Independent Banker - August 2019 - 29

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bank's home loan volume increase from $467.3
million in 2016 to $744 million in 2018.
A financial education
Practicing relationship banking can also help
borrowers make a more realistic appraisal of the
impact a home mortgage will have on their lives.
" Just because someone qualifies on paper doesn't
necessarily mean that buying that $300,000
house is the right move for them, " cautions Tim
Kluender, president and CEO of Community
Bank Owatonna, a $58 million-asset bank in
Owatonna, Minn.
Over his more than 25 years in banking, Kluender
has often challenged first-time homebuyers
to take three to six months to save the difference
between their rent and the mortgage they qualify
for. He's also asked them how they would cover
other expenses, such as property taxes, homeowner's
insurance and items that new homeowners
aren't used to needing, like a lawn mower.
" Say a borrower was paying $800 a month in
rent but qualified for a $1,400 monthly mortgage, "
Kluender explains. " I would ask them
point-blank, 'How will you come up with the extra
$600?' Often, they didn't have good answers. "
This exercise was a real eye-opener for many
borrowers. " They found that it was tougher than
they thought and that some payments left them
little margin for error, " Kluender reports.
For many borrowers, especially first-time
homebuyers, this was their first exposure to systematic
budgeting. " Many have said that no one
taught them this type of thing in school or their
parents didn't teach them this. I think they really
felt it taught them some discipline and budgeting
skills, " Kluender says.
The personal touch in mortgage lending also
means banks find ways to solve loan problems
that might derail loans funded in highly tech-centric
processes. Jonathan Hale, mortgage lender
for $160 million-asset Citizens Bank in Amarillo,
Texas, recalls a borrower who opened three new
credit accounts just as his home loan was about to
close. " That's a real red flag, " Hale says.
But Hale didn't drop the loan. " I said to the
borrower, 'This isn't fatal, but it's an obstacle.
We can't close in this situation. Come in and let's
figure this out.' "
Hale helped the borrower review his assets and
" We look at helping
borrowers ... as an
investment in our future. "
-Jonathan Hale, Citizens Bank
find a way to pay off and close the accounts. Once
this was accomplished, the borrower's credit
score bounced back up. " He was appreciative that
I did that rather than say, 'You don't qualify any
more; we're done,' " Hale says.
Dan King and the Willamette Valley Bank team
had the hair-raising experience of a borrower
arriving at their closing with the news that the
financing had fallen through for the purchaser
of their home and the mortgage insurance was
going to increase.
The team leapt into action. While the loan
documents were being signed, the underwriter
revised the loan to incorporate the new circumstances.
The loan originator and the underwriter
also called the mortgage insurance company and
persuaded them to match the original pricing.
" We made all of these changes while the borrower
was signing loan documents and the loan
was funded on time, " King recalls.
The community banking ideal
Community banks that leverage their relationship
banking skills are positioned not only to be
Quick stat
63%
of millennials use
a smartphone
as a primary
research tool
when shopping
for a home
Source: Clever Real Estate
Judith Sears is a writer in Colorado.
independentbanker.org Q 29
competitive but also to earn customers for life.
" We look at helping borrowers, especially the
young people with thin credit files, as an investment
in our future, " says Hale. " That keeps a
pipeline going for us. "
For Kluender, personal counseling that takes
a comprehensive view of the borrower's situation
can and should be a community bank selling
point. " Many banks have seminars, " he says.
" One-on-one advice and coaching demonstrates
the added value that community banks can
provide. We need to put out that message in marketing
and advertising that we're not here just to
push a product but to provide education for customers
and the community. In other words, we
want to set them up for success, not failure. "
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Independent Banker - August 2019

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