were very “debt averse.” Millennials have grown up through the financial crisis and the Great Recession.

Wells Fargo offers several mortgage programs for first-timers, including 97 percent financing for a person with a credit rating as low as 600, and it requires no mortgage insurance which increase monthly payments, said Moran.

It also has attractive 100 percent loans for veterans and those in rural areas.

“It’s our way of helping first time home buyers,” Moran said.

The Arlington credit union has an “80/10/10” program which offers 80 percent financing with 10 percent down and another 10 percent as a second mortgage, all without private mortgage insurance, Cook said.

M & T is “very conservative” in its lending practices, said Skaff.

“We are diligent in our underwriting” which industry-wide is “back to where it should have been.”
But M & T is always seeking borrowers “who are able to qualify and repay the mortgage.”

If buyers are thinking about a home purchase, “they should not wait much longer,” Skaff said.