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2020 Rocks Home Loans Amid COVID-19Lock Icon

5 min read

The surprise tandem that made home sales especially memorable for residential realty companies last year made 2020 equally unforgettable for mortgage lenders.

Historically low interest rates and a coronavirus-fueled housing market combined to generate record business for underwriting home loans.

Arkansas lenders rode the same wave forecast to carry the U.S. total for mortgage originations beyond $4 trillion when the final nationwide numbers are tallied in the coming weeks.

Fayetteville’s Arvest Bank, the largest mortgage lender in Arkansas, registered a year-over-year increase of 59% as its in-state tally topped $1.7 billion during 2020.

“Late 2019, business started picking up,” said Steven Plaisance, president and CEO of Arvest’s mortgage division. “We entered 2020 pretty busy.

“Once COVID hit, that sent interest rates even lower and opened the floodgates to record production nationally.”

During 2020, Arvest financed mortgages totaling nearly $4.7 billion primarily across its footprint that includes Oklahoma, Missouri and Kansas. That established a new highwater mark shattering its previous record of $2.8 billion in 2019.

“We helped more than 21,288 families with new loans to refinance old debt or purchase a new home,” Plaisance said of 2020. “It was a very productive year. I’ve been in mortgage lending for 29 of my 31 years in banking. This one has been as intense as ever.”

The same forces that boosted its volume of in-house mortgage originations mushroomed Arvest’s loan servicing portfolio beyond $65 billion. Extending to all 50 states, the lender’s servicing portofolio encompassed more than 336,000 mortgages at year-end.

Plaisance said the 2020 surge of business hasn’t abated with the start of the new year. A nearly $1 billion pipeline of loans in process now assures a busy first quarter for mortgages at Arvest.

“It is the largest it’s ever been despite coming off a record year in 2020,” Plaisance said.

“There are still loans in play. How many borrowers could refinance but didn’t look at it in 2020? As of right now, there’s an abundance of opportunity out there. It’s been quite a run for sure and busy everywhere.”

More Mortgage-Backed Space

The outbreak of COVID-19 is credited with spreading residential discontent among homeowners who wearied of their living quarters under the work-from-home and quarantine model.

Many homeowners refinanced debt to simply lock in on a better interest rate while others reworked mortgages to fix up or remodel their living space.

Many went house hunting and borrowed to buy bigger with an eye toward more home office space and more elbow room for the kids and the demands of distance learning. The pandemic-induced cabin fever that drove buyers into the housing market baffled and astonished.

“When the pandemic hit, no one knew what would happen,” said Bill Edwards, CEO of mortgage lending at Little Rock’s Eagle Bank & Trust. “When rates go low, you will have a whole lot of volume. I would’ve thought it would’ve been on the refi side.”

Pandemic notwithstanding, homebuyers went on the move in all the Arkansas markets where Eagle Bank does mortgage business: Little Rock-North Little Rock, Benton-Bryant, Conway, Fayetteville, Bentonville, Jonesboro and West Memphis.

“More than 50% of our volume was purchases,” Edwards said. “Historically, the second and third quarters are our best quarters. The real volume push this year didn’t come until May.”

From what he’s seen so far, 2021 is starting off strong and promising.

“The first quarter of this year will be better than the first quarter last year,” Edwards said. “It will be substantially better in the first quarter. The rest of the year? That’s anybody’s bet at this point.”

The big double-digit growth in Arkansas home sales in 2020 also registered on the books of Arkansas mortgage lenders.

Eagle Bank & Trust closed more than $604 million worth of mortgages for the year. That represented a whopping one-year increase of 96% shared with Little Rock’s Bank of England Mortgage, where the mortgage total ballooned to $319 million last year.

The dollar volume of Arkansas mortgage lending by Regions Bank of Birmingham, Alabama, reached $490 million, an 84% bounce over 2019. At Pine Bluff’s Simmons Bank, the year-over-year mortgage growth in Arkansas approached 82%, hitting $616 million.

“Unprecedented” is how Michael Powell, mortgage division president for Simmons Bank, described the mortgage lending market in 2020.

“I remember reading about COVID in China in January,” he said. “Right around March, I thought ‘I don’t know how this is going to work out’ but wondered if it would be horrific for the housing industry.

“We saw the refinances coming. But it was unimaginable that people would go out and buy homes like they did, that people would be comfortable touring property and getting out and about during a pandemic.”

As with other business sectors, the phenomenon of the home becoming the new office is making its operational impact on the mortgage lender.

“About 90% of our staff is working from home,” Powell said. “That is producing a challenge to maintain a sense of community within the business unit.

“You’re going to have employees, going forward, who request to work from home. We’ve proven the past months that it can be done. What we have to all adjust to is the camaraderie that we lose through email communication.”

He is still seeing big demand to refinance homes and purchase new ones, although housing inventory is down from all the sales activity in 2020. Favorable interest rates remain in play with the ever-popular 30-year fixed-rate mortgage as the funding vehicle of choice among homebuyers.

Other lenders reporting big gains in Arkansas mortgage lending include Searcy’s First Security Bank at nearly 76% with a total of more than $416 million; Jacksonville’s Arkansas Federal Credit Union at 62% and surpassing $224 million; El Dorado’s First Financial Bank at 54.5% almost reaching $168 million; and Conway’s Centennial Bank at nearly 46% approaching $560 million.

Tracy French, president and CEO of Centennial Bank, said the same homebuying spree that swept across Arkansas markets washed over the bank’s markets in north Florida and south Alabama.

French notes that a seller’s market has become more common with a dwindling number of homeowners putting their house on the market. That is helping buoy a healthy homebuilding scene in markets such as northwest Arkansas.

“We think it’s going to be a good bell-curve type thing, with activity picking up in the spring,” he said of continued demand for home loans. “The economy is still good, and a lot of people are moving around and upsizing.

“The mortgage business in 2020 was certainly a good year for business. Who knew what was going to happen back in March?”

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