East-West Meets Tough Mortgage Market | Local finance giant feels pinch of turbulent economy
The catchy 1-800-East West jingle that’s familiar to anyone who even only occasionally listens to a minute of radio is much more than that.
In fact, the Marlborough-based company, which is a wholly-owned subsidiary of Worcester-based Commerce Bank & Trust, says its instantly recognizable advertising campaign is helping keep 1-800-East West Mortgage afloat in an increasingly turbulent economy that has sunk other mortgage lenders.
1-800-East West’s August closings were down 17 percent compared to August of 2007, according to David Bernotas, the company’s president. And he considers East West lucky.
August was the most recent month for which Bernotas had closing volume numbers.
He said that while the 46-employee company is planning “a small cut-back in staff” in anticipation of the traditionally slow holiday season, East West is “on target.”
The company moved to a 10,000-square-foot office in Marlborough from a building it alone occupied in Peabody last year.
“We’re seeing a small decline in loan volume, but we’re on target. We will close more loans this month than we did in the last six or seven months,” Bernotas said.
Part of that is seasonal. The residential real estate market tends to adhere to the same February-May and August-October cycle year after year. More people plan on closing on a home loan in time to move before the holidays and after the end of the school year.
Bernotas said East West took advantage of interest rate dips in early September and had strong loan application volume that month resulting in “a sizeable amount” of closings in October.
“We’re an anomaly. We transact business a little differently. Our mortgage business is driven by our advertising. Our branding and our name recognition is second to none,” Bernotas said.
But 1-800 East West isn’t so much bucking a trend as it is riding one out.
Brian Thompson, president and CEO of Commerce Bank & Trust, said 1-800 East West has “scaled its business to (its) new volume level.”
East West “is still doing a lot of advertising and [re-finances], which are an important part of our business, are doing well, it’s just that there’s not as much business for anybody as there once was.”
Although it has shown slight increases very recently, the Mortgage Bankers Association’s Weekly Mortgage Applications Survey has been tracking significant fall-offs. The refinance share of mortgage activity nationwide had increased to 46 percent as of Oct. 10 from 43.4 percent the previous week.
In September, that share dipped to 34 percent and struggled to climb to slightly more than 50 percent before settling into the low-to mid-40 percent range this month.
Mortgage application volume in September was unpredictable at best and week-to-week, the association reported increases of nearly 10 percent as well as decreases of 10 percent. So far this month, the association has tracked a 22 percent loan application decrease, and increases of 2.2 and 5 percent.
The spotty, unpredictable loan volume is part and parcel of a drowning residential real estate market and a wildly unpredictable interest rate market.
Bernotas said 1-800 East West recently went through four interest rate changes in a single day.
“It’s not the business it once was,” Thompson added. “And that’s because of the real estate business and the amount of activity has lessened. We’ll be there when the market turns around one day, and we’re optimistic it will.”
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