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Region's Housing Recovery Real, Mortgage Lenders Find
YOUNGSTOWN, Ohio -- The number of homeowners looking to refinance their mortgages continues to outpace those who want to become homeowners, Mahoning and Shenango Valley mortgage bankers report, but the gap is narrowing as the recovery continues.
Indeed, the percentage of those in the region looking to secure a mortgage to buy a house exceeds the national average, they say. This includes loans for new construction.
As Ken Mayland, president of ClearView Economics, Pepper Pike, said Nov. 20, “The housing recovery is for real!” He was reacting to the U.S. Department of Commerce report that housing starts across the United States grew 3.6% in October. “But the real news,” he pointed out, “is that they sustained last month’s [September’s] outsized 15% gain.”
The economist also noted that the housing rebound has favored multi-family units, not single-family residences.
The president and CEO of First National Bank of Pennsylvania, Vincent J. Delie Jr., says, “We do have pockets across our footprint where prices tend to put single-family homes out of reach for some customers.” But overall, its customers are buying single-family houses.
First National Bank is offering a 30-year fixed at 3.375% with a 5% down payment and a 15-year fixed at 2.625% with 5% down.
Most First National mortgages that aren’t refinancings are for single-family homes, Delie says, and the average amount it finances on purchases in Mahoning and Trumbull counties is $140,000.
With mortgage “rates at historic, all-time lows,” as Home Savings and Loan Co. Vice President Mike Garmone says, people have more confidence the economy is improving and their more stable situations allow them to buy single-family houses.
Home Savings is offering a 30-year fixed rate at 3.375% with 5% down and a 15-yearfixed at 2.625%, 5% down.
At Huntington Bank in Youngstown, John Lacy, vice president and mortgage manager, joins his counterparts in saying, “The mortgage business is very strong. The purchase business is higher here than in other markets.”
Huntington is offering a 30-year fixed at 3.50% with 5% down and a 15-year fixed at 2.75% with 3% down.
While refinancing mortgages continues to exceed taking out a mortgage to buy a house across Huntington’s footprint, Lacy says, “In the Mahoning Valley, it’s 60% refinance to 40% purchase year-to-date” compared to “70% refinance to purchase 30% across the bank.” Huntington serves Ohio, western Pennsylvania, Michigan, Indiana, Kentucky and West Virginia.
“This is a good time to be in the residential mortgage business,” says Joe Gerzina, chief lending officer at Farmers National Bank. Year over year, mortgage volume is up “more than 150% at the Canfield-based bank, he reports. Not only that, over the last three months, borrowing to begin construction of a new house constitutes “45% of our purchase business.”
Gerzina continued, “We’re bullish on the construction of new homes. It’s quite a pickup. For a while [2008-10] it was almost zero.”
Farmers is offering a 15-year fixed rate of 2.875% with 5% down and a 20-year fixed rate of 3.50% with 5% down.
Year to date, the volume of mortgages at Home Savings is 25% ahead of last year’s Garmone reports, which is why the 70% refinances to 30% purchases this year to the 60%-40% breakdown last year is somewhat misleading. “We’ve handled far more purchases this year than last,” he says. The low rates also persuade homeowners rates won’t get appreciably lower so there’s little benefit in waiting to refinance.
First National Bank has seen “a relatively steady split of 60% between refinancing and 40% purchase and new construction,” Delie says. Before the refinance boom, “those percentages were reversed,” he says, “with only 25% to 30% of our business being refinances.”
Roughly half of the refinanced mortgages are for terms of 15 years or less, he says, while three-fourths of the purchases are 30-year term.
Gerzina did not have the split at Farmers readily available but could say that his bank’s refinancing activity was pretty evenly divided between 15-year and 30-year fixed rate.
The Mortgage Bankers Association projects that when 2012 statistics are completed, refinancing activity across the United States will be $870 billion, $200 billion more than its previous projection and $400 billion above its estimate in the summer of 2011.
Where First National Bank, Home Savings and Loan and Huntington and Farmers National Bank of Canfield sell the majority of mortgages they originate in secondary markets, Home Federal Savings and Loan Association of Niles does not. It keeps the mortgages it originates in its portfolio, says its president, Lawrence Safarek.
Home Federal requires a 20% down payment on its 15-year 4% fixed-rate residential loans. Safarek and Homes Federal chief financial officer Daniel E. Csontos explain that the low interest rate environment won’t last. “Eventually, rising rates will return,” Csontos says. And when they do, Home Federal can’t afford to find itself charging less in interest than the going rate.
Home Federal, which serves Trumbull and Mahoning counties, finds 70% of its mortgage business is refinancing, Csontos reports, and the amounts financed are $100,000 and less,” Safarek says.
While rates at Home Federal may exceed most other lenders, the bank competes on lower closing costs, Csontos says, and “a faster turn-around time,” Safarek adds. “People have confidence in us and are happy to deal with someone they know will be here for the long haul.”
A veteran of the U.S. military can buy a house with no down payment and the Federal Housing Administration will allow as low as a 3.03% down payment, mortgage lenders here otherwise require 5% down on a 30-year fixed rate mortgage. They’d like to see 20%, as was the norm a generation ago, they say, but are content to offer 5% with private mortgage insurance or PMI.
“A lot try to get to 20% to avoid PMI,” says Huntington’s Lacy. Regardless, those who lack the 20% down find “FHA pricing really attractive” and that Fannie Mae will buy mortgages that lenders originate with only the 5% minimum down.
The average amount financed at Huntington is $105,000, Lacy says, and this is both refinanced mortgages and house purchases. At Farmers, the figure is $145,000,” Gerzina says. At Home Savings, the average runs between $145,000 and $150,000, Garmone says.
And at First National Bank, Delie says, “Our average loan amount is $160,000 for refinances and a bit less for purchases. More specifically, in Mahoning and Trumbull counties, our typical refinance is slightly over $200,000. Purchase prices average closer to $140,000.”
In such a low-interest rate environment, it’s not surprising there’s little demand for adjustable rate mortgages (ARMs) or bi-weekly mortgages or interest-only mortgages. The difference is small between rates on ARMs and fixed, the lenders pointed out. Only if someone knew his job was likely to take him elsewhere within five to seven years would it make sense to take one out, Gerzina says.
With the increase in volume, the mortgage staffs at area lenders needn’t worry about job security. Home Savings’ Garmone is devoting much of his time to reviewing applications of those seeking to prequalify for a mortgage before they approach a real estate agent as his staff processes mortgage applications. “My staff is so busy I’ve been doing all the prequalification work myself,” he relates.
At Farmers, Gerzina says his staff gives priority to those who want to purchase a house over processing refinancing applications.
“We’re back in growth mode here,” says Huntington’s Lacy. “You can feel the excitement in the housing market and people are encouraged that they’ll have jobs and can afford to buy a house.”
The lenders also cite the spillover effect the increased number of home purchases is having on the regional economy, from buying new carpet and curtains to repairing plumbing and electrical fixtures.
EDITOR'S NOTE: This story was published in the December edition of The Business Journal. CLICK HERE to subscribe.
Copyright 2012 The Business Journal, Youngstown, Ohio.