by Evan Weese, Columbus Business First.
Banks in the second half of 2013 have grappled with how best to generate mortgage banking income in the face of higher interest rates and heightened regulatory scrutiny.
It’s not all doom and gloom, though. Heartland Bank CEO Scott McComb acknowledges the challenges cutting into banks’ non-interest income, but feels buoyed by the community banking niche and a historical outlook on interest rates. Refinancings have plunged and originations slowed, but McComb doesn’t see that as a big concern.
“Rates historically are still very, very low,” he said of 30-year fixed-rate mortgages that are averaging just above 4.1 percent. “People have very short memories if they think that’s high.”
Mortgage banking income has dropped significantly at U.S. banks because of the year’s uptick in rates from historic lows. Gahanna’s Heartland through three quarters of the year saw non-interest income fall 33 percent to $2.8 million.
Among U.S. banks with less than $20 billion in assets, mortgage banking income fell 27 percent in the third quarter from a year earlier.
What’s more, bankers are concerned the Consumer Financial Protection Bureau’s qualified mortgage rules, which take effect Jan. 10, will tighten credit and restrict income even more.
“It’s kind of sad when we have to pass laws where the borrower has to show they can cover,” McComb said. “The loan officers and the (community) banks know the customers pretty well.”
Still, he doesn’t expect the regulation to have a huge impact at $577-million-asset Heartland. Community banks, he said, “have capitalized on keeping a lot of those loans in our portfolio,” allowing for open dialogue, he said.
Evan Weese covers funding and capital for Columbus Business First.