Local banks still lending, but wary of foreclosures
BY MARY LANCASTER INDEPENDENT WRITER

With the nation's major banks toppling like dominos, it should be comforting to islanders to know that the two local banks are still lending, but with somewhat tighter guidelines, and are confident in their institutions' solvency. The bad news is that while neither have experienced foreclosures within the last year on Nantucket properties they have mortgaged, as the economy's woes deepen there is a greater potential that such action could occur this winter.

Beth Ann Meehan, the senior mortgage loan officer for Pacific National Bank, owned by Bank of America, said that Bank of America, which recently acquired the investment bank Merrill Lynch, is one of the most sound financial institutions still standing with more capital than any other bank in the country.

"We have been seeing increased deposit growth in the last few months. Our deposit growth has been a positive thing in these economic times," said Meehan. "We were never involved with the sub-prime business, so Bank of America's lending portfolio is healthier than other banks. Money is still available for mortgages and personal and business loans, and the restrictions are as they have always been — you need good credit and

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have to be able to afford your payments. It's the age-old wisdom.

"We are stable. Because we are not sub-prime lenders we were strong going into the crisis, but now we have slightly tighter lending practices such as you need a higher credit score or higher down payment, and for jumbo loans over $417,000 a review of two years of tax returns is required," she explained. "Now everything is reviewed closely for the debt-to-income ratio to make sure you can afford that loan."

Bill Hourihan, president of Nantucket Bank which is a division of Sovereign Bank, echoed the confirmation that funds remain available for lending to qualified applicants and of the stability of his institution.

"The lending window is open with rates that are competitive and better for conventional mortgages than for jumbos," said Hourihan, noting that situation is reflected nationally. "The jumbo market has been affected by higher interest pricing. Our product mix was not as extensive or creative as at other banks in the last five years. It has been similar to what it has been, and we have always tried to be careful in our lending decisions."

Hourihan said Nantucket Bank has not foreclosed on any island mortgages within the last year, though he did acknowledge that there have been more overdue mortgages in that period than in the previous three to five years when delinquent home loans were virtually non-existent.

"There is serious potential for a number [of them] that could happen this winter," he predicted about foreclosure action, which does not necessarily end in actual foreclosure. "On the pure volume of business with our market share here in an economic downturn, we are not going to escape without problems."

The number of overdue personal loans through Nantucket Bank has also risen during the last six to nine months, though Hourihan said the dollar amount is not alarming because those loans are smaller than mortgages. In his view, the nation's financial crisis particularly affects Nantucket Bank because customers are confused about the gravity of the situation and about the safety of the bank where they are borrowing and saving.

"We have a good capital position, we have liquidity, we have good management and we are in a good market from Philadelphia to New Hampshire," said Hourihan. "Globally, Sovereign has not suffered a deposit run-off which has gotten other banks in trouble. We (Nantucket Bank) only lend on Nantucket. We know our customers and we know the area."

Meehan, who is not aware of significant delinquencies with personal loans through her bank, said she has been receiving calls from non-Bank of America customers who are seeking advice about the home loans they are carrying and about available bail out programs.

"I'm trying to stem the tide. There are government programs that went into effect October 1. If people are in trouble they need to reach out to their existing lender and find out if they are eligible for any of these programs. They are not inquiries I can direct here because I'm not trained in handling people about to go into foreclosure, but there are resources out there for people getting into trouble," said Meehan.

"I feel fortunate to have landed with Bank of America and be part of a strong bank. It seems they are being a leader in helping with some of these distressed loans out there," she continued. "I think the island is lucky we have a strong bank here, and we need two banks. Bill Hourihan has done so much for this community." I