Acquisition brings Heartland Bank Mortgage to Springfield

Reason has reasserted itself in the mortgage business - and that's good news for Kent Kelso and his team at Heartland Bank Mortgage.

St. Louis-based Heartland Bank, a federally chartered thrift established in 1887, entered the southwest Missouri market in June when it acquired the assets of National Bank of Kansas City's Springfield mortgage office for an undisclosed sum and hired the former staff.

Kelso, an 18-year veteran of the mortgage industry, had established National Bank's local office three years earlier and now serves as Heartland Bank Mortgage's vice president and area manager.

"National Bank of Kansas City decided to change their business model and not have any outlying satellite branches," Kelso said. That meant shuttering the Springfield office, as well as locations in Tempe and Phoenix, Ariz.

"Heartland Bank had been contemplating the Springfield market for some time, and they came to me and said, 'Hey, this looks like a great opportunity; why don't we just take over your operation there,'" said Kelso, who also is a loan officer.

The office at 3322 S. Campbell Ave., Ste. W, opened as Heartland Bank Mortgage June 2. It employs a staff of six including four loan officers and an underwriter/processor.

Kelso's crew has approximately 67 years of combined mortgage lending experience, most of it acquired in the "good old days" before the subprime tsunami.

"The (employees) down there specialize and are experts in government (Federal Housing Administration) and rural housing products," said Mark Sandau, president of Heartland Bank Mortgage in St. Louis. "With our expertise and their expertise, we figure it's a great opportunity for us to provide service to the Springfield market."

With assets of more than $850 million, Heartland Bank has 13 bank locations in Missouri and a regional headquarters in Denver. Heartland Bank Mortgage has locations in Chesterfield, Springfield, St. Charles and Sunset Hills; Denver; Fairview Heights, Ill.; and Overland Park, Kan.

Back to the basics

Kelso said that during his 18-year career, he's never worked for an institution that was involved in subprime lending, and Heartland Bank Mortgage is no exception.

"There was a lot of stupidity running amok there," he said of the subprime lending frenzy, noting that the high-water mark was NINJA loans, an acronym for no income, no job and no assets.

These days, Kelso said, loans have to make sense for the borrower and the lender.

"You have to have a job (and) be gainfully employed somehow," he said. "You actually have to be able to prove that."

Standard documentation - in the form of pay stubs, W-2 and other tax forms, and a positive credit report - is again necessary.

"Do they have to have perfect credit? No - particularly on government loans such as FHA," Kelso said. "Do they have to have decent to good credit? Yes, they do. Is the credit guideline underwriting tougher than it was six months or a year ago? Yes it is."

But the bottom line, he added, is that "there is plenty of money to be loaned to people who really can afford to pay it back."

About 98 percent of Heartland's local business is government loans - FHA, Department of Veterans Affairs and U.S. Department of Agriculture, Kelso said. In terms of clients, he said, "In this particular market right here right now, it's probably 60 percent first-time or first-step-up home buyers. The majority of the market these days has been FHA. There's been a lot more VA buyers and USDA."

VA loans are available to guardsmen and reservists as well as regular military, regardless of whether they have been deployed. "If you have been deployed, that just accelerates everything," Kelso said.

USDA loans are for rural residential properties and are not available in Springfield, Nixa or Battlefield, but they can be used in Ozark, Republic, Willard and the surrounding region. The USDA program offers 100 percent loans - zero down payment - and no private mortgage insurance, Kelso said.

Also, with interest rates at historic lows, there are some sweet deals available - for the right borrower at the right time. For one client with perfect credit, lots of equity and the right timing, Kelso was able to lock in a 30-year, fixed-rate loan at 4.375 percent.

"Forty-five minutes later, you couldn't get that, but it did settle in that day at 4.625, so still a tremendous rate," he said. "Today it really depends on your credit, your loan-to-value, the kind of loan, etc."

As of Jan. 6, the national average on a 30-year fixed-rate mortgage was 5.33 percent, according to Bankrate.com.

The Springfield office is doing about 30 loans a month. Government loans tend to be smaller, averaging around $100,000, so that translates to monthly dollar volume of about $3 million. That's down from the past, Kelso said, but "still a respectable number."

And that's having an impact on Heartland's overall bottom line.

"We've had a phenomenal year this year," said Heartland Bank Mortgage President Sandau in late December 2008. "We're about 44 percent above where we were (in 2007 when) we closed $188 million, and (in 2008) we'll close ... somewhere around $292 million."