Independent Banker - September 2017 - 60

Lender Life
president. " Our goal is to have them
improve these properties and thus
improve the market values of other
homes in those neighborhoods. "
The program has been working
well, and Community Bank Owatonna
has granted several of these
loans. " We work with a select group
of investors and contractors who do
these on a regular basis, " he says.
" They have enough experience that
they can look at a property, decide if
it makes sense for them to buy it, and
determine where they need to be on
the price, based on how much they
are going to put into it. "
This program differs from others
like it in that the bank allows the
borrower to borrow more against
the property than it normally would
on a commercial property-up to 90
percent of the total investment.
additional properties, which keeps
the program strong and active.
When the renovated properties
come up for sale, they often fi t in well
with some of the bank's fi rst-time
homebuyer programs. " Since the
homes have been remodeled, the fi rsttime
buyers, who usually don't have
a lot of assets, don't have to worry
about installing a new roof, furnace,
windows, etc., " Grams says.
Across-the-board lending
While some community banks might
offer one or two specialty home and
mortgage loan products, First Federal
Savings Bank in Twin Falls, Idaho,
with assets of more than $606 million,
offers a wide variety, including
homebuilder construction loans,
USDA Rural Development Loans,
mortgage loans for self-employed
90%
Percentage of total project
investment Community
Bank Owatonna will lend
in its Renovate and
Restore program
Of course, offering so many programs
creates challenges, particularly
when it comes to compliance. " For
example, our customers often get
frustrated when they have to wait so
long for appraisals or to sign their
closing documents, " Hughes says.
" They wonder why they can't waive
these timing requirements. "
First Federal tries to be proactive.
" If a loan touches mortgage
lending, we are generally active
in it, as long as it makes sense
for our local customer base. "
-BRENDA HUGHES,
FIRST FEDERAL SAVINGS BANK
" We are looking at the fi nal market
value, " Grams explains. " Let's say the
purchase price is $70,000 and they
are going to put $30,000 into it. We
will actually lend up to $90,000 of
that $100,000 investment. " The bank
completes an appraisal before the
borrower buys the property, based
on the improvements he or she plans
to put into it, so it can determine
the fi nal value and make sure it is
more than the purchase price plus
the improvements. " For example,
the fi nal value should probably be
$125,000 to $130,000, " he says. In the
end, the bank is actually only lending
$90,000 on a $125,000-plus home.
Grams says lending up to 90
percent allows the investors to have
more capital available to purchase
homebuyers, piggyback mortgages
and Energy Effi cient Mortgages.
" We look at all loan programs that
are available and determine when it
makes sense for us to offer programs
that we can deliver to the secondary
market, as well as loans that we might
want to put on our books and hold in
our portfolio, " says Brenda Hughes,
senior vice president, director of
mortgage and retail lending for First
Federal Savings Bank. The community
bank is particularly active in
the secondary market, selling many
loans directly to Freddie Mac and the
the Federal Home Loan Bank. " If a
loan touches mortgage lending, we
are generally active in it, as long as it
makes sense for our local customer
base, " she says.
60 ICBA IndependentBanker September 2017
" We let customers know at the point
of application what the process is and
how long it may take, " she says. The
bank also stays in constant communication
with customers throughout the
process, letting them know when they
will be receiving certain documents
and what the next step will be.
With so many programs, Hughes
emphasizes the importance of having
" very seasoned " loan offi cers. " We
have people who know the details of
all of the programs, " she says. " You
really can't substitute anything else
for this experience. "
Rapid changes to the market and
to specifi c programs make continual
training another critical element. " We
do a lot of in-house training, as well
as external training when it is available
and makes sense, " Hughes says.
How will these programs fare in
the future? Hughes says it depends
primarily on whether the economy
holds fi rm. " Any time the economy
shifts, changes tend to occur in program
requirements and the overall
availability of programs, " she says.
" Currently, though, the emphasis
that the government is placing on
housing lends itself to the continuity
of these programs. "
William Atkinson is a writer in Illinois.
Independent Banker - September 2017

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