I have just come across this and thought it was so good and so simple that I had to share it. Please remember that anyone who is around about 45 years older and more will recognise what you are about to read: this is exactly how it used to be.
“One case in point is Hudson City Bancorp, a 140 year old company based in Paramus, New Jersey that has managed to avoid the mortgage meltdown and continues to post tremendous results. Business journalists have discovered this quiet little outfit and marvelled at its strategic insights. Its shares are up 50% since last August, when the credit crisis really kicked in. "Hudson City banks the old-fashioned way," Newsweek marvelled. "It takes deposits and makes mortgages to people who buy homes in which they plan to live. And then it hangs on to" the mortgages, rather than sell them in the secondary market.
Imagine the brilliance! Take deposits. Make sensible loans. Repeat over and over again, until your market capitalisation approaches $10 billion.” PLEASE NOTE THE IRONY!!
The New York Times tried to unpack the secrets of Hudson's success and offered this analysis: "The bank carefully screened loan applicants to ensure they would be able both to afford a new house and reside there, rather than flip it. And the bank demanded hefty down payments ... as a cushion against any sharp drop in home prices, because it planned to hang on to the loans."
What a formula! Make sure borrowers can afford their loans. Insist that they make a big down payment. Favour owners over speculators. AGAIN NOTE THE IRONY!!”
The real benefit of what this traditional, safe and sensible mortgage provider does is easily seen in the following figures:
“The bank has written 100,000 mortgages worth $26 billion and has a grand total of 15 foreclosures. Not 15%, just 15 mortgages out of 100,000.”
So, here is the model of what we used to do in the pre Thatcher days. So what went wrong? It’s obvious isn’t it?!
DW
No comments:
Post a Comment