Community banks gained significant mortgage market share in the Bay State this year, even as the state’s top-10 lenders saw their numbers drop.
Based on dollar volume of residential loans closed, four Massachusetts-based banks and the state’s largest credit union rose to top-25 status in June 2008, data from Banker & Tradesman publisher The Warren Group shows.
That’s a ranking that just one – Eastern Bank – had achieved at the same time last year.
Salem Five, Eastern Bank, Digital Federal Credit Union, Rockland Trust Co. and Boston Private Bank have also grabbed nearly 4 percent of the statewide mortgage market share this year, compared to the 3 percent a slightly different top five community lenders had at the same time in 2007.
The numbers are still a far cry from the early 1990s, when banks originated well over half of mortgage loans nationwide. And they pale in comparison to the 36 per-cent overall market share the state’s top-10, mostly national, lenders achieved this year (up from 33 percent in the first half of 2007).
But local banks’ overall lending also went up – to $1.3 billion for the top-five in the first half of this year, compared with $1.2 billion last June.
The Bay State’s top-10 lenders, as a group, have seen loan production drop by more than $1 billion. In the first half of 2007, those lenders, including Bank of America, Countrywide, Wells Fargo and Citizens Bank, collectively made $12.7 billion in loans, compared to $11.5 billion so far this year.
The overall message is clear, said bank consultant Jim Jones, president of First Wellesley Consulting in Wellesley.
“We’re seeing a strong move by community banks and credit unions to move up the leader board,” he said. “That tells me two things: One, consumers are pursuing a flight to safety [in the wake of the subprime lending crisis], and two, these institutions have found ways to tap into that demand.”
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That couldn’t be more true at DCU which moved from 47th to 20th place, by dollar volume of loans closed, in the past year.
The 350,000-member Marlborough giant ($4.1 billion), introduced an unusual mortgage product last fall, a spokesman said.
“We offered a no-PMI [private mortgage insurance] loan,” said spokesman Tim Garner. The loans were offered to any borrower who could put between 10 percent and 20 percent down on a property.
Typically, lenders require borrowers with less than 20 percent to pay private mortgage insurance, which ensures that the lender will get repaid if the borrower defaults. But when DCU realized it hadn’t had more than one PMI claim in a dozen years, Garner said, it decided to experiment by offering loans without it.
“The promotion was so successful we had to end it earlier than expected,” in March, he said. DCU kept all its no-PMI loans in portfolio.
At Salem Five Mortgage Co., President Edward J. McDonald attributed its move up in the ranks to customers the bank gains through related business lines.
“We are the largest servicer of mortgage loans headquartered in New England,” he said, which means that in addition to the bank’s own customers getting regular mail from Salem Five, other lenders’ customers send their payments to the bank.
Several national lenders’ exit from the mortgage market in the past year also plays a role in local banks’ success, said Massachusetts Mortgage Bankers Association Executive Director Kevin Cuff.
“Look at how many of [last year’s leaders] are out of business now,” he pointed out.
In fact, at least nine of Massachusetts’ top-25 lenders in 2007 are now completely or partially out of the market – a direct or indirect result of subprime lending woes.
