BANKING & FINANCE OVERVIEW
fraud in Fort Lauderdale is a testament to the significant ongoing mortgage activity in the market. CoreLogic reported that fraudulent mortgage applications dropped 26% across the country during 2Q20. One of every 164 mortgage applications contained indications of fraud at the end of the quarter, while the proportion was one in 123 in 2Q19. The record volume of mortgage refinances fostered by historic low interest rates is the primary factor behind this fall. Fort Lauderdale also showcased a drop mirroring the national trend, falling from top of the list to third place nationally. Even the pandemic couldn’t discourage companies from betting on Fort Lauderdale’s effervescent mortgage market. In September 2020, Re/Max Holdings acquired Wemlo, a 20-month-old mortgage processing startup based near Fort Lauderdale. Fort Lauderdale’s mortgage market has also eyes on the Biden administration as a harsher stance against predatory lending is likely to be adopted, particularly directed at installment lenders. While South Florida’s real estate market continues to sizzle in the unprecedented low interest rate environment, calls for caution are multiplying. Ken H. Johnson, a real estate economist at Florida Atlantic University’s College of Business warns that home prices have been on the rise uninterrupted since 2012 but a halt is just around the corner. What is more, he estimates South Florida homes to be overvalued by as much as 20%. Even if mortgage rates are expected to remain low at least until 2023, consumers should be wary of rising rates or properties of sale, as they could very well flatten home prices. On the plus side, mortgage underwriting has improved dramatically compared to where it was during the 2008 crisis, while individual credit scores are virtually at an all-time high since 2012. Competitive environment Given COVID-19, forecasts for the M&A market were on the downside in March 2020, but it didn’t pan out that way. In fact, dealmaking numbers climbed both globally and nationally, although the overall dollaramount in the United States was lower than in 2019. During the second half of 2020, the world saw a flurry of deals that sent total M&A value to $3.6 trillion, according to Refinitiv data. While representing a 5 percent decrease for the same period in 2019, the segment demonstrated a definitive improvement and a strong sign of recovery compared to the first half of 2020. In the United States alone, the number of deals was up on 2019, although the overall value in 2020 dropped 21% to $1.4 trillion. Leading deals included S&P Global’s $44 billion
Kevin Rogers South Florida Regional President Seaside Bank and Trust
What lessons were learned througout the PPP process? As a smaller community bank, we did not have thousands of applications that a large regional bank would have. Their clients were directed into a portal, falling in line. The biggest complaint was they did not have any communication with their bankers. The application went through the portal and they were left waiting to hear back from someone. Our clients came directly to the bankers, and therein lies the difference. We were talking with our clients, entering the portals for them and we were able to communicate. When we got the approval from the SBA, we were able to go back to them directly to announce their approved status. The biggest issue right now is the forgiveness phase. There is still all kinds of noise out there. Clients think the SBA is going to come up with a program that will waive everyone but you have to go through a process. The work we are doing now seems to be just as involved as in the first phase because we have to communicate with our clients to make sure they go through the forgiveness process. What regulatory issues are you keeping an eye on? Believe it or not, COVID-19 is not our biggest challenge or concern. We consider ourselves a wealth management private bank and as such, it is considered high risk by the Federal Reserve and the government. We are always concerned about anti-money laundering, tracking money and related issues. It’s difficult to onboard any client as we have to be strict and thorough with our due diligence and background checks to ensure we are dealing with people who do not have any negative news or issues in the past that can come back to haunt us. In parallel, we are always cautious about fraud, hacking and things going on in the banking industry. That would be our primary concern. We regularly have meetings with our employees about being careful when we are sending wires, for instance. We make sure we know who we’re talking to, that we know it’s our client we’re talking to. www.capitalanalyticsassociates.com
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