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51 » VISIT US ONLINE @ DSNEWS.COM RESTRUCTURING HELPS BANK MANAGE INCREASING COSTS OF LENDING In an article by Joseph Lawler in the Washington Examiner, Sam Vallandingham, President and CEO of Barboursville, West Virginia-based First State Bank, explains how revamping his business structure allowed First State to continue making and servicing home loans after the housing crisis. According to Vallandingham, the numerous new rules and regulations made for an extremely difficult time for lending, but on top of that, it imposed a fear of litigation. While the housing bubble inflated, more and more mortgage lenders were making loans without establishing borrower income, according to the article. When the bubble finally burst, and the foreclosure crisis followed, a nationwide investigation on paperwork and procedure led to suits against the five biggest banks. At that point, CFPB released new mortgage rules, and the Federal Reserve finalized new capital rules for banks that put mortgage servicing at a disadvantage. Of all the changes, the article said the requirements to maintain a higher level of capital in banks was the single most important modification. ere was a mandate to have a minimum of 10 percent of capital relative to as- sets. For example, if the bank lends $100 worth of loans or assets, it can have, at most, $90 of its own debt to creditors. So, 10 percent of its funding must come from ownership stakes. Losses to bondholders cause panics, according to the article. Losses to shareholders do not, so higher capital ratios mean that shareholders have more to lose before the bondholders feel vulnerable. Vallandingham said his bank's bottom line has taken a hit because of these rules, as they are related to, but distinct from First State's bread-and- butter asset of the home loan. According to many mortgage bankers, the rights to serve mortgages are weighted strictly because they must have 2.5 times the capital for each dollar in mortgage servicing assets. Vallandingham said this is a major hit. e institution is on the small end, as far as banks go, with just under $200 million in assets, but it services a book of $700 million. When these rules were established, it decreased the bank's regulatory capital by $2 million and limited the bank's ability to offer new loans without risking noncompliance. As far as the future goes, Vallandingham said you either have to sell off your mortgage servicing rights or find a way around it—like restructuring—so you can continue to service mortgages without incurring capital charges. COASTAL CITIES CLAIM MOST EXPENSIVE ZIPS To live comfortably in the U.S. doesn't mean one has to be rich, but if homeowners aspire to live amongst America's elite ZIP codes, a hefty paycheck is a definite must. According to a recent report from GOBankingRates, the nation's top ZIP requires a whopping $670,000 in annual income. Is it at all surprising that America's most expensive ZIP code belongs to the Golden State? Leave it to California's Bay Area to claim the poshest suburb in the country. Atherton, California ZIP code 94027, requires a total income close to $670,000 a year to cover living expenses, discretionary spending, and saving. e Hamptons are known as the hot spot for New York's wealthiest inhabitants and high-priced homes. Located on Long Island, one can find the ZIP code 11976 in Water Mill. With costly utilities, median home values close to $4 million, and an average mortgage payment of $16,275 a month, to live comfortably in this area will cost $440,000 total income a year. Alpine, New Jersey, has a median home value of over $2.6 million. e cost of living in this ZIP code is close to five times the U.S. average, while its average mortgage payment is almost $12,000 per month. Its 07620 ZIP came in as the No. 3 costliest in the nation e cost of living in ZIP code 98039 is almost five times greater than the U.S. overall, making Medina, Washington, the fourth most expensive ZIP in the country. How much will it cost to call Microsoft co-founder Bill Gates, who lives with his family in a 66,000-square- foot Medina mansion, your neighbor? A total income of $297,905. With the fifth-highest median home value in this study, Greenwich, Connecticut, requires a total income of $222,002. e city is also home to the next two most expensive ZIP codes in the state. GOBankingRates's report used data developed from Zillow to survey monthly living expenses—transportation, utilities, health care, and groceries—in the most expensive ZIP codes in each state. e 50-30-20-budget rule was used to determine the yearly income necessary to cover necessities, discretionary income, and savings.

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