Mortgage Mania Keeps Marching

Top 5 Non-bank Lenders
• Click here to see this chart. (Chart requires Adobe Acrobat viewer. Click here for a free copy.)

Interest rates may be on the rise and the home refinancing boom over, but loan origination offices have been popping up all over Northwest Arkansas, and the industry shows no sign of slowing.

All told, there were about $5.82 billion worth of mortgage loans made in Benton and Washington counties in calendar 2003. That averages out to $174,080 per mortgage.

Of those loans, 29,387 transactions worth $4.72 billion were made by the 40 institutions on the Northwest Arkansas Business Journal’s 2004 list of the area’s largest mortgage lenders. The complete listing is on page 37.

Combined, the top 10 lenders on the list made 21,731 loans and account for about 73.9 percent of the two-county total.

Last year, the Business Journal calculated that 36 lenders processed 35,049 loans worth about $4.37 billion in 2002. If numbers for both years are correct, 16 percent fewer loans were made in 2003, but for an 8 percent higher dollar value. Due to a variation in source data and how it was compiled, edited and tabulated, however, there is a small possible margin of error in the comparison, although the gist is the same.

This year’s list is ranked by number of mortgages processed by a company within the calendar year and deliberately excludes credit unions, family trust transactions or any company processing fewer than 75 loans within the year. Commercial mortgages are included.

Waco Title Co. of Springdale supplied the raw data consisting of lenders, dollar values and closing dates.

Bentonville’s Arvest Bank Group Inc. alone processed more than 9,887 loans in the two counties, totaling more than $1.27 billion in 2003, down 8 percent from 10,792 transactions in 2002, but up slightly in value from $1.18 billion.

It’s not surprising that the bank with a 42 percent market share in the Northwest Arkansas metropolitan statistical area (see story, p. 1) would have such a large bite of the mortgage pie. In fact, the bank processed 29.4 percent of the 33,524 mortgages made in Benton and Washington counties last year. The 2002 cycle was believed to be the first time an Arkansas institution had crossed the $1 billion mortgage threshold. Bank officials recently said they are on track to do it again in calendar 2004.

What is surprising, however, is the giant gap between the No. 1 and the No. 2 spots.

The latter is held by Arkansas National Bank of Bentonville, which processed 1,755 loans in 2003. That’s a full 8,132 fewer transactions — 82 percent less — than Arvest.

The number of transactions per mortgage lender falls off from there.

Non-Bank Lenders

Despite the local heavyweight champion of lending and the jumble of data on the lenders list, one trend shines brighter than any other: the rapid market share growth of non-bank, out-of-area lenders such as Chase Manhattan and Wells Fargo.

Kay Weiderhaft, sales manager of Chase Manhattan Mortgage in Rogers, increased her firm’s Northwest Arkansas business by 178 percent from calendar 2002 to 2003.

Justin Moore, branch manager for Wells Fargo Home Mortgage, has increased that firm’s Northwest Arkansas business by 103 percent in the same period.

Wells Fargo is the only out-of-area, non-bank lender in the Top 10. The other nine are banks. And of those, only Bank of America and Regions Bank are chartered outside of Arkansas.

This suggests most people prefer to deal with familiar in-state bankers to process their mortgages, even though banks turn around and sell most of the loans in the secondary market.

Many banks sell to the wholesale arm of mortgage companies like Wells Fargo and Chase Manhattan. Some, like Arvest, boast the ability to service customers’ loans even after selling them on the secondary market.

Wells Fargo Home Mortgage, which is the retail arm of the larger national bank, is headed by Moore in Northwest Arkansas. He oversees three offices in the area.

WFHM moved from the No. 10 slot in 2002 to No. 3 in 2003 with a 103 percent increase in the number of transactions (from 805 to 1,636).

Moore attributed the growth to the quality and quantity of his staff. Wells Fargo had only two mortgage originators in 2002, but now has 13 people working on loans in three offices, he said, and he’s looking to hire more. The Springdale office, the first for WFHM in Washington County, just opened the first week of October.

Moore’s offices also began tracking every single loan processed, he said. He found that the vast majority came from Realtor referrals, customer referrals and repeat customers and not from advertising, he said.

“That has been our growth,” Moore said, adding that he’s competitive, but that WFHM isn’t always the lowest in price.

“There’s always someone out there with an eighth of a percent off,” he said. Service and a huge offering of flexible products has helped the company, he said.

“We just do everything we can for these people,” Moore said.

He and Weiderhaft, sales manager of Chase Manhattan Mortgage, both said the refinancing boom of 2002 and early 2003 helped their numbers, but that their firms did not focus on refinancing. Each said their focus was on the new purchase market, because they knew the refinance boom was finite.

Refinancing was just bonus for the business, Moore said. Between 25 percent and 28 percent of the WFHM business was refinancing in 2002 and 2003, but that has slipped to about 14 percent this year, he said.

“We were out there talking to Realtors … pursuing the purchase market,” Weiderhaft said of Chase Manhattan’s business.

Chase’s local retail operation moved from No. 27 to No. 16 by processing 474 loans in 2003 compared to 170 in 2002. The Rogers office didn’t open until April of 2002 and the Springdale office didn’t open until November of 2002, so numbers from that year are skewed. Weiderhaft oversees four local loan originators.

She said being a non-bank lender has a great advantage because she doesn’t have to worry about selling loans on the secondary market. Weiderhaft said she can also focus on just one product and not have to deal with pressures to push other bank-related products.

There’s a minimum of two people on staff who can speak fluent Spanish, Weiderhaft said. She couldn’t say what percent of the local business is Hispanic, only that that market has been good for Chase overall.

Weiderhaft said about 30 percent of her business is done in neighboring states. Those are numbers that would not show up on the Chase’s closings in the two-county area.

“It’s really important to differentiate yourself in a market,” she said, noting that diverse products are another factor for Chase.

Another key to Chase’s success, she said, was hiring quality lenders who are known in the market. But the Chase’s out-of-market brand name hasn’t hurt any either, she said.

“We do a lot of high dollar stuff and a lot of low dollar stuff,” she said. “My emphasis is on quality and not quantity.”

Chase’s average loan in 2003 was for $119,919.

More Analysis

As far as the average amount per loan, Chambers Bancshares of Danville was the clear winner in 2003. The holding company loaned an average of $1.07 million on 211 loans.

Chambers Bancshares is the holding company for Chambers Bank of Danville and the former Fayetteville-based Community Bank of North Arkansas. Community was renamed Chambers Bank of North Arkansas in October. The two operations’ mortgages were combined for 2003 because the transactions essentially trickled to the same company within that year.

Other banks that were acquired, such as First National Bank of Springdale and Superior Bank FSB of Fort Smith, were not combined with their purchasers’ loans because the buyouts happened throughout the year and some were not complete until the end of 2003. Therefore, FNB of Springdale and Superior’s numbers are on the list, even though they technically no longer exist.

Robert Taylor, president and CEO of Chambers Bank of North Arkansas, said the average loan value might be impressive, but that his institution did not grow by $21 million last year.

Chambers is a commercial-development focused lender, Taylor said, and some of the mortgages may indicate multimillion-dollar closings although some are on a “draw” agreement where the borrower withdraws only a small amount of the loan at a time.

Taylor said the bank also closed on a lot of large commercial loans last year, but many times Chambers will sell part of the loan to other banks in the state.

“We are short term lenders,” he said. The average commercial loan from Chambers is from two to three years, Taylor said.

Chambers had about $10 million in loans on the books last year, Taylor said.

Another factor contributing to the high average dollar amount could be commercial refinances, Taylor said.

The next top lender in terms of dollar value was ABN Amro Mortgage Group Inc. of Troy, Mich., whose average was $387,401. Eighty-two percent of ABN Amro’s mortgages were in Benton County.

Chambers Bancshares had 133 mortgage transactions worth $110.1 million in Benton County and 78 mortgages worth $117.6 million in Washington County for the year.

Benton County beat Washington County by $4,842 in average loan value, but there were 234 more mortgages in Washington County for the year.