LI mortgage lenders down by half since 2007

Long Island has half the number of mortgage lending branches it did in 2007, when the subprime market imploded, according to data on state-licensed mortgage bankers.

There were 93 state-approved lending branches here last year, down from 190 in 2007; 48 lenders had headquarters on the Island last year, an almost 40 percent drop from the 76 in 2007, the New York State Banking Department told Newsday.

The decline matches a statewide trend in an industry that had a huge part in bringing down the nation's economy, and Rholda Ricketts, deputy superintendent of banks, is concerned about whether consumers can now get the best loans possible, given the cuts.

Issue of competition

"Once the market contracts, you always have the issue of competition . . . that would allow for pricing variations that's necessary for consumers to shop around," Ricketts said. "You're looking for consumers to be able to derive a benefit by shopping between lenders."

The ranks of lenders have thinned for several reasons, and while major national players, such as Bank of America and other FDIC-insured institutions have survived, most state-licensed lenders are small and midsize, more vulnerable to housing and credit market forces, industry veterans said.

Like the home sales business, where inflated prices have been falling, the lending world is in the midst of a shake-up to reach a balance between supply and demand.

Ricketts said tougher borrowing requirements have been drying up the pool of customers, leaving lenders thirsty.

"When an investor is demanding 20 percent down, you need to have people who can put that 20 percent down," she said.

Many lenders consolidated, filed for bankruptcy or had key licenses stripped by federal and state regulators, Ricketts said.

In the past three years, at least four major lenders headquartered on the Island met one of those fates: Lend America, Topdot, American Home Mortgage and Delta Financial Corp.

'Survival of the fittest'

"It's survival of the fittest," said Zahra Jafri, president of Lynx Mortgage Bank, a small lender with Westbury headquarters and a branch in Manhasset.

From her 20-plus years industry perspective, she thinks the landscape here is still "saturated" with home lenders. Not all the irresponsible lenders are gone, she said, but the smaller number has led to an annual 15 percent growth for Lynx in the past two years.

"It's not about the quantity," Jafri said. "I think we have to focus on the quality of the shops that are still open."

The Center for Responsible Lending, a nonprofit watchdog group based in Washington, views the nationwide downsizing as good news for consumers, said spokeswoman Kathleen Day.

"They were in many cases mills that churned bad products out as fast as they could to get fees," she said. "I haven't heard of a great, wonderful lender who's been totally put out of business."

State officials said 22 new branches opened on the Island last year, but lending veterans said double that number open in normal years.

In the past year, Continental Home Loans of Melville has opened seven offices in New York and New Jersey and hired 150 people, said chief executive Mike McHugh, for a total of 17 offices and 400 staff.