The times have certainly changed! Just a few short years ago no one would even have thought of applying online for a mortgage. A recent study by the American Bankers Association showed that 60% of real estate borrowers today prefer to apply in person for their mortgage instead of applying online. I’m not surprised that it’s 60%, I’m surprised that 40% of today’s borrowers would choose NOT to be face to face with their banker. That same survey revealed that 66% of today’s borrowers are not confident with their knowledge of the mortgage process. Could be a fairly strong correlation and the reason the borrower would want a ‘real’ person helping them.
CoreLogic recently showed that the value of home equity has doubled in the past five years. Most of that is not from borrowers paying down on the principle but in the added value of real estate. The value has gone from $6 trillion five years ago to $13 trillion this year. Not only that, but CoreLogic is predicting another $1 trillion additional being added to the equity side in this year alone! Now there is a wide variation depending on what part of the country you are in, but everyone has gained equity.
Are your property taxes too high? If you think so, you’re standing with some pretty high rollers. Walt Disney Parks (Magic Kingdom, Epcot and Hollywood Studios), along with SeaWorld, Universal Orlando, and other commercial property owners have filed over 100 lawsuits against the Orange County Appraiser Rick Singh. But believing that their properties assessments are exceeding fair market value and proving it in the Orange Circuit Court will be two different things!
The county assessor (Singh) valued Epcot at $446 million, Magic Kingdom at $437 million and Hollywood Studios at $339 million. There are other lawsuits for quite a few hotels that are not just owned by Disney, but by other corporations.
The New York district Federal Reserve came out with a very interesting report, household debt has hit a level that is above the peak level of 2008! Does this mean we’re in trouble? I don’t think so. Household debt level includes credit cards, consumer loans (such as autos), student loans and also real estate (or home loans).
Real Estate loans have dropped from a 2008 high of 73% to 68%, and with the tougher lending requirements since 2008, those real estate loans are in good position credit wise. The real difference in credit from 2008 is student loans and auto loans. Those categories are significantly higher.
Total delinquency for all loans was flat for the last quarter at 4.8%. This is the lowest since the recession. Student loans represent the highest delinquency rate at 11%. The growing household debt shows that most of those people who struggled through the ‘Great Recession’ have reestablished their credit and are borrowing again. That’s good!
The week after Comptroller of the Currency closed First NBC Bank of New Orleans another billion dollar plus bank was closed, Guaranty Bank of Milwaukee, Wisconsin.
Bad loans seemed to be the primary cause but Guaranty Bank also had an insane number of branches located in grocery stores. Out of 119 branches, 107 were located in grocery or similar retail outlets.
I have often discussed Efficiency Ratios (non-interest expense/net income) and how important it is for a bank’s profitability. A strong cost foundation is the most significant influence on sustained profitability. The best performing banks run around 52% efficiency ratios, while medium performing banks run around 75%. That’s a large difference and I bet Guaranty Bank with all of their overhead was running significantly higher.
One benefit of a community bank working with SAMCO is lowering a bank’s non-interest expense, thus improving their efficiency ratio. The lower the ratio the more profit a bank will generate. Call us if you would like to know more.