Idaho and Washington Feel the Pain
Montana Banks Remain Remote from National Crunch
By Robert Stuckman, 5-06-08
Ask Tom Welch, president of Pioneer Federal Savings and Loan (offices in Dillon and Deer Lodge, Mont.) about his mortgage portfolio: “Great,” he says, “As good as it’s been. I can’t tell you the last time I’ve had a foreclosure.”
Even as risky national lending practices and the collapse of the housing bubble have pulled the national economy into recession, lenders in Montana remain largely unaffected by mortgage losses. Banks in the state haven’t been hurt much by the credit crunch, either, because few swing big leveraged financial deals, bankers say.
“Montana has some foreclosure hot spots,” said Helena branch president Paul Drake of the Federal Reserve Bank of Minneapolis. “But we haven’t seen the kind of issues like Arizona or Nevada, not even close to it.”
Check out state and county date from the Federal Reserve Bank here. Only Montana’s largest counties (by population) have data included.
Idaho and other smaller markets in the region have begun to feel the national pain. The Idaho Business Review ran a story last week on how the banking crisis has begun to hammer regional banks like Cascade Bancorp and WaMu, which “dismantled its entire mortgage loan office, (closed) numerous offices and (released) or (pulled) a number of loans officers.”
The main worries for Montana bankers, said Steve Turkiewicz of the Montana Bankers Association, include the overall economic health of the nation and the tenor of the housing talk.
“It’s more of a psychological thing. Most are probably more concerned with national stories than with their loans or with investors,” Turkiewicz said. “Most banks in Montana are fairly strict in their underwriting.”
Two years ago, state banking regulators noticed more aggressive lending practices by mortgage brokers in the state, and last year the Montana Legislature passed significant legislation with licensing and regulatory oversight provisions, Turkiewicz said.
Montana’s an old school state. (Maybe it’s not so much a case of moral strength as sheer stubbornness. Fads in the Big Sky State die hard.)
“We look at applications and make decisions if it makes sense for both of us,” said Welch of Pioneer Federal Savings and Loan. “That’s pretty much the same across the state. Some sell their loans, sure, but in general, in Montana, we know our customers. We’re good at what we do. Banking in Montana is solid.”
[End of article]Sounds like things might be all right in Deer Lodge and Dillon. But let's look at the larger Montana cities. Three problems there:
1) Loans held locally are mostly OK. But most banks sell off as many loans as they can. And these loans are probably 0-down and with other risky features. Thus the banks aren't at risk, but the communities are.
2) Ever hear of Countrywide? I check local records, and the number of foreclosures coming lately from Countrywide, Wells Fargo, CitiFinancial, and other nationwide lenders are just unreal. Many of these were subprime loans.
3) Local banks have been lending huge sums for spec homes and subdivisions. When builders start to get into trouble, guess who's on the hook?
Montana is not an island. Montana is not insulated from the national economy or recent lending frenzy. Those who think otherwise are in for a rude awakening.