NexTier, the holding company of NexTier Bank, will acquire Mars Bancorp, the holding company of Mars Bank. Terms of the deal were not disclosed.
The combined company and branch locations will operate under the NexTier Bank brand, both banks said in a release Thursday. With the acquisition, NexTier Bank will have total assets in excess of $2.6 billion.
Clem Rosenberger, NexTier’s president and CEO, will lead the combined institution. Meanwhile, Jim Dinoise, president and CEO of Mars, will join the NexTier Bank Board of Directors upon the consummation of the transaction.
“This merger ensures our customers will continue to receive access to the products, services, and technology they need while maintaining the relationship-driven, hands-on service they’ve come to expect,” Dionise said in a statement.
Mars Bank — an independent community bank in Pennsylvania — offers mortgage lending, retail and commercial banking in six locations throughout the state.
Mars Bank held $520.8 million in assets as of June 30, 2023.
In the mortgage lending business, Mars Bank offers 30-year fixed conventional, FHA loans, a medical professionals mortgage program, construction loans, home equity loans and Home Equity Line of Credits (HELOCs), according to its website.
Mars Bank posted an origination volume of $50.9 million across 234 loans in the past 12 months, according to the mortgage data platform Modex.
NexTier Bank has 27 branches in western and central Pennsylvania and had $2.1 billion in assets as of June 30, 2023.
In its mortgage division, the bank offers construction, purchase loans, home equity loans as well as HELOCs in addition to providing consumer loans, wealth management and merchant services.
NexTier Bank produced $50.6 million in origination across 205 loans over the past 12 months, Modex showed.
American Bank of Oklahoma has agreed to settle redlining charges brought by the Department of Justice and will make restitution by lending $1 million in Black and Hispanic neighborhoods in Tulsa.
Executives of the Collinsville, Oklahoma, bank denied wrongdoing. In a press release late Monday, they said they entered into the settlement “to avoid the cost and distraction of protracted litigation.”
Chief Executive Joe Landon criticized the DOJ for disclosing racially charged emails the government claims American Bank employees forwarded to each other, and for mentioning the 1921 Tulsa Race Massacre in its press release announcing the settlement, as well as in the complaint against American Bank.
Both consent order and complaint were filed Monday in U.S. District Court for the Northern District of Oklahoma in Tulsa.
According to the DOJ’s 24-page complaint, American Bank employees circulated emails that contained racial slurs, including use of the “N-word” in its entirety. Other emails exchanged among co-workers at the bank touched on sensitive topics like immigration, gang violence and the supposed decline of Detroit, Michigan.
But in an interview Monday, Landon said “the majority” of the emails DOJ referenced came from outside the bank “and I have no control over that.”
“I get 100 to 200 emails a day. I don’t read them all,” Landon added.
In a subsequent statement, American Bank claimed that “many of the quotes were taken from unsolicited communications forwarded or written by third parties, and others were taken out of context.”
“Any racially or ethnically insensitive sentiments included in these emails do not reflect our culture or values,” American Bank added in the statement.
The DOJ also noted some of the neighborhoods American Bank allegedly redlined were victimized in the 1921 Race Massacre, where white rioters destroyed the city’s largely African American Greenwood District, killing as many as 300 people, according to some accounts.
“Providing equal access to credit is essential in every community, but the painful history of Tulsa makes this agreement particularly poignant because the redlined areas include historically Black neighborhoods that have endured the legacy of racial violence and the continuing effects of segregation and discrimination,” Assistant Attorney General for Civil Rights Kristen Clarke said Monday in a press release.
The complaint is more explicit on this point, stating the “area that [American Bank] redlined includes the historically Black neighborhoods in Tulsa that were the site of the 1921 Tulsa Race Massacre.”
Landon, for his part, said he founded American Bank in 1998, nearly eight decades after the attack on Greenwood. He voiced his concern that mentioning the Race Massacre might dampen customer interest in the lending program American Bank has agreed to undertake in the settlement.
“We were kind of shocked that they brought that up,’ Landon said Tuesday in an interview. “We didn’t see the relevance. We’re moving into a new community. We’re going to do our best. I think we can be successful there. … I sure don’t see it as helping.”
Andrea Mitchell, American Bank’s attorney, called the DOJ’s references to the 1921 Race Massacre “politically charged and entirely irrelevant.”
“Seeking to link bank conduct to this event over 100 years ago entirely undermines the remedial purpose of a consent agreement, which is to create a framework for banks to develop trust with minority communities to be able to better serve those communities with mortgage credit and other banking services,” Mitchell, managing partner at the law firm Mitchell Sandler in Washington, said Tuesday in a statement.
A DOJ spokesperson declined to comment on its references to the 1921 Race Massacre.
The DOJ claimed the $383 million-asset American Bank steered clear of minority neighborhoods in the Tulsa metropolitan statistical area, confining its operations to majority white communities. “American Bank of Oklahoma engaged in the illegal practice of redlining and failed to serve the diverse members of our Tulsa community as they attempted to purchase homes,” Clinton Johnson, U.S. attorney for the Northern District of Oklahoma, said in DOJ’s press release.
The DOJ alleged that American Bank’s federal regulator, the Federal Deposit Insurance Corp., warned about fair-lending risk and recommended specific measures to address the issue. None of the recommendations were implemented and, as a result, American Bank made far fewer mortgage loans in Black and Hispanic neighborhoods compared with similarly situated lenders, according to the DOJ.
But Landon said American Bank’s business model has been to focus on small towns in eastern Oklahoma, rather than deliberately avoiding lending to mortgage borrowers in Tulsa’s minority neighborhoods. “I’m from a small community,” Landon said Tuesday. “I’ve always lived in a small community. I love small towns. That’s one of the reasons we chose where we are. It had nothing to do with race.”
With the mortgage industry still rightsizing, mortgage professionals are worried about regulation of the industry and inflation that thins already tiny margins. Industry players are largely pessimistic about the economic climate and expect interest rates to trend up in the near term future, according to the HousingWire Q2 2023 LenderPulse survey.
Roughly 30% of 155 respondents of the LenderPulse survey pointed to increased regulation, rising interest rates and inflation as the biggest challenge they face in the next three months, out of a total of 11 options that included lender stability, underwriting problems and competitiveness of product offerings.
About 19.4% of the surveyed mortgage professionals said loans falling through was the biggest challenge, ranking as the second most challenging factor. Lead generation ranked as the third biggest hurdle at 15.5% and staying motivated trailed at the fourth place at 14.2%.
Other challenges selected by mortgage professionals were relationships with real estate agents at 8.4%; competitiveness of rate sheet and underwriting problems at 5.8%; lender stability at 3.9%; competitiveness of product offerings at 1.9%. None of the surveyed mortgage professionals said staff cuts caused decreased ability to close loans and lack of training were the challenges they faced.
LenderPulse requests surveys from 24,000 mortgage professionals across the country on market trends and lender opportunities and challenges. Of the 155 completed surveys, 32.3% of the respondents were from the Southwest, 21.3% from the Midwest, 16.8% from the Northeast, and 14.8% of the respondents from the Northwest and Southeast. RealTrends LenderPulse is a forward-looking quarterly survey. The survey was conducted from February 27 to April 3.
Economic and Housing Market Outlook
Amid theFederal Reserve‘s efforts to tame inflation, 44.5% of surveyed mortgage professionals expressed pessimism about the economy in the next three months. Of the total, 36.1% were neutral and 19.4% were optimistic.
Mortgage professionals’ pessimism about the economy in the near term stemmed from expectations of interest rates trending higher.
About 47.1% of the respondents said rates will likely go up in the next three months, 30.1% of the survey participants said rates will remain flat while 22% said rates will trend down.
A total of 45% of participants said home sales in their markets will remain flat for the next three months; 30.3% said sales will go up more than 5%; and 25.2% expected sales to go down more than 5%
In the latest report from the National Association of Realtors (NAR), existing home sales rose 14.5% in February month over month for the first time after 12 months of decline.
Incentives in the Market
In a higher-rate environment, temporary rate buydowns funded by sellers, lenders or builders were widely offered as an incentive for buyers.
The majority of the 155 respondents – about 70% of the total – noted temporary rate buydowns funded by the seller, builder or lender are offered as incentives to buyers.
“Sellers are entertaining offers with rate buydowns and concessions to keep this market going but also to sell their property,” a loan originator in California said.
In a high-rate environment, lenders call the temporary rate buydown a win-win strategy for both sellers and buyers when used appropriately.
For example, a 2-1 buydown can be paid for by the homebuyer or the home seller can pay for it as a seller concession. That payment can be made in the form of mortgage points or a lump sum deposited in an escrow account with the lender and used to subsidize the borrower’s reduced monthly payments.
“As it pertains to buydowns and or seller funded buydowns, in my opinion and from my perspective I feel this product is really only viable and something that makes sense for a borrower if the buydown is seller or builder funded,” an operations manager based in California said. “It is essentially free money that would be credited back to the borrower should they pay the loan off within the buy down structure (1/0, 2/1, or 3/2/1).”
Seller credit for closing costs, price reductions waiving of fees, and adjustable-rate mortgages (ARMs) were also mentioned by mortgage professionals as incentives offered in the market.
“The 2/1 buydowns were working great, but now the market has tightened with a lack of supply of homes on the market, so a lot of the sellers quit offering this or accepting this,” a mortgage broker in Arizona said.
“Borrowers opt for ARMs more often than a fixed rate for a more competitive rate. Many are curious about buydowns but we are currently operating in what is still a seller’s market so not seeing many seller-funded buydowns,” a loan officer in Boston noted.
Pivot to a purchase mortgage market
In a purchase mortgage-focused market, getting referrals from real estate agents is key to landing business.
Keeping in contact with Realtors periodically, forming new relationships at open houses and setting up in-person meetings were how mortgage professionals strengthened relationships with realtors, according to the submitted written responses.
“Volunteering with our local Board of Realtors, on three (3) committees; Education, Banking & Finance and Membership Engagement. Looking to form relationships that I can turn into referrals down the road once they realize how organized I am, how smart I am and that I am a relationship lender in a local community bank!” a loan officer in Washington noted.
Sharing leads and sending out newsletters are ways loan officers try to get themselves to stand out in a highly competitive industry.
“Actively engaging with them, monthly lending newsletter, training opportunities [is how we strengthen relationships with Realtors],” an executive at a regional bank in Michigan said in a written response.
“Our goal is to strengthen our Realtor partners relative to their competitors. To do this, we’re holding skills and knowledge classes and meeting face to face to share best practices,” a loan officer located in Texas said.
If you have questions about LendingPulse email RealTrends Editorial Director Tracey Velt at [email protected]. Also, be sure to sign up for the new Data Digest newsletter, a weekly breakdown of news, tips and strategies for success.
Broker Pricing, Non-QM, Lead sourcing, Tech Products; STRATMOR on Employee Culture; The Fed and Rates
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Broker Pricing, Non-QM, Lead sourcing, Tech Products; STRATMOR on Employee Culture; The Fed and Rates
By: Rob Chrisman
7 Hours, 34 Min ago
For those attending the Western Secondary, remember, it never rains in Southern California. Except for now. Here’s one person who won’t be seeing So Cal any time soon, and dare I say, every honest person in our biz is happy when this happens. Daniela Rendon, 31, was a Miami real estate broker but was sentenced to three-and-a-half years in prison for stealing $381,000 in COVID relief funds, wire fraud, money laundering, and identity theft. Rendon probably won’t care too much about what the Federal Reserve does while she’s working in the laundry room or serving up oatmeal, but the Fed will probably restate, through Chairperson Powell speaking at the end of the week, its intent to keep interest rates high for an extended period to make sure inflation does not flare up again. In other legal and compliance news, Freedom Mortgage’s RESPA Consent Order with the CFPB is getting some attention from Mortgage Musings author and attorney Brian Levy. (Today’s podcast can be found here and this week’s is sponsored by PHH Mortgage. For over 30 years, PHH Mortgage has provided industry-leading mortgage services and helped countless homebuyers and homeowners find financing solutions to meet their needs. Hear an interview with Arrive Home’s Matt Pettit on down payment assistance programs and the push for more affordable housing.)
Lender and Broker Software and Services
If you’re in Dana Point for CMBA Western Secondary, you may be able to spot a blue whale lobtailing or a playful pod of dolphins on the water. But inside the Waldorf Astoria, there is ample opportunity for a type of spectating to help you run your business better. On Wednesday at 11 am PT, grab a seat for the engaging session, “How is Technology Providing Efficiencies in the Secondary Market.” Jay Arneja of SimpleNexus, an nCino company, will be weighing in on a wide range of technology options that can make your firm nimbler during a time of market volatility. If you can’t make the show, check out this blog on how different types of eClosings can save you $160-$440 per loan.
Nationwide Appraisal Network (NAN) is thrilled to announce that it has made the 2023 Inc. 5000 list of fastest-growing private companies in America for the fifth time. This accomplishment is a testament to its sustained commitment to excellence and growth. The Inc. 5000 recognition underscores NAN’s dedication to providing top-notch appraisal services and fostering innovation in the industry. Through its unwavering commitment to client satisfaction and technological advancement, the company is proud to have achieved this milestone for three consecutive years, demonstrating resilience and adaptability in a dynamic market landscape. “We are honored to once again be recognized on the Inc. 5000 list as we continue to grow at an extraordinary pace, even after 19 years in business. This achievement reflects the hard work of our team, and their commitment to deliver concierge-level service for our valued clients on every order” said Steve Sussman, Chief Business Development Officer.
It’s been an impressive year for Flagstar Bank, a business that now has nearly $119 billion in assets, thanks to the merger with New York Community Bank and acquisition of certain lines of business from Signature Bank. Flagstar continues to expand their products and services for their customers, further highlighting that their commitment to the mortgage space is just as strong as it has been for the last 35 years. The newest addition to the Flagstar mortgage family is the Specialized Mortgage Banking Solutions (SMBS) group. This team of seasoned financial professionals focuses on deposit gathering and customized treasury management services and products for all types of businesses connected to mortgage loans. Structured Cash Management Services from SMBS is designed to simplify and streamline operational costs and improve your cash position. At Western Secondary this week? Be sure to connect with a Flagstar team member to learn how their many offerings can help your business thrive in today’s market.
Free report: These growing borrower segments present opportunities for new business in 2023’s market. Wondering how to fill your pipeline when loan volume is scarce? New data from Maxwell gives lenders an exclusive look into home buyer groups taking on higher rates head-on. Did you know, for instance, that the share of 18 to 24-year-old borrowers has increased by 18 percent year-over-year? Now is the time to cater to these rising home buyers. For exclusive data and actionable takeaways, click here to download Maxwell’s Q2 Mortgage Lending Report.
Take Advantage of LoanStream’s Summer Specials to help you Grow that Pipeline! NON-QM Special for Purchase, Refinance & Cash-Out Programs. 50 BPS Price Improvement on all 740+ FICO Non-QM Programs (Special may not be combined with Select Non-QM Programs). Only Non-QM Special available for Correspondent. Prime Special: 35 BPS Price Improvement on Government Purchase Loans, 35 BPS Price Improvement on Government and Conventional High-Balance Purchase, Refinance and Cash-Out Loans (Specials are not available for use with DPA loans and cannot be combined together or with Select Loan Promotions. Restrictions apply. For loans locked 8/1/2023 through 8/31/2023. Visit LoanStream for more information or speak with your Account Executive.
“In this market, hustle is everything. You can’t afford to waste a single dealor a single minute. That’s why ReadyPrice has launched its innovating new Shop, Lock, & Deliver loan exchange platform, designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders and all on a single platform, at no cost to brokers. It’s the industry’s most powerful universal delivery portal, and it’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check us out today.”
STRATMOR on Employee Culture
Have you visited a Chick fil A restaurant lately? When the employes say, “It’s my pleasure,” and not just “you’re welcome,” you believe them. They seem genuinely happy to serve their customers, and their happiness makes their customers smile. Maybe the mortgage industry can learn something from this fast-food giant’s approach to employee engagement. In his August Customer Experience Tip, STRATMOR Group’s MortgageCX Director Mike Seminari addresses how lenders can build a vibrant, positive employee culture that begets a world-class customer experience. He suggests three steps lenders can take to foster an employee-prized culture that can’t help but make for a better customer experience. Check out the new Customer Experience Tip, “Happy Employees, Happy Customers: A Page From a Fast-Food Giant’s Playbook.”
Capital Markets
Stocks and bonds both fell last week as healthy economic data drove the narrative that the Federal Reserve will keep interest rates higher for longer, though prices stabilized on Friday. After settling Thursday at its highest level since November 2007, the benchmark 10-year U.S. Treasury yield fell back below 4.3 percent but still logged its fifth straight week of higher rates, once again proving that rate predictions should be taken with a grain of salt.
The steady rise in yields is making investors nervous because past surges have at times proved destabilizing for markets. With the 10-year yield still well below the level of short-term rates set by the Fed, some analysts see room for the benchmark rate to keep climbing. Bond yields continued to rise across the board, extending an upswing that began nearly three months ago at the beginning of the summer. The latest FOMC minutes, which stressed that additional interest rate hikes might be needed, nudged rates even higher. Investors are still sizing up how rising yields compare with stock valuations, but the immediate consequences might be more apparent in the housing market. LOs everywhere know that 30-year fixed-rate mortgages solidly topped 7 percent on the latest developments, marking the highest level seen in more than 20 years.
Fed Chair Powell speaks at the end of the week, and is expected to highlight some of the progress made in combating inflation but stay on script with his most recent commentary about the need to stay vigilant. Some think Powell leaves enough of a hawkish edge that the door remains open to more rate hikes. Certainly, he is likely to reiterate the Fed’s commitment to its 2 percent inflation target and to push back (implicitly or explicitly) against the degree of rate hikes that markets are pricing for next year.
As the Federal Reserve looks to restore its dual mandate of price stability and maximum employment, originators are looking at long-term mortgage rates in the U.S. reached a two-decade high. The 30-year fixed mortgage rate hit 7.09 percent, a level not seen since April 2002, crimping both sales and refinancing activity. Back then, the average U.S. home price was roughly $187,000 versus $416,000 today. Despite elevated mortgage rates, there is activity amongst potential home buyers, especially in the new home market where builders have been offering seller concessions, rate incentives, and price cuts to move inventory. New home building permits increased in July to a 930,000-unit annual pace.
And our market has taken note of troubling data out of China. This adds to the hawkish rhetoric from Federal Reserve officials and has investors rethinking the economic landscape which led to last week’s Treasury rout. That rout pushed 10-year yields close to their highest point since 2007. It has also spurred a debate over why the bond market has turned dangerous. Economic activity continues to expand and has led many analysts to shift their outlooks regarding possible contraction. However, monetary policy lags (e.g., the time it takes before central bank tightening fully works through the economy) are longer now. The reasons include fewer variable rates on U.S. debt relative to a few years ago, businesses’ reluctance to let go of workers after the pandemic shortages, and the Fed’s large balance sheet that currently contains over $8 trillion in assets.
If Fed officials think interest-rate hikes are going to impact the economy sooner than in actuality, that means the Fed is very likely to keep rates too high for too long, raising the risk of a larger-than-expected decline in growth, and eventually, inflation. Pricing in futures markets now implies that the first Fed Funds rate easing won’t come until the Spring of 2024. The minutes from the Fed’s July meeting echoed those sentiments as well as noted that upside risks to inflation remain which would necessitate further tightening. For now, the message may be as important as any action as interest rate markets resign themselves to adjust to a higher for longer mindset.
After last week closed with a rally in bond markets due to China debt and financing concerns, this week brings the Kansas City Fed’s Jackson Hole Economic Symposium over Thursday to Saturday, with Fed Chair Powell scheduled to speak on Friday. Economic data releases are mostly second tier including regional Fed surveys, housing data, durable goods orders, S&P Global PMIs, and Michigan sentiment. Supply consists of the usual T-bills, as well as $16 billion 20-year bonds, $24 billion reopened 2-year FRNs, and $8 billion reopened 30-year TIPS. With no economic releases of note scheduled today, we begin the week with Agency MBS prices worse .125-.250 and the 10-year yielding 4.29 after closing last week at 4.25 percent.
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Meadows Bank is pleased to announce that Chris Swendseid has accepted the position of Chief Executive Officer (CEO). Chris has been with the Bank as Chief Financial Officer (CFO) since its founding in 2008. Chris takes over as Chief Executive Officer upon the retirement of Arvind Menon earlier this year.
“Chris has been a critical co-captain for years, involved in every aspect of the Bank’s successful navigation,” said William J. Bullard, Chairman of the Board. “Chris has been an incredible manager of Bank assets, liquidity and risk assessment. We are fortunate to have him continue as a leader and fiduciary to all of our investors, clients and employees.”
Chris began his banking career in Reno serving in various roles within the investment, accounting and finance areas. He relocated to the Las Vegas valley in 1999 to serve as the CFO of a start-up community bank. And then joined the Meadows Bank-in-organization team in 2007.
Julie Brutch has been promoted to Chief Lending Officer (CLO) from her previous position of Executive Vice President/Senior Lending Officer. Julie joined Meadows Bank in 2008, after working at several other financial institutions. She graduated from UNLV in 1989 with a Bachelor of Science in Business Administration with a concentration in Finance, as well as graduating from Pacific Coast Banking School in 2010. Julie has lived in Las Vegas since 1981.
“We are pleased to have Julie take on this new role within the bank,” said Chris. “We are fortunate to have a senior banking professional with her skill set and experience to strengthen and lead our lending efforts.”
Diane York has been promoted and will serve as the Bank’s Chief Financial Officer. Diane has been with the Bank since June 2019 in the role of Controller. Diane’s previous experience includes Senior Accounting Manager with Smile Brands, Inc. and with Gaikai (PlayStation) as well as Audit Supervisor with Hein & Associates and RSM McGladrey.
Chris said, “Diane’s experience and financial diligence has served her well to take on this role. Her reputation for execution and achieving results makes her the right choice to lead our finance and operations teams.”
About Meadows Bank Meadows Bank is a full-service community bank committed to valued partnerships with our clients. Our relationship-based approach to banking focuses on making decisions locally, close to our clients. The bank offers a full suite of lending and deposit products and services. Meadows Bank was founded in 2008 in Las Vegas, Nevada and currently has branches in Las Vegas, NV; Henderson, NV; Reno, NV; Pahrump, NV and Phoenix, AZ. For more information on the bank and its products and services please visit our website at www.meadowsbank.bank.
Media Contact: Jennifer Hall [email protected] (702) 471-2004
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Well that didn’t take long. Only about six months after we bid adieu to 3% down mortgages, they have resurfaced.
But this time things are a little different. Though Fannie Mae and Freddie Mac still don’t accept mortgages with less than five percent down, some individual lenders have loosened up guidelines in an effort to increase business.
It’s no secret that loan origination volume is well below levels seen last year, and perhaps the best way to boost sales is to make it easier to qualify for a mortgage.
One area that has been particularly troublesome for prospective buyers is coming up with a large enough down payment. In fact, most renters have no other choice than a 3.5% down FHA loan.
Get a 3% Down Mortgage with No PMI
On Friday, TD Bank reportedly began offering mortgages with down payments as small as three percent to certain low- and moderate-income borrowers via its Right Step program, per the WSJ.
The program is reserved for borrowers who earn up to 80% of the median area income as determined by HUD, the parent of the FHA.
While not everyone can qualify for such financing, it does represent a loosening from the original five percent down payment required a year ago.
The loan program doesn’t require private mortgage insurance either, and the down payment can come in the form of a gift from family or a non-profit.
However, the interest rate on such loans will likely be higher to compensate for the increased risk and lack of PMI, though it could still be cheaper than FHA financing.
I took a look at TD Bank’s mortgage rates on their website and they seemed to be in line with typical market rates – not significantly higher or lower than the competition.
Because Fannie and Freddie haven’t changed their stance, TD Bank will likely keep the loans on their own books and assume the risk of default.
This represents a shift from the originate-to-distribute model that has been widely relied upon before and after the most recent mortgage crisis.
The WSJ noted that the Arlington Community Federal Credit Union in Virginia would also begin making 3% down mortgages starting next month, down from a previous minimum of five percent.
They will accept loan amounts up to $417,000, the conforming loan limit.
Another community bank based in New Jersey, Valley National Bank, lowered their down payment requirement to five percent from 25% for certain buyers on the East Coast.
Wells Fargo Also Offers Quasi-3% Down Mortgages Now
Even the nation’s top lender is in on the 3% down game, kind of. Though Wells Fargo requires a five percent minimum down payment for primary residential purchases, they now allow up to two percent of that to come in the form of a gift from relatives.
So in a sense it’s a 3% down mortgage as long as the borrower can secure that two percent from an allowable source.
While it sounds like loose lending has returned, Wells apparently has strict underwriting requirements for such loans, including high minimum credit scores and so on.
In other words, we haven’t jumped in the DeLorean, punched it to 88 mph and traveled back to 2006.
Sure, there are some lenders offering FHA loans with credit scores as low as 550, but most are still relatively cautious, especially with the ATR and QM rules in effect.
And I’ve yet to come across any lenders offering 100% financing on 4-unit, non-owner occupied properties with sub-620 credit scores. When that happens run, or rather, sell!
Fraud attempts on mortgage payoffs increased by five times in the second quarter versus the prior three months, and based on July’s data, that elevated pace is still ongoing, CertifID found.
Among the causes is the disruption in the banking industry caused by three high profile failures earlier this year, which resulted in shifts in deposit relationships.
The change opened the door for the fraudsters, explained Thomas Cronkright, the co-founder and executive chairman at CertifID.
The fraud prevention company unveiled its PayoffProtect verification product last September. In the second quarter, PayoffProtect caught $12 million of fraudulent payoffs, up from just $1.9 million in the first quarter.
The crisis at Silicon Valley Bank, the first high profile failure, happened on March 10. That started a chain of events where depositors pulled money from similarly situated depositories, which later also resulted in the closures of Signature Bank and First Republic Bank.
And within that transfer of liquid assets is where the fraudsters are able to find an opening. They pretend to be the entity receiving the payoff and contact the party responsible for moving the funds, saying they had previously been using a community bank.
The perpetrators claimed that they instead had established a new relationship with another bank and the funds needed to be sent to accounts there that they controlled. “There was a ton of that going on during this period that we reported against,” Cronkright said.
And because this was tied to an ongoing news story, victims had their guard down.
Higher home values are playing into the opportunity. “The title settlement industry handles a lot of payments where the buyer is receiving a substantial net proceeds amount, but it pales in comparison to the mortgage obligations that are satisfied at closing,” Cronkright said. And at the end of the first quarter, total mortgage debt outstanding was over $12 trillion.
It is not just the old line attributed to Willie Sutton about robbing banks because it’s where the money is, but another adage as well, which is that these fraudsters never retire a successful scam, Cronkright said.
It’s easy for the criminal to impersonate the borrower and obtain loan payoff information. And on the other end, institutions need to be more diligent in verifying where the funds are being transferred to. In one case, CertifID had the fraudulent information and used it to test a financial institution and four times a bank employee said the data was correct, Cronkright said.
Once they find success, the crooks are able to “layer in” and set up multiple transactions where they attempt to divert funds, he continued.
And this is just another flavor of the same business email compromise scams, which have plagued all sorts of commerce in recent years. Later, when they have indications that the transaction is progressing, a fraudster is able to imitate the borrower or another legitimate party.
Real estate related complaints reported to the Federal Bureau of Investigation about business email compromise schemes resulted in a record amount of dollar losses, $446.1 million, and the second-most ever number of incidents, 2,284, during 2022. And mortgage fraud experts agree that those totals are likely understatements of the size of the problem.
Mortgage payoffs represented 24% of cases and 47% of losses reported to CertifID’s fraud recovery services last year. Its State of Wire Fraud report found $1.4 billion or over 340,000 suspect wire transactions during 2022.
Another reason for the uptick is that fraud prevention firms have developed better detection tools, so more incidents are being reported, Cronkright said.
He has a second point of view on this, as Cronkright is also an owner of Sun Title Agency, where he has to manage against this very risk.
“You’re managing it on a transaction-by-transaction basis, and we have seen the movement across the financial markets and deposit accounts,” Cronkright said.
The upheaval in banking has people in that business asking, “Are we done yet? And we’re good for now or are we going to continue to see a lot of that depository movement?” he asked rhetorically.
Flagstar Bank revealed the fintech graduates of its latest MortgageTech Accelerator program, which is designed to assist startups whose work aims at driving innovation in home lending technology.
Hailing from the East and West Coasts, the four companies going through the accelerator specialize in processes related to facilitating the renter-to-homeownership pipeline, audit review and compliance, renovation lending and income verification.
The latest class includes two New York-based firms: Housetable, who offers tools to help issue equity-backed second liens for renovations; and Landis, whose platform provides a rent-to-own model to assist aspiring buyers achieve homeownership.
Also among the latest group is Certo/ai, an artificial-intelligence powered data-review system used across lending operations, including underwriting, audit and compliance, with offices in Washington, D.C.; and Greenline, a San Francisco startup similarly employing AI with income verification tools to streamline lending to self-employed borrowers and small-business owners.
Through the program, Flagstar allows the chosen fintechs to test their models and software in situations involving existing banking clients and loan portfolios, while providing potential opportunities to continue the relationship with the lender post graduation.
“Thanks to the collaboration of Flagstar’s leadership team, we were able to apply our data and automated technology to real-world cases Flagstar experiences today,” said Gene Swanzey, co-founder of Certo/ai.
The latest round of participants represents the fourth accelerator class supported by Flagstar and the first since its merger with New York Community Bank was approved late last year. With its headquarters now in Hicksville, New York, company officials retained the Flagstar name and pledged to continue offering the tech accelerator program.
“The mortgage accelerator has been tremendously successful for Flagstar, helping us stay at the forefront of innovations in the mortgage industry and deliver a better experience to our customers,” said Lee Smith, president of mortgage for Flagstar, in a press release. “It’s a win-win all around,” he said.
The bank offers graduates one-on-one access to senior leaders on Flagstar’s mortgage team, along with other mentorship, networking and coaching opportunities. Flagstar also advises each company on topics concerning technology integration, pricing strategy and product roadmaps.
“Through hands-on experience, we were able to enhance our suite of products and gain insights into the dynamics of a leading mortgage originator and large-scale bank, all of which helped us better tailor our services as a strategic vendor,” said Housetable Co-Founder and CEO David Benizri.
While several financial institutions, including Barclay’s, BMO Financial Group and Bank of America, offer similar tech programs to support new startups, Flagstar’s accelerator is the only one geared specifically toward serving home lending and adjacent segments.
The unveiling of the latest fintechs to emerge from the accelerator coincides with a recent merger announcement coming from two alums of the program. Stavvy, who completed the program in 2020, reached a deal to acquire servicing startup Brace, one of the inaugural 2019 participants. The acquisition is expected to bolster Stavvy’s servicing capabilities alongside its existing technology-based lending and closing solutions.
Flagstar expects to launch its fifth accelerator program in early 2024, it said. In reviewing fintech applicants, the bank looks for innovators working in all facets of the mortgage industry, from origination and servicing to compliance and secondary markets, while considering their strategies in addressing goals spelled out in the Community Reinvestment Act. Flagstar measures progress of startups’ product development, their potential for growth and likely CRA impact in making its selections.
TPO Programs, Broker Locking, New Media Company, CRM Products; Investor News; Capital Markets
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TPO Programs, Broker Locking, New Media Company, CRM Products; Investor News; Capital Markets
By: Rob Chrisman
13 Min, 13 Secs ago
Planet Home’s Michael B. reminds me, “I miss every shot I don’t take.” The topics here in Orlando at the FAMP convention include not only prospecting, prospecting, and… prospecting, but also not missing a shot by offering clients more than a couple products. Freddie, Fannie, FHA, and VA are fine, but every client and referral source is precious, and what happens if someone walks through the door and needs a loan for a renovation (remodel), or a condotel, or a non-warrantable condo, or qualifies for a bond program, or… the list goes on. In the category of leads, have you looked into any local real estate investment clubs as a source of business? What about going after leads from divorce attorneys or local hard money lenders? Persistence! Another big topic at the FAMP conference is saving money, and STRATMOR’s current blog is titled, “Improving Revenue Might Be Right Under Your Nose.” (Today’s podcast can be found here and is sponsored by Candor. Candor’s patented automated underwriting decision engine, CogniTech, is a state-of-the-art, 100 percent machine platform that can handle infinite loan scenarios. Listen to an interview with Ally Home’s Glenn Brunker on the homebuyer affordability issue and potential ways to alleviate it.)
Lender and Broker Software, Products, and Services
School is back in session for the majority of America’s youth. But just because you are an adult doesn’t mean you should pass up on opportunities to polish your professional skillset. Surefire℠, Black Knight’s CRM and Mortgage Marketing Engine, has created Mortgage Marketing University (MMU) with free 101, 201 and 301-level courses designed to help brokers, LOs, LOAs and your marketing team get up to speed on best mortgage marketing practices and stay on top of their game. The MMU companion eBook is an ideal resource for your team to keep at its fingertips. Download the MMU eBook today.
Debuting Rebel Chics Media! “We understand the needs of the real estate industry and are here to help you engage, “edutain” and inspire homebuyers with branded social content. Our agency-quality subscription content, along with writing prompts, allows you to address the questions and concerns of potential homeowners. This content is ideal for LOs, banks, credit unions, and Realtors looking to build a strong social brand. Benefit from 50+ years of combined industry experience of our founders, Jillian Sorensen & Dana Trajcevski. Move beyond generic posts like Spring Cleaning tips and Pumpkin Pie recipes, and instead, unlock the power of storytelling. Now is the perfect time to build your brand, and Rebel Chics Media is here to support you. We understand that you’re busy and don’t have the time, energy, or tools to create content yourself. Leave that to us and focus on growing your brand and connecting with your audience.”
Brokers can now shop, lock, and deliver on one platform that seamlessly connects brokers, lenders, and originators. In this market, hustle is everything. You can’t afford to waste a single deal… or a single minute. That’s why ReadyPrice has launched its innovative new Shop, Lock & Deliver loan exchange platform, designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders, and all on a single platform, at no cost to brokers. It’s the industry’s most powerful universal delivery portal, and it’s already helping thousands of brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Come check ReadyPrice out today.
TPO Programs for Brokers and Correspondents
Profitable mortgage companies are focused on the long-term value of the customer relationship. Essex Mortgage’s partners enjoy greater customer retention, GNMA pass-thru pricing, no overlays, no LLPAs, NO EPOs, and NO EPDs. They also receive Tax Deferred asset growth and a long-term cash flow stream without having to be a GNMA issuer themselves. Please contact us to discuss how the Essex GNMA Excess MSR program can help retain and enhance your customer relationship, broaden guidelines, and expand into new markets. Please contact Kimberly Schenck.
Push strongly through the summer buying season with Luxury Mortgage Corp. (“LMC”). LMC is offering a 100-bps price special for newly locked Full and Alt Doc (Bank Statement, 1099 Only, Asset Qualifier) purchase loans until August 31st. LMC’s elite team isn’t stopping there; they are also offering a 50-bps pricing improvement on DSCR purchase loans! Click here for full details of the specials. Are you, not an approved broker? It’s time to align with true partners who will be here for you and execute at the highest levels. Take your business to sustainable new heights with the elite team. Click here to become an approved wholesale broker.
Investor and Agency News
Ginnie Mae launched a New Environmental, Social, and Governance (ESG) Composite and Webpage, view the Press Release.
USDA Rural Development issued Updated HB-1-3555, Chapter 3, Lender Approval bulletin on 07/24/2023.
On 7/26/2023, with Amendment No. 6 to DR-4720, FEMA declared federal disaster aid with individual assistance made available to Vermont’s Orleans County affected by severe storms, flooding, landslides, & mudslides from 7/7/2023 and continuing. See AmeriHome Mortgage Disaster Announcement 20230706-CL for inspection requirements.
AmeriHome Correspondent 20230702-CL Disaster Announcement. On 7/14/2023, with DR-4720, FEMA declared federal disaster aid with individual assistance has been made available to 6 Vermont Counties; Chittenden, Lamoille, Rutland, Washington, Windham and Windsor affected by severe flooding from 7/7/2023, and continuing. See the attached announcement for inspection requirements.
PHH Mortgage had a Disaster Alert for Vermont and California. “The following disaster declaration is being issued or modified today pertaining to: Vermont DR-4720: New Disaster declared 07/14/23, and California DR-4699: Update to End Date of Occurrence.
Citi Correspondent Lending Bulletin 2023-06 includes credit policy updates on mortgage assumptions, public assistance & Section 8 income, and unplanned buydowns. Mandated screening – submitting non-obligated party detail notification, and clarifications on restricted stock & non-vested stock, and Chinese assets.
Collectively, average older homeowners sit on over $9 trillion in equity and have an average retirement savings is less than $60,000. But through a reverse mortgage, senior homeowners can maximize their financial stability by unlocking the accumulated equity without selling their property, allowing them to access the increased value of their homes and provide a financial cushion in a rising housing market. The time is now to build your reverse mortgage business with Plaza Home Mortgage®. We have the programs, including FHA HECM. Plus, we offer training and dedicated reverse mortgage staff to get you rolling into this right. Email [email protected] to get in touch or submit your details for a full reverse pre-qual.
In Pennymac announcement-23-49, the go-live date of Extended Lock Commitments was revised to “TBD,” and the updated schedule will be communicated through a future announcement.
American Heritage Lending Wholesale offers DSCR No Doc Loans including Non-Warrantable Condos.
On June 27, 2023, FHA published ML-2023-13 announcing that it is adopting the Fannie Mae/Freddie Mac Form 1103, Supplemental Consumer Information Form (SCIF) for mortgage applications dated on or after August 28, 2023. See AmeriHome Mortgage Product Announcement 20230705-CL.
Fairway Wholesale Lending Client Announcement 2022-07-27 issued a reminder about its new Admin Fee schedule that went into effect for all applications dated on or after 7/26. They will work through a transition period with the Admin Fee as this change becomes effective with applications taken & loans disclosed on & after Wednesday, 7/26. Fairway will begin using the new fee schedule for all loans we issue initial disclosures effective Wednesday, 7/26.
Capital Markets
Call it whatever you want, or believe whatever you want, in the rating agency Fitch’s downgrade of U.S. Treasury debt, one of things highlighted was the Jan. 6 insurrection. Once again, a reminder that politics, interest rates, and mortgage banking are intertwined. But overall, despite the increased hikes by the Federal Reserve, for the most part the U.S. economy continues to chug along.
Today we saw the “first Friday of the month” jobs situation figures. But it seems that the unemployment rate is not a leading economic indicator. Looking back at changes in U.S. unemployment rate data since 1953, a period including 10 recessions, on average the unemployment rate has not noticeably changed during the 12 months leading up to a recession. Dr. Elliot Eisenberg, Ph.D. points out that, “But once the recession begins, the unemployment rate slowly rises and peaks 12 months later at a level three percentage points higher than when the recession began.”
Yesterday began with the Bank of England raising UK rates to a 15-year high, though investors domestically continued to react to the U.S. credit downgrade by Fitch Ratings, which led to another “bear steepener” in the bond markets. “Risk-off” themes were present, and Wednesday’s route in U.S. Treasuries spilled over into yesterday’s session. The 10-year yield rose to a 9-month high as market participants took a closer look at rising debt-service levels.
The downgrade of U.S. government debt to AA+ from AAA by Fitch on Tuesday won’t affect the U.S. economy much and puts the Fitch rating at the same level as S&P, which made the downgrade in 2011. A couple other reasons not to worry include debt ratings mattering much more for emerging economies, most bond traders will keep buying U.S. debt at the same level, and the Fed can essentially set the interest rates on U.S. debt, anyway.
On the data front, weekly jobless claims increased by 6k to 227k while the ISM Non-Manufacturing Index and the Manufacturing PMI report showed a deceleration in growth consistent with reports from other major economies. Services sector activity continued to expand in July, but at a slower pace than the prior month. Even so, the report said that the majority of respondents remain cautiously optimistic about business conditions and the economy. Finally, productivity increased 3.7 percent in the second quarter, well above 1.7 percent expectations, with output up 2.4 percent and hours worked down 1.3 percent. Unit labor costs, meanwhile, were up 1.6 percent, lower than expected and which reflected a 5.5 percent increase in hourly compensation and a 3.7 percent increase in productivity. The pickup in productivity and the deceleration in unit labor costs is a good combination for the soft-landing view. After one of the better-than-expected releases this week was the ADP report which reported 324k in private jobs creation versus 189k expected, risks for an upside surprise in nonfarm payrolls were raised.
As for that BLS report, nonfarm payrolls increased 187k versus 200k expectations and back months were revised down 49k jobs. The unemployment rate dropped to 3.5 percent, and average earnings are still solid versus 0.3 percent month-over-month and 4.2 percent year-over-year expectations. After any knee jerk reaction, the Treasury market will begin setting up for next week’s $103 billion Quarterly Refunding beginning Tuesday with $42 billion 3-year notes followed on Wednesday and Thursday by $38 billion 10-year notes and $23 billion 30-year bonds. Both 3-years and 30-years were increased by $2 billion and 10-years by $3 billion versus the prior Quarterly Refunding. We begin the day with Agency MBS prices unchanged from Thursday, the 10-year yielding 4.19 after closing yesterday at 4.19 percent, and the 2-year up to 4.89.
Jobs and Transitions
William “Bill” Sohan, an industry veteran and former Senior Vice President with Academy Mortgage, has joined employee-owned USA Mortgage as a regional Vice President. Sohan will oversee USA’s Maryland operations and work to expand its national footprint. “I found USA’s loan-officer-first mentality, freedom for their regional leaders, and transparent work environment very attractive,” he said. “I am in business for myself, but not by myself. It’s a huge advantage that USA is run by former high-producing loan officers who understand the needs of their salespeople. I’m excited to give my sales team access to some great new resources, while still maintaining their access to Fannie and Freddie direct and dozens of loan programs.” Founded in St. Louis in 2001, USA has offices in 34 states and is licensed in 49 states plus the District of Columbia. For a confidential conversation about joining USA, contact Brooke Anderson at 609-500-1520.
Presidential Bank Mortgage is expanding into the Southeast! John Pruitt, former Director of Fidelity Bank Mortgage in Atlanta, has joined the senior management team of the Bethesda, Maryland-based Community Bank as SVP of Production and Strategic Initiatives. “I’m so excited to join Presidential at this opportune time in the industry to help grow a best-in-class mortgage lending platform,” Pruitt said. “The combination of a solid Community Bank and entrepreneurial mortgage lending model is truly unique in our industry.” Expansion plans are underway to open full-service lending markets in Georgia and the Carolinas. Leadership, Sales, and Operations positions are available throughout the region. Please send your confidential inquiry to John Pruitt.
Academy Mortgage is proud to be among the small number of lenders who have been selected to offer the Freddie Mac BorrowSmart Access℠ program. This equitable housing program allows qualified first-time homebuyers looking to purchase a home within one of 10 eligible metropolitan markets to obtain a credit for their down payment and/or closing costs through combined contributions from Freddie Mac and Academy Mortgage. Through this assistance, borrowers can fund 100 percent of the cash required to close; prepare for long-term sustainability through homeownership; and receive pre-purchase homebuyer counseling through the Freddie Mac BorrowSmart Access program. Academy is proud to support this initiative to bring equitable housing opportunities to traditionally underserved communities. Academy is committed to fulfilling its Vision to Inspire Hope, Deliver Dreams, and Build Prosperity in all communities by helping its clients build generational prosperity through homeownership. Join a team with the loan products and the Vision to advance housing for underserved communities: contact Scott Starr to explore the possibilities that await at Academy.
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The Jefferson Avenue commercial district in Buffalo, New York, is anchored by a supermarket.
There are dozens of other businesses and services along the 12-block corridor — a couple of bank branches, a library, a coffee shop, gas stations, a small plaza with a dollar store and a primary care clinic and a business incubator for entrepreneurs of color.
But Tops Friendly Markets, the only grocery store on Buffalo’s vast East Side, is the center of activity. More than just a place to buy food, pick up medications and use an ATM, the store is a communal gathering space in a predominantly Black neighborhood that, for generations, has been segregated, isolated and disenfranchised from the wealthier — and whiter — parts of the city.
Which explains how it came to be the site of a mass shooting on a spring day in May of last year. On that Saturday, a gunman, who lived 200 miles away in another part of the state, drove to Jefferson Avenue and went into Tops, and in just a few minutes killed 10 people, injured three and inflicted mass trauma across the community.
It is a scenario that has sadly, and repeatedly, played out in other parts of the country that have experienced mass shootings. But this one came with a twist: The gunman’s intention was to kill as many Black people as possible.
To achieve that, he specifically targeted a ZIP code with one of the highest percentages of Black residents in New York state. All 10 who died that day were Black.
“The mere fact that someone can research, ‘Where will the greatest number of Black people be … on a Saturday morning,’ that’s not by chance,” said Franchelle Parker, a community organizer and executive director of Open Buffalo, a nonprofit focused on racial, economic and ecological justice. “That’s not a mistake. It’s a community that’s been deeply segregated for decades.”
The day of the shooting, Parker, who grew up in nearby Niagara Falls, was driving to Tops, where she planned to buy a donut and an unsweetened iced tea before heading into the Open Buffalo office, which is located a block away from Tops. The mother of two had intended to complete the mundane task of cleaning up her desk — “old coffee cups and stuff” — after a busy week.
She saw the news on Twitter and didn’t know if she should keep driving to Jefferson Avenue or turn around and go back home. She eventually picked the latter.
When she showed up the next day, there were thousands of people grieving in the streets. “The only way that I could explain my feeling, it was almost like watching an old war movie when a bomb had gone off and someone’s in, like, shell shock. That’s how it felt,” said Parker, vividly recounting the community’s collective trauma in a meeting room tucked inside of Open Buffalo’s second-story office on Jefferson Avenue.
Almost immediately following the May 14, 2022, massacre, which was the second-deadliest mass shooting in the United States last year, conversations locally and nationally turned to the harsh realities of the East Side and how long-standing factors that affect the daily life of residents — racism, poverty and inequity — made the community an ideal target for a white supremacist.
Now, more than a year after the tragedy, there is growing concern that not enough is being done fast enough to begin to dismantle those factors. And amid those conversations, there are mounting calls for the banking industry — whose historical policies and practices helped cement the racial segregation and disinvestment that ultimately shaped the East Side — to leverage its collective power and influence to band together in an effort to create systemic change.
The ideas about how banks should support the East Side and better embed themselves in the neighborhood vary by people and organizations. But the basic argument is the same: Banks, in their role as financiers and because of the industry’s history of lending discrimination, are obligated to bring forth economic prosperity in disinvested communities like the East Side.
I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.
Chiwuike Owunwanne, corporate responsibility officer at KeyBank
“Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that,” said The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity, a four-year-old enterprise focused on racial, geographic and economic health disparities. “But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.”
To be sure, banks’ ability to reverse the course of the community isn’t guaranteed — and there is no formula to determine how much accountability they should hold to fix deeply entrenched problems like racism. Several Buffalo-area bankers said that while the Tops shooting heightened the urgency to help the East Side, the industry itself cannot be the sole driver of change.
“There are a lot of institutions … that can certainly play a part in reversing the challenges that we see today,” said Chiwuike “Chi-Chi” Owunwanne, a corporate responsibility officer at KeyBank, the second-largest bank by deposits in Buffalo. “I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.”
A long history of segregation
How the East Side — and the Tops store on Jefferson Avenue — became the destination for a racially motivated mass murderer is a story about racism, segregation and disinvestment.
Even as it bears the nickname “the city of good neighbors,” Buffalo has long been one of the most racially segregated cities in the United States. Of the 114,965 residents who live on the East Side, 59% are Black, according to data from the 2021 U.S. Census American Community Survey. The percentage is even higher in the 14208 ZIP code, where the Tops store is located. In that ZIP code, among 11,029 total residents, nearly 76% are Black, the census data shows.
The city’s path toward racial segregation started in the early 20th century when a small number of job-seeking Black Americans migrated north to Buffalo, a former steel and auto manufacturing hub at the far northwestern end of New York state. Initially, they moved into the same neighborhoods as many of the city’s poorer immigrants and lived just east of what is today the city’s downtown district. As the number of Blacks arriving in Buffalo swelled in the 1940s, they were increasingly confronted with various housing challenges, including racist zoning laws and restrictive deed covenants that kept them from buying homes in more affluent white areas.
Black Buffalonians also faced housing discrimination in the form of redlining, the practice of restricting the flow of capital into minority communities. In 1933, as the Great Depression roiled the economy, a temporary federal agency known as the Home Owners’ Loan Corporation used government bonds to buy out and refinance mortgages of properties that were facing or already in foreclosure. The point was to try to stabilize the nation’s real estate market.
As part of its program, HOLC created maps of American cities, including Buffalo, that used a color coding scheme — green, blue, yellow and red — to convey the perceived riskiness of making loans in certain neighborhoods. Green was considered minimally risky; other areas that were largely populated by immigrant, Black or Latino residents were labeled red and thus determined to be “hazardous.”
“The goal was to free up mortgage capital by going to cities and giving banks a way to unload mortgages, so they could turn around and make more mortgage loans,” said Jason Richardson, senior director of research at the National Community Reinvestment Coalition, an association of more than 750 community-based organizations that advocates for fair lending. “It was kind of a radical concept and it has evolved over the decades into our modern mortgage finance system.”
The Federal Housing Administration, which was established as a permanent agency in 1934, used similar methods to map urban areas and labeled neighborhoods from “A” to “D,” with “A” considered to be the most financially stable and “D” considered the least. Neighborhoods that were largely Black, even relatively stable ones, were put in the “D” category.
The result was that banks, which wanted to be able to sell mortgage loans to the FHA, were largely dissuaded from making loans in “risky” areas. And Buffalo’s East Side, where the majority of Blacks were settling, was deemed risky. Unable to get loans, Blacks couldn’t buy homes, start businesses or build equity. At the same time, large industrial factories on the East Side were closing or moving away, limiting job opportunities and contributing to rising poverty levels.
“Today what we’re left with is the residue of this process where we’ve enshrined … a pattern of economic segregation that favors neighborhoods that had fewer Black people in them and generally ignores neighborhoods that had African Americans living in them,” Richardson said.
Case in point: Research by the National Community Reinvestment Coalition shows that three-quarters of neighborhoods that were once redlined are low- to moderate-income neighborhoods today, and two-thirds of them are majority minority communities.
Adding to the division between Blacks and whites in Buffalo was the construction of a highway called the Kensington Expressway. Built during the 1960s, the below-grade, limited-access highway proved to be a speedy way for suburban workers to get to their downtown jobs. But its construction cut off the already-segregated East Side even more from other parts of the city, displacing residents, devaluing houses and destroying neighborhoods and small businesses.
As a result of those factors and more, many Black residents have become “trapped” on the East Side, according to Dr. Henry Louis Taylor Jr., a professor of urban and regional planning at the University at Buffalo. In 1987, Taylor founded the UB Center for Urban Studies, a research, neighborhood planning and community development institute that works on eliminating inequality in cities and metropolitan regions. In September 2021, eight months before the Tops shooting, the Center for Urban Studies published a report that compared the state of Black Buffalo in 1990 to present-day conditions. The conclusion: Nothing had changed for Blacks over 31 years.
As of 2019, the Black unemployment rate was 11%, the average household income was $42,000 and about 35% of Blacks had incomes that fell below the poverty line, the report said. It also noted that just 32% of Blacks own their homes and that most Blacks in the area live on the East Side.
“Those figures remain virtually unchanged while the actual, physical conditions that existed inside of the community worsened,” Taylor told American Banker in an interview in his sun-filled office at the center, located on the University at Buffalo’s city campus. “When we looked upstream to see what was causing it, it was clear: It was systemic, structural racism.”
Banks’ moral obligations
As the East Side struggled over the decades with rampant poverty, dilapidated housing, vacant lots and disintegrating infrastructure, banks kept a physical presence in the community, albeit a shrinking one. In mid-2000, there were at least 20 bank branches scattered across the East Side, but by mid-2022, the number had fallen to around 14, according to the Federal Deposit Insurance Corp.’s deposit market share data. The 14 include four new branches that have opened since early 2019 — Northwest Bank, KeyBank, Evans Bank and BankOnBuffalo.
The first two branches, operated by Northwest in Columbus, Ohio, and KeyBank, the banking subsidiary of KeyCorp in Cleveland, were requirements of community benefits agreements negotiated between each bank and the National Community Reinvestment Coalition. In both cases, Northwest and KeyBank agreed to open an office in an underserved community.
Evans Bank opened its first East Side branch in the fall of 2021. The office is located in the basement of an $84 million affordable senior housing building that was financed by Evans, a $2.1 billion-asset community bank headquartered south of Buffalo in Angola, New York.
Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that. But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.
The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity
On the community and economic development front, banks have had varying levels of participation. Buffalo-based M&T Bank, which holds a whopping 64% of all deposits in the Buffalo market and is one of the largest private employers in the region, has made consistent investments in the East Side by supporting Westminster Community Charter School, a kindergarten through eighth-grade school, and the Buffalo Promise Neighborhood, a nonprofit organization focused on improving access to education in the city’s 14215 ZIP code.
Currently, Buffalo Promise Neighborhood operates four schools. In addition to Westminster, it runs Highgate Heights Elementary, also K-8, as well as two academies that serve children ages six weeks through pre-kindergarten. Twelve M&T employees are dedicated to the program, according to the Buffalo Promise Neighborhood website. The bank has invested $31.5 million into the program since its 2010 launch, a spokesperson said.
Other banks are making contributions in other ways. In addition to the Jefferson Avenue branch and as part of its community benefits plan, Northwest Bank, a $14.2 billion-asset bank, supports a financial education center through a partnership with Belmont Housing Resources of Western New York. Meanwhile, the $198 billion-asset KeyBank gave $30 million for bridge and construction financing for Northland Workforce Training Center, a $100 million redevelopment project at a former manufacturing complex on the East Side that was partially funded by the state.
BankOnBuffalo’s East Side branch is located inside the center, which offers KeyBank training in advanced manufacturing and clean energy technology careers. A subsidiary of $5.6 billion-asset CNB Financial in Clearfield, Pennsylvania, BankOnBuffalo’s office opened a month after the shooting. The timing was coincidental, but important, said Michael Noah, president of BankOnBuffalo.
“I think it just cemented the point that this is a place we need to be, to be able to be part of these communities and this community specifically, and be able to build this community up,” Noah said.
In terms of public-private collaboration, some banks have been involved in a deeper way. In 2019, New York state, which had already been pouring $1 billion into Buffalo to help revitalize the economy, announced a $65 million economic development fund for the East Side. The initiative is focused on stabilizing neighborhoods, increasing homeownership, redeveloping commercial corridors including Jefferson Avenue, improving historical assets, expanding workforce training and development and supporting small businesses and entrepreneurship.
In conjunction with the funding, a public-private partnership called East Side Avenues was created to provide capital and organizational support to the projects happening along four East Side commercial corridors. Six banks — Charlotte, North Carolina-based Bank of America, the second-largest bank in the nation with $2.5 trillion of assets; M&T, which has $203 billion of assets; KeyBank; Warsaw, New York-based Five Star Bank, which has about $6 billion of assets; Northwest and Evans — are among the 14 private and philanthropic organizations that pledged a combined $8.4 million to pay for five years’ worth of operational support, governance and finance, fundraising and technical assistance to support the nonprofits doing the work.
Laura Quebral, director of the University at Buffalo Regional Institute, which is managing East Side Avenues, said the banks were the first corporations to step up to the request for help, and since then have provided loans and other products and education to keep the program moving.
Their participation “is a signal to the community that banks cared and were invested and were willing to collaborate around something,” Quebral said. “Being at the table was so meaningful.”
Richard Hamister is Northwest’s New York regional president and former co-chair of East Side Avenues. Hamister, who is based in Buffalo, said banks are a “community asset” that have a responsibility to lift up all communities, including those where conditions have arisen that allow it to be a target of racism like the East Side.
“We operate under federal charters, so we have an obligation to the community to not only provide products and services they need but also support when you go through a tragedy like that,” Hamister said. “We also have a moral obligation to try to help when things are broken … and to do what we can. We can’t fix everything, but we’ve got to fix our piece and try to help where we can.”
In the wake of a tragedy
After the massacre, there was a flurry of activity within banks and other organizations, local and out-of-town, to respond to the immediate needs of East Side residents. With the community’s only supermarket closed indefinitely, much of the response centered around food collection and distribution. Three of M&T’s five East Side branches, including the Jefferson Avenue branch across the street from Tops, became food distribution sites for weeks after the shooting. On two consecutive Fridays, Northwest provided around 200 free lunches to the community, using a neighborhood caterer who is also the bank’s customer. And BankOnBuffalo collected employee donations that amounted to more than 20 boxes of toiletries and other items that were distributed to a nonprofit.
At the same time, M&T, KeyBank and other banks began financial donations to organizations that could support the immediate needs of the community. KeyBank provided a van that delivered food and took people to nearby grocery stores. Providence, Rhode Island-based Citizens Financial Group, whose ATM inside Tops was inaccessible during the store’s temporary closure, installed a fee-free ATM near a community center located about a half-mile north of Tops, and later put a permanent ATM inside the center that remains there today. And M&T rolled out a short-term loan program to provide capital to East Side small-business owners.
One of the funds that benefited from banks’ support was the Buffalo Together Community Response Fund, which has raised $6.2 million to address the long-term needs of the East Side.
Bank of America and Evans Bank each donated $100,000 to the fund, whose list of major sponsors includes four other banks — JPMorgan Chase, Citigroup, M&T and KeyBank. Thomas Beauford Jr., a former banker who is co-chair of the response fund, said banks, by and large, directed their resources into organizations where the dollars would have an immediate impact.
“Banks said, ‘Hey, you know … it doesn’t make sense for us to try to build something right now. … We will fund you in the work you’re doing,'” said Beauford, who has been president and CEO of the Buffalo Urban League since the fall of 2020. “I would say banks showed up in a big way.”
Fourteen months later, banks say they are committed to playing a positive role on the East Side. For the second year, KeyBank is sponsoring a farmers’ market on the East Side, an attempt to help fill the food desert in the community. Last fall, BankOnBuffalo launched a mobile “bank on wheels” truck that’s stationed on the East Side every Wednesday. The 34-foot-long truck, which is staffed by two people and includes an ATM and a printer to make debit cards, was in the works before the shooting, and will eventually make four stops per week around the Buffalo area.
Evans has partnered with the city of Buffalo to construct seven market-rate single family homes on vacant lots on the East Side. The relationship with the city is an example of how banks can pair up with other entities to create something meaningful and lasting, more than they might be able to do on their own, said Evans President and CEO David Nasca.
The bank has “picked areas” where it can use its resources to make a difference, Nasca said.
“I don’t think the root causes can be ameliorated” by banks alone, he said. “We can’t just grant money. It has to be within our construct of a financial institution that invests and supports the public-private partnership. … All the oars [need to be] pulling together or this doesn’t work.”
‘Little or no engagement with minorities’
All of these efforts are, of course, welcomed by the community, but there is still criticism that banks haven’t done enough to make up for their past contributions to segregating the city. And perhaps more importantly, some of that criticism centers on banks failing to do their most basic function in society — provide credit.
In 2021, the New York State Department of Financial Services issued a report about redlining in Buffalo. The regulator looked at banks and nonbank lenders and found that loans made to minorities in the Buffalo metro area made up 9.74% of total loans in Buffalo. Overall, Black residents comprise about 33% of Buffalo’s total population of more than 276,000, census data shows.
The department said its investigation showed the lower percentage was not due to “excessive denials of loan applications based on race or ethnicity,” but rather that “these companies had little or no engagement with minorities and generally made scant effort to do so.”
“The unsurprising result of this has been that few minority customers or individuals seeking homes in majority-minority neighborhoods have made loan applications … in the first instance.”
Furthermore, accusations of redlining persist today, even though the practice of discriminating in housing based on race was outlawed by the Fair Housing Act of 1968.
In 2014, Evans was accused of redlining by the New York State Attorney General, which said the community bank was specifically avoiding making mortgage loans on the East Side. The bank, which at the time had $874 million of assets, agreed to pay $825,000 to settle the case, but Nasca maintains that the charges were unfounded. He points to the fact that the bank never had a fair lending or fair housing violation, no specific incidents were ever claimed and that the bank’s Community Reinvestment Act exam never found evidence of discriminatory or illegal credit practices.
The bank has a greater presence on the East Side today, but that’s because it has grown in size, not because it is trying to make up for previous accusations of redlining, he said.
“Ten years ago, our involvement [on the East Side] certainly wasn’t what you’re seeing today,” Nasca said. “We were looking to participate more, but we were participating within our means and our reach. As we have grown, we have built more resources to be able to do more.”
Shortly after accusations were made against Evans, Five Star Bank, the banking arm of Financial Institutions in Warsaw, New York, was also accused of redlining by the state Attorney General. Five Star, which has been growing its presence in the Buffalo market for several years, wound up settling the charges for $900,000 and agreeing to open two branches in the city of Rochester.
KeyBank is currently being accused of redlining by the National Community Reinvestment Coalition. In a 2022 report, the group said that KeyBank is engaging in systemic redlining by making very few home purchase loans in certain neighborhoods where the majority of residents are Black. Buffalo is one of several cities where the bank’s mortgage lending “effectively wall[ed] out Black neighborhoods,” especially parts of the East Side, the report said.
KeyBank denied the allegations. In March, the coalition asked regulators to investigate the bank’s mortgage lending practices.
Beyond providing more credit, some community members believe that banks should be playing a larger role in addressing other needs on the East Side. And the list of needs runs the gamut from more grocery stores to safe, affordable housing to infrastructure improvements such as street and sidewalk repairs.
Alexander Wright is founder of the African Heritage Food Co-op, an initiative launched in 2016 to address the dearth of grocery store options on the East Side, where he grew up. Wright said that while banks’ philanthropic efforts are important, banks in general “need to be in a place of remediation” to fix underlying issues that the industry, as a whole, helped create. (After publication of this story, Wright left his job as CEO of the African Heritage Food Co-Op.)
Aside from charitable donations, banks should be finding more ways to work directly with East Side business owners and entrepreneurs, helping them with capital-building support along the way, Wright said. One place to start would be technical assistance by way of bank volunteers.
“Banks are always looking to volunteer. ‘Hey, want to come out and paint a fence? Want to come out and do a garden?'” Wright said. “No. Come out here and help Keshia with bookkeeping. Come out here and do QuickBooks classes for folks. Bring out tax experts. Because these are things that befuddle a lot of small businesses. Who is your marketing person? Bring that person out here. Because those are the things that are going to build the business to self-sufficiency.
“Anything short of the capacity-building … that will allow folks to rise to the occasion and be self-sufficient I think is almost a waste,” Wright added. “We don’t need them to lead the plan. What we need them to do is be in the community and [be] hearing the plan and supporting it.”
Parker, of Open Buffalo, has similar thoughts about the role that banks should play. One day, soon after the massacre, an ATM appeared down the street from Tops, next to the library that sits across the street from Parker’s office. Soon after the ATM was installed, Parker began fielding questions from area residents who were skeptical of the machine and wanted to know if it was legitimate. But Parker didn’t have any information to share with them. “There was no outreach. There was no community engagement. So I’m like, ‘Let me investigate,'” she said. “I think that’s a symptom of how investment is done in Black communities, even though it may be well-intentioned.”
As it turns out, the temporary ATM belonged to JPMorgan Chase. The megabank has had a commercial banking presence in Buffalo for years, but it didn’t operate a retail branch in the region until last year. Today it has four branches in operation and plans to open another two by the end of the year, a spokesperson said.
After the Tops shooting, the governor’s office reached out to Chase asking if the bank could help in some way, the spokesperson said in response to the skepticism. The spokesperson said that while the Chase retail brand is new to the Buffalo region, the company has been active in the market for decades by way of commercial banking, private banking, credit card lending, home lending and other businesses.
In addition to the ATM, the bank provided funding to local organizations including FeedMore Western New York, which distributes food throughout the region.
“We are committed to continuing our support for Buffalo and helping the community increase access to opportunities that build wealth and economic empowerment,” the spokesperson said in an email.
In the year since the massacre, there has been some progress by banks in terms of their interest in listening to the East Side community and learning about its needs, said Nicholas. But he hasn’t felt an air of urgency from the banking community to tackle the issues right now.
“I do experience banks being a little more open to figuring out what their role is, but it’s slow. It’s slow,” said Nicholas. The senior pastor of the Lincoln Memorial United Methodist Church, located about a mile north from Tops, Nicholas is part of a 13-member local advisory committee for the New York arm of Local Initiatives Support Coalition, or LISC. The group is focused on mobilizing resources, including banks, to address affordable housing in Western New York, specifically in the inner city, as well as training minority developers and connecting them to potential investors, Nicholas said.
Of the 13 members, seven are from banks — one each from M&T, Bank of America, BankOnBuffalo, Evans and KeyBank, and two members from Citizens Financial Group. One of the priorities of LISC NY is health equity, and the fact that banks are becoming more engaged in looking at health disparities is promising, Nicholas said. Still, they have more work to do, he said.
“I need them to think more on how to strengthen and build the economy on the East Side and provide leadership around that, not only to provide charitable things, but using sound business and banking and community development principles to say, ‘OK, if we’re going to invest in this community, these are the types of things that need to happen in this community,’ and then encourage their partners and other people they work with … to come fully in on the East Side.”
Some bankers agree with the community activists.
“Putting a branch in is great. Having a bank on wheels is great,” said Noah of BankOnBuffalo. “But if you’re not embedded in the community, listening to the community and trying to improve it, you’re not creating that wealth and creating a better lifestyle for everyone.”
What could make a substantial difference in terms of banks’ impact on the community is a combination of collaboration and leadership, said Taylor. He supports the idea of banks leading the charge on the creation of a comprehensive redevelopment and reinvestment plan for the East Side, and then investing accordingly and collaboratively through their charitable foundations.
“All of them have these foundations,” Taylor said. “You can either spend that money in a strategic and intentional way designed to develop a community for the existing population, or you can spend that money alone in piecemeal, siloed, sectorial fashion that will look good on an annual report, but won’t generate transformational and generational changes inside a community.”
Banks might be incentivized to work together because it could mean two things for them, according to Taylor: First, they’d have an opportunity to spend money in a way that would have maximum impact on the East Side, and second, if done right, the city and the banks could become a model of the way to create high levels of diversity, equity and inclusion in an urban area.
“If you prove how to do that, all that does is open up other markets of consumption all over the country because people want to figure out how to do that same thing,” Taylor said.
Some of that is already happening, at least on a bank-by-bank case, said KeyBank’s Owunwanne. Through the KeyBank Foundation, the company is able to leverage different relationships that connect nonprofits to other entities and corporations that can provide help.
“I see this as an opportunity for us to make not just incremental changes, but monumental changes … as part of a larger group,” Owunwanne said “Again, I say that not to absolve the bank of any responsibility, but just as a larger group.”
Downstairs from Parker’s office, Golden Cup Coffee, a roastery and cafe run by a husband and wife team, and some other Jefferson Avenue businesses are trying to build up a business association for existing and potential Jefferson-area businesses. Parker imagined what the group could accomplish if one of the banks could provide someone on a part-time basis to facilitate conversations, provide administrative support and coordinate marketing efforts.
“In the grand scheme of things, when we’re talking about a multimillion dollar [bank], a part-time employee specifically dedicated to relationship-building and building out coalitions, it sounds like a small thing,” Parker said. “But that’s transformational.”