Growing number of home sales keeping banks busy

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By Sam Bonacci

The mortgage market for home purchases in Central Massachusetts is growing on a rising tide of sales, just in time for an expected slowdown in refinancing.

For example, Bank of America, the largest bank doing business in Central Massachusetts with more than $4 billion in local deposits, has seen strong growth in its mortgage business nationwide. But is that mirrored in Central Massachusetts?

Local experts say yes. Despite a continued constrained inventory, the market here continues to be strong with consistently growing prices and sales numbers, according to such experts as The Warren Group and the Massachusetts Association of Realtors.

In Central Massachusetts, volume has soared 40 percent for home loans and home equity products, according to Cathy Pallin, Northeast regional sales executive for Bank of America. Much of that is tied to growing housing demand, she said. The bank enjoyed a refinancing spurt in the first quarter this year, but the continued growth has been in new purchases, which are up 10 percent over last year.

“The focus and the shift (have) definitely been to a purchase market,” she said.

Meanwhile, one of the largest locally-owned banks, Unibank for Savings, based in Whitinvsville, has seen a strong mortgage market for the last year and a half, according to Jeff Bajema, senior vice president of retail lending. With the economy continuing to grow, mortgage rates under four percent, and unemployment trending downward, everything is coming together to boost home purchases. Those include first-time buyers and those trading up to newer homes or looking for second homes, Bajema said.

“It's all a perfect storm for buying,” he said. “Every facet of home buying has picked up for us.”

The key for UniBank has been positioning itself to more efficiently serve customers looking to take out mortgages, Bajema said, such as adding loan officers to serve more of the existing market rather than focus on pulling in new customers.

Credit unions are getting in on the action too. Digital Federal Credit Union, for instance, has seen its purchase loans rise 30 percent year over year, according to Caleb Cook, vice president of mortgage lending for the Marlborough-based institution.

“The biggest driver is the stabilization and improved home values. That is really helping the recovery,” Cook said. “And of course, the rates are really attractive.”

Part of the growth comes from mortgages that require down payments of as little as three or five percent, Cook said. While this may carry a whiff of the loans that caused the housing crisis in 2007 and 2008, he insists that those who are taking out these loans today are vetted thoroughly and that they must still comply with more stringent lending standards that were put in place post-2008.

“I do not see it going back to the Wild West days of no income and no assets,” Cook said.

However, loosening federal restrictions on down paymentss has opened up the market, especially to first-time homebuyers, many of whom are getting assistance from family members for their down payments and finding three percent down attractive.

“We're finding a huge demand for” mortgages with three percent down for first-time home buyers who are entering the market, Cook said. “Our projection is that it will add an additional 20 percent to our (mortgage) business.”

Refinancing strong, but for how long?

One area that will likely decline in the coming years is refinancing. While local experts said it's still a strong market, low interest rates since 2009 have already brought out homeowners seeking better rates. But combine that with expected increases in interest rates and it will only put greater pressure on the mortgage purchase market in the coming months, Pallin said.

“When rates tick up a little bit, that market slows down and then everyone is out there looking for that purchase business,” she said.

That signals the future for the mortgage market in Central Massachusetts, Pallin and the other bankers said. Once rates creep up, it will dissuade refinancing, but they won't climb so much as to dissuade new buyers from looking to enter the market. So for Central Massachusetts, the future of the mortgage market is bright, barring any huge shift in rates, the bankers said.

“If (rates) trickle up slowly, you are still looking at 30-year fixed (mortgage) at the mid 4s,” said Bajema. “I see this market staying around for a while.”

With efficiency and speed being keys to capturing the purchase market, banks will add personnel to capture this market.

But they're increasingly leaning on automated processes to especially pull in millennial buyers, said Cook.

“They prefer the digital channel, so we are seeing the majority of our applications, especially from millennials, coming through over the Internet,” he said. Cook explained that the goal is to make the application process go as smoothly as possible. “If you have a slick process for that, you are going to have a good referral.”