July 25, 2019
Keeping Independent Mortgage Banks in the Game
The status of independent mortgage banks in the residential real estate sector is long-standing and revered. Since the 1870s—says The Mortgage Banking Association’s February report entitled “The Rising Role of the Independent Mortgage Bank: Benefits and Policy Implications”—these institutions have been vital to the spread westward of agricultural properties and, eventually, to the expansion of residential America. Independent mortgage banks are institutions that do not accept deposits from customers, but rather that use a certain amount of their own cash-on-hand (amounting to up to 5 percent of the total loan amount) and what are known as “warehouse lines” (under which they borrow money for a very short amount of time—on the order of one to three weeks—in order to underwrite the loan until it can be sold to an investor).
There are a number of benefits to this model of mortgage lending. For one thing, the report noted, while independent mortgage banks represented only 16 percent of all Home Mortgage Disclosure Act (HDMA) reporting in 2017, they were responsible for originating a full 54 percent of loans for family mortgages from one to four persons in size. (This is a full 25 percent more than they performed in 2008.) And it is generally acknowledged that, as mortgage banks diminish their offerings of loans and servicing to potential buyers, these independent mortgage banks step in to fill the vacuum, acting effectively as what we in the business refer to as a “counter-cyclical force” in the marketplace. Moreover, the average home loan amount initiated by independent mortgage banks in 2017 was $243,000—while large banks and other depositories (which are federally insured) saw their average loan amounts at $280,000—meaning that, where lower- and middle-income Americans are concerned, independent mortgage banks offer a greater share of opportunity to own a home.
Over the past decade, the regulation over these institutions of American real estate has increased, creating a deeper base of security for home-buyers and the market alike. Independent mortgage banks are in the game to stay—and our markets are at their strongest when the sources of funding are as diverse as possible.
Whether you secure a loan from a depository bank or from an independent mortgage bank, we at Topouzis & Associates, P.C. offer the services that ensure your title gets conveyed clear of defects—and we also supply purchasers with Owner’s Policies of title insurance, just in case. Contact us if you want your property transfer in Cranston, Rhode Island; Springfield, Massachusetts; or Miami, Florida to go through without a hitch—both before and after closing.