Idaho and Washington Feel the Pain
Montana Banks Remain Remote from National Crunch
By Robert Struckman, 5-06-08
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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.”
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Comments
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.
You are so right. Local banks and credit unions were not as linked into the mortgage selling business. But even my credit union, Missoula Federal CU, was selling loans. Last summer, a loan officer there told me that they had to start holding all of the mortgages they originated.
In addition, all you have to do is look at this list of the top 20 sources of Missoula mortgage loans in 2005 to see that MT has been very much affected by the credit crunch. http://www.allmortgagedetail.com/mortgages/missoula_mt_montana.asp?type=sp&yr=2005
New Century and American Home Mortgage have gone bust, and Countrywide, Wells Fargo, and everyone else are no longer making subprime and liar loans. Last summer, I spoke with a loan officer at Wells who told me that "almost all" of the mortgage loans they had been making were subprime, so this is not a negligible change, as the New West article suggests.
There is much, much more to the local mortgage and credit story than we're hearing from the Missoulian and TV news. And now that the MOR is advertising on the evening news, we will hear even less of it.
Too bad we don't have any decent papers and reporters here, like the Cleveland Plain Dealer. Take a look at this amazing exposee. http://blog.cleveland.com/metro/2008/05/the_subprime_house_of_cards.html
Sure, we're not like Cleveland and Las Vegas and Florida and San Diego and Seattle and Boston. But what ARE we like? How bad IS it? It's time to take a long, hard look.
I'm psyched you guys have commented here. You make some good points, and I have been, and will continue, to look hard at the housing markets in our region. I actually know of one Missoula family who took out a variable rate loan on a home purchase several years ago, and they're struggling and might lose their home. (I haven't had a recent update on their status, but a month ago it didn't look good.)
The fact remains (and perhaps I needed to make this point more forcefully in the story) that banks and credit unions in Montana have not gone out of business or otherwise been hammered by drastic losses.
The mortgage companies are a different critter. And yes the volume of real estate sales have gone down. Plus, the crunch is affecting Montana in other ways. Municipalities and state government as well as the guaranteed student loan program have had a hell of a time selling bonds to raise money for sidewalks, road construction and student loans. That's a serious effect of the housing crunch.
Yet Montana banks, and this is the point of the story, have not been screwed because they lack the money to make the transaction. It's true that Missoula Fed sold home loans -- to Streeter Brothers of Billings, for instance -- but the upticks in Montana foreclosures have not taken Glacier Bancorp (which owns First Security Bank and others) into bankruptcy or close to it. But I take your point about citing one small institution working in only a few small markets. I do get tired, on the other hand, of news that always focuses on the big names to the exclusion of the real bread-and-butter places out there.
Best,
Bob
I would be more sympathetic to your "cover the small institutions side of the story" approach if ANYONE was covering the overall real estate market in Missoula and Montana. The only real estate and credit market stories in the Missoulian are from the national wire services. Even the publication of the state of Missoula housing report didn't spur anyone to do any research beyond regurgitating the MOR press release and Missoulian insert.
Sure, cover local institutions. But couldn't you cover the local market, too?
--Kasey
Good point. And I should mention that we at NewWest.Net, and in the magazine (which I edit) we are doing our best to do that. We'll keep after it. Keep an eye out. If you haven't seen the magazine, check it out.
Anyway, thanks again for commenting.
Bob
I've just scrolled back through your stories, and I see that you have been covering the regional housing market better than anyone I know. I look forward to seeing more of your work, with more questioning of the realtors and other usual sources, and with more focus on Missoula and Montana. Hopefully that will spur the Missoulian and other MT papers to follow suit.
Thanks for taking the time to listen to my kvetch.
--Kasey
A look at the Bozeman market would be most welcome. Too bad we're a non-disclosure state, so you can't find if prices really are falling or not. Check out Realtor.com's market condition reports, one realtor is showing 16% mean price decline already.