Independent Banker - June 2021 - 53

often choose to refinance to pull
equity out of their homes to pay for
home improvements, trips or college
tuition. In addition, some people who
were not in a position to refinance in
2020, perhaps because they lost their
job or had reduced income, may be
able to do so in 2021.
As refinancings slow, community
banks are turning their attention to
trends driving new home purchases.
Clear Mountain Bank in Morgantown,
W.Va., originated more than
$270 million in 2020, more than
twice its record in 2019.
" With rates expected to increase
this year, we are anticipating a
considerable slowdown in refinance
originations, " says Harry Hayes,
vice president, director of mortgage
origination at the $800 million-asset
community bank. " On the other hand,
our markets have strong economies
and are showing a lot of demand for
home purchases and construction. "
As things start to get back
to normal, Hayes says, home
construction, renovation and
purchase transactions should be
stronger in 2021.
" We are also experiencing a need
for millennial families to relocate to
bigger homes to accommodate their
growing families, " he says. " The lack
of housing inventory and the rising
cost of construction could result
in some of that demand not being
met, but we do expect purchase and
construction origination to be really
strong throughout 2021. "
Given its expectation that
construction and mortgage lending
will be strong, Clear Mountain Bank
has added more jumbo loan options
and improved its construction and
home equity products.
Attention shifts to
home purchases
The brisk pace of home sales is one
of the positive trends continuing
to drive demand for home loans in
2021. Existing-home sales increased
Closing the affordability gap
The shortage of for-sale housing inventory is creating a seller's
market that is pushing prices higher and making homeownership
less accessible. According to the National Association of Realtors
(NAR), all regions of the country are reporting double-digit
increases in year-over-year prices. Nationally, the median existing
single-family home price rose 15.8% to $313,000.
Banks can offer a variety of mortgage programs either through
Freddie Mac and Fannie Mae, or government-backed programs
available through the Federal Housing Administration (FHA), U.S.
Department of Agriculture (USDA) and Veterans Affairs (VA) loans.
" Frankly, I think we are going to see more of these programs, "
says Ron Haynie, ICBA's senior vice president of mortgage finance
policy. " This administration is very focused on housing, especially
for minorities and communities of color, and I think you are going
to see a lot more resources focused in those areas to help get folks
into safe, clean, decent affordable housing. "
Some community banks may be reluctant to offer government
home loan products, which can be more complicated and can
require a dedicated underwriter.
" Where banks can still participate in that market is through their
local or state housing finance agency, because a lot of times the
agency will have that expertise, " Haynie says. In this scenario, the
community bank acts more as a loan broker.
Many community banks offer proprietary home loan products
as part of their Community Reinvestment Act (CRA) commitments.
For example, Cornerstone Bank in Spencer, Mass., has created a
home loan product for first-time homebuyers with low to moderate
incomes. The product allows applicants to secure a loan with as
little as 3% down, and the bank pays the mortgage insurance.
" There is always a need for first-time homebuyer products, because
sometimes they struggle with the down payment, " says Scott Auen,
senior vice president of retail lending. " So, we make sure that we
have a broad array of products to offer all of our customers. "
5.6% in 2020 to total 5.64 million, the
highest level since 2006, according to
NAR. In particular, new single-family
home sales jumped 20% in 2020 to
more than 800,000. As of March,
NAR was forecasting a further 15%
increase in home purchases in 2021,
with growth of 25% in new singlefamily
home sales.
That housing boom is being fueled
by a variety of factors, including low
mortgage rates and the pandemic,
" We do expect
originations to be
significantly lower
than 2020, but the
volume will still be
strong compared with
historical numbers. "
-SCOTT AUEN,
CORNERSTONE BANK
independentbanker.org Q 53
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Independent Banker - June 2021

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