Residential mortgage expands at TotalBank

At a time when many South Florida banks can’t get away from the residential mortgage business fast enough, Miami-based TotalBank is stepping up the pace of its lending.

TotalBank, a subsidiary of Grupo Banco Popular Español, started to emphasize its mortgage business three months ago, and aggressively staked out market niches it believes suit the region’s singular market conditions. By going after the nonresident, super jumbo and first-time buyer loan market, the bank is striking a balance between opportunities for profit and avoiding many of the risks that have stifled competitors.

“Most of the community banks in South Florida are hurting from a financial standpoint and half of them don’t have a residential presence,” said Enrique Villaronga, senior vice president and residential lending manager at TotalBank. “That gives us a big advantage in the local market.”

TotalBank is heavily focused on niche products such as non-resident, super jumbo and first-time buyer loans. Villaronga said banks that compete in the first two niches need a strong portfolio in order to retain the loans because those mortgages cannot be sold to the secondary market. Banco Popular Espanol, the third-largest Spanish bank, bought TotalBank in November 2007. Because most Spanish banks weren’t caught up in the global mortgage crisis, TotalBank’s parent gives its Florida unit a degree of stability many competitors can’t claim, particularly its ability to keep loans on its books.

“When foreign nationals want to buy a second home in South Florida, we are strong enough to hold it. When affluent buyers want to purchase multimillion-dollar properties, we are strong enough to hold the loan,” Villaronga said. “Only strong banks can offer anything above the Fannie Mae limit.”

TotalBank is also aggressively going after first-time home buyers and recently launched an affordable housing loan program. The bank has partnered with Miami-Dade County to leverage government subsidies that help home buyers with down payments. Villaronga reports a surge of summer applications for affordable housing. Despite accepting applications for credit scores as low as 620, he said he isn’t concerned about subprime meltdown at TotalBank.

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“We are always going to be in the first position,” Villaronga said. He points to a scenario in which a family of four buys a three-bedroom home in Miami for $120,000. The City of Miami is offering $86,000 in subsidy money for buyers who plan to live in the home. TotalBank’s loan-to-value on the transaction is only 60 percent, he explained.

With no bad residential loans or modifications on the books, TotalBank seems poised to leverage the growing opportunity. Miami sales of single-family homes soared 73 percent in the second quarter of 2009 from a year earlier, according to Southeast Florida Multiple Listing Service statistics. Miami recorded the highest increase of any major metro market in the state, while sales only increased by 23 percent statewide.  

“This is a good time for TotalBank to make a move into residential mortgages,” said Phillip von Doorn, a Jupiter-based bank ratings analyst at “Real estate prices are low and I expect the market to heat up, especially in Miami with so many condos available. TotalBank is getting into what appear to be lower-risk loans because the values have dropped so significantly.”

TotalBank may be trying to spread its risk. The bank slipped back into the red in the second quarter as its late or unpaid loans skyrocketed 23 percent. The bank lost $136,000 in the second quarter after charging off $13.3 million in problem commercial loans. TotalBank reports $106.7 million in late or unpaid loans as of June 30, a 6.47 percent increase over the first quarter. The bank’s reserves did not grow at the same rate as the problem loans.

“TotalBank should do well with its new residential business, but in the short-term they are going to need a little more capital downstream from the parent bank,” von Doorn said. “When the nonperforming loan ratio starts to get a little high, the regulators start to get concerned and TotalBank has been losing money.”