Alabama Banks Join Forces to Fight Predatory Lending

 11/06/2006

Ala. banks join forces to fight predatory lending

Birmingham Business Journal - November 3, 2006

by Tiffany Ray

Staff

A group of Alabama banks, nonprofits and government agencies have teamed up to fight predatory practices among mortgage lenders with a series of public education campaigns intended to teach homebuyers what predatory lending is, what it means to them and how they can avoid it.

For its first effort, the Coalition Against Predatory Lending, as the group is called, pulled together $8,000 to fund a four-minute video and a 30-second public service announcement warning homebuyers of companies selling inappropriate lending products. The spots will be aired throughout the Charter Communications network in north central Alabama. The group also has produced DVDs that have been distributed to housing counseling agencies across the state.

For its next project, the coalition plans to reach out to homebuyers throughout the state through a yearlong campaign using a combination of television, radio and print spots.

Martha Walters-Pierce, senior vice president and Community Reinvestment Act officer for Birmingham's New South Federal Savings Bank, which has helped spearhead the project, said she hopes to reach homebuyers before they sign on to mortgages that could lead to foreclosure or other financial distress.

The group is nailing down plans now for the campaign and plans to start fundraising efforts early next year to collect the $160,000 it will need to finance the effort.

Walters-Pierce said predatory lenders may be selling mortgage products - such as adjustable-rate or interest-only mortgages - that are not only legal but appropriate for certain buyers. The practice becomes predatory when lenders take advantage of buyers who may not understand the terms they're being offered and sells them a mortgage product that is inappropriate to their situation.

Selling a product "that is not appropriate to someone who is vulnerable, and they don't understand, that's when it gets predatory," Walters-Pierce said.

For example, a 70-year-old mortgage applicant on Social Security is in a much different financial position from an executive earning $300,000 a year, Walters-Pierce said.

The most vulnerable markets, she said, are first-time buyers, minorities and the elderly.

Walters-Pierce said Alabama does not appear to have seen the proliferation of exotic loan products more prevalent in other markets, but their use may be increasing. "Unfortunately, when you get into a predatory situation, when it gets into foreclosures, that's when people start fussing," she said.

Rayanthnee Patterson, senior program associate for the Birmingham office of Seedco, a community development organization, said combating predatory lending practices is a Seedco national objective. Indeed, the organization has spearheaded similar campaigns in New York, Memphis, Baltimore and other cities. "I thought it would be a good idea to do it in Alabama," she said.

Patterson and other coalition members began talks 18 months ago about what they could do to gather information on the topic and make the public more savvy in choosing the appropriate loan structure for their home mortgages.

The biggest obstacle, Patterson found, was a lack of statistical data showing how much predatory lending was actually going on out there.

Walters-Pierce said few complaints have been logged in the state, but that may be due to a lack of understanding among homebuyers that they have been sold an inappropriate product, or an unwillingness to admit it. "We decided that we know it's out there (and) the best way to combat it is to educate people," Walters-Pierce said.

In addition to New South Federal, contributors to the initial campaign included the Alabama Federation of Housing Counselors, Compass Bank, AmSouth Bank, Regions Bank, Fannie Mae, the Homeownership Consortium of Alabama Inc. and the U.S. Department of Housing and Urban Development.

New South Federal CEO settles in

 10/23/2006

New South Federal CEO settles in

Birmingham Business Journal - October 20, 2006

by Tiffany Ray

Staff

Senior executives of the thrift say he will also bring a national perspective to the Birmingham institution.

New South Federal appointed Larson to the job in late August, after its former CEO, Robert M. Couch, was tapped by President Bush to oversee the Government National Mortgage Association, or Ginnie Mae.

William Ratliff III, New South's chairman, said Larson's diverse background will be an asset to the company.

Aside from his traditional banking experience, Larson has served in the executive ranks of companies focused on mortgage lending, online financial services and auto lending, all areas in which New South has a strong foothold.

And with Larson now on board, New South is in the midst of kicking off a major strategic planning effort in conjunction with its current annual budgeting process in which company leaders will identify new target markets and untapped business prospects for the coming years.

As Larson said, "Each of our businesses has growth opportunities."

A Colorado native, Larson earned a bachelor's degree in physics and a master's degree in business administration from Washington University in St. Louis. Since that time, his varied career has taken him to California, New York and Houston, among other locales.

Eight early years spent in marketing led to his career in banking when he was recruited to join Citibank in New York, where he served as director of consumer banking until 1983.

That year Larson moved to California to serve as chief operating officer for Citicorp Savings, a $3 billion institution with 1,000 employees and nearly 100 retail bank and mortgage lending offices throughout the state, he said.

Eventually, Larson became president of Northeast Exchange, a subsidiary of Citicorp in which he oversaw the development of an ATM network throughout the New York metro area market.

Larson later served as president and CEO of Maryland-based B.F. Saul Mortgage Co., a $6.5 billion residential lending business. In the late 1990s he was president and chief operating officer of Mortgage.com, a Florida-based Internet mortgage lender. From 2000 to 2005, Larson made another leap, this time to Beverly, Mass., where he served as president and CEO of Monetrics Inc., a venture capital-backed tech startup providing automated underwriting services to auto lenders.

Since joining New South a couple of months ago, Larson has traveled frequently between Birmingham and Palm Beach, Fla., where he lived previously, while focusing intently on New South's market.

Ratliff acknowledged that Larson's status as a newcomer to Alabama might be an early challenge, but only to a degree. Although the bank's headquarters, and much of its employee base, is here, Alabama represents less than a third of New South's deposits and only 15 to 20 percent of its lending activity, he said. "We're not a community bank in the sense that most of our activities take place within a small geographic area."

With offices in 20 states stretching from Nevada to Maryland, New South operates within a broad geographic footprint. From that standpoint, Larson's "national perspective is something of real value to us," Ratliff said.

Larson joins New South Federal at a time when the company is reporting record earnings, Ratliff said. The new CEO's mission, the chairman said, will be to lead the company to continued success, helping it expand its reach and capabilities.

As of June 30, New South reported total assets of nearly $1.8 billion, up from $1.6 billion the year before. Its deposits exceeded $1.2 billion, up from about $1.1 billion last year.

The company's employee base shrank during that year from 542 to 460, due largely to New South's decision to outsource loan servicing operations that were previously handled in-house at the Birmingham headquarters.

While discussions remain preliminary, Larson said New South Federal's expansion plans could include a bigger step into online financial services.

Umbrella Bank, the Internet bank New South Federal acquired in 2004, holds promise for the company as the Internet becomes increasingly accepted by consumers, he said. Commerce on the Internet has grown enormously, Larson said, "and it's just getting bigger and bigger and bigger."

The company also is considering taking its mortgage business online. Currently, about 8 percent of all consumer-direct mortgages are done online, Larson said. That's up from less than 1 percent six years ago.

Talk of an online economy in the late 1990s, he said, has now turned to "less talk but more growth."

With recent merger activity creating new opportunities for Alabama banks, Ratliff said adding retail branches also is a possibility.

Larson said increasing consolidation in the financial services industry also opens the door for New South Federal to expand its base of midsize customers.

"We see a tremendous opportunity for growth," he said.

Despite slowdowns in some real estate markets, Larson said New South's diversified business and geographic mix position it to weather such storms.

Ratliff agrees. "We're very fortunate in that we not only are diverse across lines of business but we are diverse across geographic markets."

For future expansion, Larson said, he'll look to other U.S. markets with similar demographic and economic profiles to New South's existing ones.

In tandem with those plans, Larson said he intends to look at ways to increase New South's share of business in existing markets through better customer service.

"If you are an integral part of your clients' business, you're going to grow market share when your clients' businesses grow," he said.

Along with the professional challenge, Larson said he was attracted to New South Federal because of its commitment to community efforts.

The thrift is involved in a range of financial education and community service programs through the Birmingham Homeownership Center and several other groups.

New South Federal named one of Birmingham's Best Places to Work

 09/29/2006