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Thursday, Oct. 7, 2010 09:57 am

State sends local housing loans to national bank

Three Springfield banks lose 837 loans

The Illinois Housing Development Authority is saving money by consolidating loan servicing with a national bank, but Springfield-based banks are losing out, along with dozens of other Illinois banks.

From March to August of this year, the state agency that provides home loans for low- and middle-income first-time homebuyers and veterans consolidated 7,037 housing loans that had been serviced by 32 Illinois banks to the Bank of America, based in North Carolina. Meanwhile, three Springfield banks lost the revenue generated by a total of 837 loans they had serviced before the consolidation. Marine Bank of Springfield lost 257 loans, Bank of Springfield lost 13 loans, and Illinois National Bank lost 567 loans.

Rebecca Boykin, communications manager at IHDA, says the consolidation was done because it allows IHDA “to sell, or securitize, the mortgage loans previously serviced by 32 Illinois financial institutions.”

The move reduces IHDA’s costs to service its Single-Family Program portfolio, Boykin says. IHDA requested bids from financial institutions to service the loans and help securitize them, Boykin says, but only Bank of America and U.S. Bank Home Mortgage submitted proposals. Bank of America was determined to be the most qualified for the job. The role of banks has been to work with customers to obtain loans from IHDA, then to collect payments for IHDA and handle recordkeeping.

Sarah Phalen, senior vice president of Illinois National Bank, says the consolidation doesn’t directly take money out of the Illinois economy – loan payments will still be sent back to IHDA after being collected by Bank of America – but it indirectly means less work and less revenue for INB and other Illinois banks.

While IHDA did inform loan holders that their loans would be transferred to Bank of America, Phalen says many customers contacted INB with concerns after having issues with Bank of America during the transfer.

“A person’s home is usually their most valuable and treasured asset and it can be a bit stressful to be informed the servicing of that is moving elsewhere,” Phalen says. “Even though our lenders did not originate all of these loans and we were servicing them for other Illinois financial institutions, INB had a good relationship with those banks and their customers. We respected their relationships and did whatever we could to communicate with all parties about the loans. … As always, INB will do our very best to make sure our customers, or those we service, are provided the most current and best information available.”

Community banks like INB tend to provide a higher level of service for customers than national banks, Phalen says.

“We are able to work with customers a bit more easily and spend more time helping them on different issues,” she says. “Still, we have found that the IHDA office is very helpful as well.  They are able to cut through the red tape that you might find at a multinational bank.  Each time an IHDA customer has called INB asking us to help them with a problem at Bank of America, we are able to work with the IHDA office in Chicago to get the issue resolved.”

The consolidation is just one of many “sweeping changes” in the mortgage industry over the past 12 to 18 months, Phalen says, adding, “We just want to be sure that the consumers continue to be serviced with the same care that they had been.”

Contact Patrick Yeagle at pyeagle@illinoistimes.com.
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