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Loan market forever changed, Chamber luncheon participants told
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| Guest presenter: Ron Curtis, vice president and regional credit manager of National Bank of Arizona spoke Friday at the Benson/San Pedro Valley Chamber of Commerce luncheon. (Thelma Grimes/photo.) |
Thelma Grimes/San Pedro Valley News-Sun
Gone are the days of walking into a bank, giving them a name, and getting a loan immediately.
Ron Curtis, vice president and regional credit manager of National Bank of Arizona, spoke about the current loan market and the continued road to recovery for the national economy Friday at a luncheon hosted by the Benson/San Pedro Valley Chamber of Commerce.
"A few years ago, there seemed to be too much capital and too little interest rates," Curtis said. "A lot of these large institutional investors bought at higher rates of return. They created these sub-prime markets. They loosened up all kinds of lending. Some banks, and many non-bank lenders, introduced no-doc loans. In other words, sign your name, say this is what my income is, and you qualify."
A lot of people got into the housing market, investors flocked to it, and prices starting climbing. It had to adjust at some point, Curtis said.
"Credit cards were available from everybody. You could get a credit card from anywhere, department stores, even the alumni association," Curtis said. "Something had to happen. Consumer debt hit an all-time high. With all this demand, there had to be a correction; we couldn't keep going like this forever."
Now, many people could no longer qualify for homes they are already in. However, Curtis noted that Benson is not as bad off as many other areas such as California or Nevada.
"Demand for goods and services has slowed," Curtis said. "All the loan defaults caused a lot of pressure on banks. Because of capital, a lot of banks shut down completely."
With defaults increasing, Curtis said banks just stopped lending, which is where the market is right now.
While the residential real estate market has already crashed, Curtis said banks are now looking at commercial buildings, noting that many office buildings are either not full, or tenants are struggling to make lease payments.
Curtis also touched on the bailout the federal government approved to help banks recover. While some believe the bailout was free, Curtis said banks have to pay.
"I know they keep talking about bank bailouts; that's political rhetoric," Curtis said. "For our funds we pay 5 percent back to the government. It is not a free bailout at all."
National Bank received about $1.4 billion in bailout funds at the end of 2008. National Bank is part of Zions Bank, which is the holding company.
Curtis said since receiving federal assistance, Zions has also approved $28 billion in loans, and has helped get other banks back on their feet.
To further stabilize the confidence in banks, Curtis said insurance limits were also increased over the last year, noting that National Bank's premiums have increased from $3.5 million to $6 million.
"But it did bring stability; it has helped," Curtis said. "If you look at how that program is working, it has done what it was supposed to do, despite what some politicians may think. It was a good plan, and we have been very wise with the funds that we have received."
Curtis said National Bank has continued to approve loans and operate.
On a "go forward" basis, Curtis said National Bank will continue to make sure that the loans they approve make sense, therefore, taking a closer look at the primary and secondary-sources of income.
Curtis said days of giving loans to anyone are over, noting the market has changed forever.
Gone are the days of walking into a bank, giving them a name, and getting a loan immediately.
Ron Curtis, vice president and regional credit manager of National Bank of Arizona, spoke about the current loan market and the continued road to recovery for the national economy Friday at a luncheon hosted by the Benson/San Pedro Valley Chamber of Commerce.
"A few years ago, there seemed to be too much capital and too little interest rates," Curtis said. "A lot of these large institutional investors bought at higher rates of return. They created these sub-prime markets. They loosened up all kinds of lending. Some banks, and many non-bank lenders, introduced no-doc loans. In other words, sign your name, say this is what my income is, and you qualify."
A lot of people got into the housing market, investors flocked to it, and prices starting climbing. It had to adjust at some point, Curtis said.
"Credit cards were available from everybody. You could get a credit card from anywhere, department stores, even the alumni association," Curtis said. "Something had to happen. Consumer debt hit an all-time high. With all this demand, there had to be a correction; we couldn't keep going like this forever."
Now, many people could no longer qualify for homes they are already in. However, Curtis noted that Benson is not as bad off as many other areas such as California or Nevada.
"Demand for goods and services has slowed," Curtis said. "All the loan defaults caused a lot of pressure on banks. Because of capital, a lot of banks shut down completely."
With defaults increasing, Curtis said banks just stopped lending, which is where the market is right now.
While the residential real estate market has already crashed, Curtis said banks are now looking at commercial buildings, noting that many office buildings are either not full, or tenants are struggling to make lease payments.
Curtis also touched on the bailout the federal government approved to help banks recover. While some believe the bailout was free, Curtis said banks have to pay.
"I know they keep talking about bank bailouts; that's political rhetoric," Curtis said. "For our funds we pay 5 percent back to the government. It is not a free bailout at all."
National Bank received about $1.4 billion in bailout funds at the end of 2008. National Bank is part of Zions Bank, which is the holding company.
Curtis said since receiving federal assistance, Zions has also approved $28 billion in loans, and has helped get other banks back on their feet.
To further stabilize the confidence in banks, Curtis said insurance limits were also increased over the last year, noting that National Bank's premiums have increased from $3.5 million to $6 million.
"But it did bring stability; it has helped," Curtis said. "If you look at how that program is working, it has done what it was supposed to do, despite what some politicians may think. It was a good plan, and we have been very wise with the funds that we have received."
Curtis said National Bank has continued to approve loans and operate.
On a "go forward" basis, Curtis said National Bank will continue to make sure that the loans they approve make sense, therefore, taking a closer look at the primary and secondary-sources of income.
Curtis said days of giving loans to anyone are over, noting the market has changed forever.
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