How community banks will reign in 2014

Small banks stay well positioned for success, Freddie says

Despite some small lenders choosing to shut the door on originating mortgages, community banks could have just the right kind of leverage to succeed in 2014’s lending environment.

“Community banks, I think, are best prepared and best equipped. They are uniquely positioned, and their market is well defined,” Christina Boyle, vice president and interim head of the Single-Family Sales and Relationship Management organization with Freddie Mac said. “They are not trying to be positioned in everything.”

But not all lenders feel the same.

Cape Bancorp announced in its latest financial earnings that it is exiting residential mortgages.

"Management made the difficult decision to exit the residential mortgage loan origination business. This had been an important business segment for most of our 90-year history, but management believed changes within the industry required a scale of operations that we would not be able to profitably deliver,” Michael Devlin, president and CEO of Cape Bancorp and Cape Bank, said.  

“Further, we believe that exiting this business segment will serve to improve Interest Rate Risk management and we expect to realize a reduction in operating expenses in 2014,” Devlin said.  

And while some lenders are choosing this route and evaluating their business, Boyle explained it is not their only option.

“There is certainty a lot on all lenders' plates. With the changing environment and all this out there, we have to acknowledge that,” Boyle said.

However, she added, “Community lenders are very trusted as lenders within their own footprint. It is a good time for them, as many lenders are trying to figure out where they play in the lending space.”

Freddie Mac explained that it is doing work around greater purchase certainty, support and information, as well as making sure lenders are competitive from an execution perspective to be successful.

According to Boyle, lenders need to be transparent and have a lot of access to guidance and help from various groups that are broader participants in the market today.

In order to thrive in 2014, lenders need to get clarity and be comfortable in what they are doing and how they are doing it, Boyle explained.

Lenders are getting good guidance from Freddie Mac and good materials to help them have greater purchase certainty and confidence to continue originating mortgages in today's lending space, she added. 

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