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How LOs are dealing with an explosion of activity in NYC’s suburbs

A break down of mortgage lending activity in NYC and its red-hot bedroom communities

The banks need bodies.

Documents need to be collected, credit scores need to be checked, appraisers need to be arranged. There’s a lot of mortgages to be processed, and frankly, it’s overwhelming.

Across its mortgage footprint, “Citizens Bank has hired close to 100 underwriters, processors and loan officers this year to keep up with the demand and further their commitment in the mortgage retail space,” said Ace Watanasuparp, who heads residential lending for Citizens in New York City.

Citizens is not alone. With interest rates at historic lows and a rush on the suburban market, lenders in New York City and its bedroom communities are working overtime to process what they say is an unprecedented book of business

“Activity [in New York City] has definitely picked up in the last month-and-a-half since showings resumed,” said Melissa Cohn, a mortgage lender and broker with William Raveis Mortgage. “People are out there, they’re looking for the best deal.”

Though Citizens is processing a large amount of refinancings, the purchase market in New York City is also picking up steam, according to Watanasuparp. Sales and contracts aren’t yet back up to normal levels, but the return of families – often for school – has meant more deals are being discussed, he said.

Though the Manhattan market has thawed somewhat from its state of suspended animation during the coronavirus, it isn’t likely to really pick up until families return from the Hamptons and other second-home spots, observers said.

Many of the sellers coming back to Manhattan – where over 13,000 apartments sit empty – will have to take a 20% discount on listing price to get a deal over the line, Watanasuparp said.

The numbers bear out the difficulties. While Brooklyn and Queens have seen considerable activity over the last month, signed contracts in July were down 57% year-over-year in Manhattan, according to Jonathan Miller of appraisal firm Miller Samuel. And while August will be better for Manhattan, and September will be even better, this isn’t exactly a market that resembles the boom years of 2015 and 2016.

A glut of product and tighter lending standards

One particular pain point for lenders, mortgage brokers and real estate agents has been the state of Manhattan’s condominium market.

Many of the new condo buildings in the city haven’t hit the 50% presale threshold, which means several large retail banks won’t come in and finance mortgages at those buildings, Cohn said. And because New York is unique in the preponderance of co-ops and condos, lenders must scrutinize both the buyer and the finances of the building itself.

Cohn is hopeful that pre-sales in the condo market pick up and lenders return to the non-QM marketplace in the fall.

Complicating matters for some buyers and real estate agents is that many retail banks tightened their lending standards during the pandemic, though they are fielding so many applications it hasn’t sapped profits.

“The reason for all the bank behavior right now where they’re pulling back a little bit is because they’re managing risk like they didn’t do in the last cycle,” said Miller. “If you had a pulse you could get any mortgage you wanted. In this cycle that’s not happening…lenders are smartly remaining risk-averse.”

The banks are “looking for higher credit scores, more post-closing reserves, and higher down payments in the city, especially in the jumbo market,” said Cohn, who has been a broker for over 35 years and just recently joined Williams Raveis. “They’ve become a lot tougher in their underwriting. If you meet their guidelines, they’d be happy to loan to you at record-low rates.” 

Interest rates on jumbo loans in New York City – the most common form of financing due to high home prices – are averaging roughly 3% for a 30-year fixed-rate loan.

Markets in Brooklyn and Queen are as hot as ever, and savvy buyers are back hunting for apartments in Manhattan, several sources said.

Cohn said she had a client who abandoned plans to buy a second home in the Hamptons because the market had become “too frothy.” Instead, she picked up a new home in Manhattan. That’s where deals can be had, Cohn said.

Welcome to the (suburban) jungle 

If you only read the tabloids, you might be under the impression that New York City is dead and every able-bodied man, woman and child has swam across the Hudson to make a new home in suburbia.

“The fleeing-the-city narrative is not true, but there is outbound migration,” said Miller. “You can tell by looking at the suburbs.”

In July, there was a 44% increase in single-family home sales for the suburban counties surrounding the city year-over-year, according to data from Miller. New Jersey has seen about a 33% year-over-year increase in sales, per data from appraisal firm Otteau Group. But even that’s nothing compared to the boom in activity in Westchester County, just north of the Bronx, where sales ticked up 112% in July. In neighboring Fairfield, Connecticut, sales rose 73%, according to Miller.

The numbers are stunning, but closer inspection is warranted.

“What’s happening in the suburbs is that while contract activity is up big, as you move higher in price tranche the sales activity is up sharply,” said Miller. “I don’t think people realize how much it’s up.”

Miller’s analysis found that the luxury market at $2 million and up in Westchester – which has struggled in recent years – increased 413% over the same period last year in July.

Westchester and Fairfield counties in particular have become havens for urbanites looking for a second home or a new primary residence, according to Ed Mainland, executive director at Chase Home Lending. They have high-performing school districts, are a train ride away from the office in Manhattan, and homes often come with three-to-four times the space.

Over the last month, Chase has roughly doubled the number of mortgages issued year-over-year in Westchester and Fairfield, Mainland said.

“We are extremely busy,” he said. 

Lenders across the region have been staffing up to meet the demand and finalize applications within a 30-day timeframe, according to loan officers and bank executives. That’s especially true on the purchase side, where retail loan officers run the risk of alienating the real estate agents who fed them the client if they can’t process loans quickly enough. 

Chase claims it’s averaging 21 business days to process loans for new purchases by existing customers in Westchester and Fairfield. 

“We’ve stuck to our commitment to customers in the purchase space,” Mainland said. 

Not every bank is hitting its target, however. Several LOs and brokers told HousingWire that some of the big retail banks are averaging well over 30 business days to complete just the underwriting process. It’s taking two months or longer for some retail lenders, they said.

Everyone’s hiring

On LinkedIn, there are hundreds of mortgage loan officer and underwriter jobs available in the New York City metropolitan area. Citizens Bank, Guardhill Financial, Axos Bank, UNFC Bank, PNC Bank and US Bank are among those looking to hire.

“Everyone is scrambling to hire more support,” said Cohn, who herself was looking to staff up. 

LOs and mortgage brokers in New York and its suburbs expect to be dealing with high volume for the foreseeable future.

“We’re expecting 20201 to be the same in terms of numbers,” said Watanasuparp. “As long as inventory is still an issue, we’re going to see demand.”

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