In the world of home buying, life used to be simple.
Savings and loan associations would take in savings deposits and lend that money out to finance a home purchase. Savings and loans, or thrifts, provided straight amortized loans, with regularly scheduled payments on both interest and principal, set up over a 20- or 30-year period.
While savings and loans are still around, they are declining in popularity as new types of lenders appear on the scene. One of the developments is the growing importance of mortgage brokering. Although mortgage brokers have been around since the 1890’s, only since the 1980’s have they gained a significant place in the mortgage business.
Simply put, a mortgage is a binding agreement between lender and borrower in which the borrower pledges property (the house being purchased) to the lender to secure the loan. If the payments are not made, the lender can take the property by a judicial process called foreclosure. A broker is someone who acts as an agent for others, representing them in purchases, negotiations and sales, for a fee. Stockbrokers and pawnbrokers are familiar examples.
A mortgage broker assists prospective house buyers by analyzing their ability to repay a loan and finding a lender who will accept them as borrowers. Mortgage broker’s fees are paid by the borrower, the lender or a combination of the two. In New York and Vermont, mortgage brokers are licensed and must post a surety bond. Twenty hours of training is required before the license is issued; annual refresher courses are also required.
In a typical transaction, a mortgage broker will meet with the loan applicant and gather information to complete the application. The important items are proof of employment and income, a credit report, and a balance sheet which is a listing of assets and debts. Some brokers have their own money to lend, while other brokers use a variety of lenders to pair with the applicant. Borrowers prefer traditional loans with about 90 per cent of mortgage loans set up with a 30-year repayment and a fixed rate of interest.
For the state as a whole, New York is among the most expensive states in which to buy a house, with the state median sales price at $302,000 as of 2018. However, in Clinton County, the most recent figures show the median sales price at $145,000. In Essex County, the median price is $176,000 while in Franklin County, it is $89,000. The median amount is preferred over the mean, or simple average, because it is the value in the middle of the list of all the sales values and not as influenced by outlying factors, like a very high or very low sales amount.
Two local mortgage brokers are Advisors Mortgage Group of Lake Placid and CrossCountry Mortgage, located in downtown Plattsburgh. The Advisors office is managed by Harrison Sangster, a New Jersey native and resident of Wilmington, New York. Sangster, a U.S. Navy veteran, has had a long career in conventional banking, most recently at Glens Falls National Bank where he served as a credit officer, corporate banking officer, credit department manager and finally, Northern Region banking manager and vice president over a period of 15 years.
On the lookout for new opportunities, Sangster took the advice of a friend from grade school who suggested he contact Advisors. He’s glad he did. “It feels like family,” he told SB. Advisors operates in 30 states and has 280 employees. Sangster is the only employee in the Lake Placid office, with all of the back-office chores handled at the company headquarters in New Jersey. He does only residential loans, including purchases, refinances and home improvement loans. Most of his business lies within the Glens Falls and Plattsburgh areas, but he also does lending for vacation home purchases, particularly in Lake Placid. A smaller part of his loans is to Canadians. He focuses his days on “knocking on doors” and looking to create relationships with local realtors, attorneys and chambers of commerce. Social media is also part of his strategy to increase lending.
Sangster’s philosophy of lending is, “If it’s not to the customer’s benefit, say no.” He described a recent applicant with a promising future but who was saddled with onerous student loans. He showed him how tight his budget would be if he were to buy a house, and recommended he spend the next three years concentrating on ridding himself of the loans. Nearly all of his customers take out loans guaranteed by the Federal Housing Administration, the Veterans Administration or the U.S. Department of Agriculture. Sangster finds current construction costs for new houses at around $200 per square foot, which he regards as prohibitively high, and responsible for driving customers to existing houses. Demand is high and turnover is relatively fast compared to other areas of the state.
CrossCountry Mortgage performs the same basic functions as Advisors, but in a different market and a different way of operating. Adam Crosley manages the six-person office on Bridge Street in Plattsburgh. He’s a native of South Colton in St. Lawrence County and a graduate of the Hotel Restaurant Tourism program at SUNY Plattsburgh. He returned to the North Country after two years working in Alaska and has been in lending of various sorts since 2008. In 2018, his office handled 158 residential loans and for 2019 they are on track to produce about 185 loans. He estimates they will close loans worth about $25 million. According to Crosley his share of the local lending market is about 30%.
Some of 52 lenders Crosley uses specialize in certain types of properties or borrowers, like those with a less than optimum credit score. He said that all of his business comes from referrals and he does no advertising, noting that “people do business with those they know, like and trust.” Crosley’s service area extends from Ticonderoga to Watertown, New York, with a hot spot in Tupper Lake, but most of his loans are made in Clinton County.
“My team is the reason for our success,” Crosley emphasized. He especially singled out Nicole Mero, an experienced lender who acts as his “team captain.” He stays in close contact with all the parties in a transaction and finds that an incoming call with questions takes up 20 minutes, while an outgoing call providing information takes only two minutes. He sends out a lot of hand written thank you notes and follows up regularly with existing customers. His primary role is to act as the front man, the person who is mostly out of the office looking for business. With two young children at home, he said his goal is to get down to working only a 40-hour week.
Although conventional banks do most of the residential lending here in the North Country and across the United States, prospective borrowers would be well advised to get several estimates on what it will take to get them into a home. Talk to credit unions, banks, a savings and loan, and mortgage brokers to see where the best fit is for you.