Entrepreneur: The pendulum swing of housing finance

CoastalStates Bank chief Jim MacLeod How do we get things back on track? CoastalStates Bank chief Jim MacLeod says the answer is in continued government backing and increased lending oversight.

With a housing, mortgage and finance crisis still gripping the country and the national economic fabric in tatters, it’s time for a return to less conservative lending, an equilibrium in residential financing and an abandoning of fear, says CoastalStates Bank President and COO James S. MacLeod.

Fresh from a housing financing summit in Washington, D.C., MacLeod is full of ideas and determination to get nation back on its feet. But, he cautions, “it’s probably going to be another year or year and a half to get the fear out of the market.”

A native of New Jersey, MacLeod, 62, lives in Sea Pines, and plans to retire here. “Hilton Head is one of those special places you discover when you visit, and you never want to leave,” he says. When he came to Hilton Head, MacLeod saw a need for a community bank. And after retiring “for what seemed like one day” from a long career with Mortgage Guaranty Insurance Corp., he founded CoastalStates Bank with his friend Randy Dolyniuk in 2004. (Dolyniuk is chairman and CEO of CoastalStates Bank, and MacLeod is president and COO.) “We started with one branch, in this building (at 5 Bow Circle on Hilton Head’s south end), and we just waited, hoping someone would walk in the door.” Today, the bank has four branches, and $420 million in assets.

“We went in with the philosophy that we provide good, solid local-based customer service with a knowledge and understanding of the community’s needs and desires,” MacLeod said. “This way of doing business has been incredibly well-received.”

With a work and education background in real estate financing, credit, planning and consulting, MacLeod’s chief love is helping people achieve their dreams of owning a home. He earned a master’s degrees in real estate and urban affairs and city planning from Georgia Institute of Technology and Georgia State University.

But with the advent of one of the worst financial and housing collapses in the county’s history, MacLeod realized that the government and private institutions and programs were under severe threat of disastrous default. On Aug. 17, he joined 200 other housing and financial experts from government and the private sector in Washington for the U.S. Department of Treasuryand Department of Housing and Urban Development-hosted Conference on the Future of Housing Finance. At the center of the debates was something near to MacLeod’s heart: the participation and influence of Freddie Mac and Fannie Mae in America’s housing markets.

Fannie Mae and Freddie Mac are publicly traded, governmentsponsored enterprises chartered by Congress to provide liquidity, stability and affordability to the U.S. housing and mortgage markets, and MacLeod believes they are essential in the viability of the housing industry.

“What brought us out of the Great Depression was housing, and since the 1930s there have been all kinds of government policies and programs to encourage the housing market,” he said. “Real estate is still slow, and a restructuring is needed.”

One such reformation may be our ways of thinking. “Is it a goal, as it once was, that every American own a home?” he asks. “Maybe that’s not right. Renting should not be a stigma.”

Whereas it has been thought that 70 to 75 percent of Americans should be able to own a home, “per-haps a more realistic percentage is between 60 and 70 percent.”

And while MacLeod is a firm believer in private sector initiative (“I was a big fan of Reagan”) he believes that a return to healthy and sane housing markets depends mightily upon government backing, support and leadership.

“No one wants the taxpayer to be left holding the bag, but the size of the housing market is so big that it requires some kind of government involvement. And if we do make changes in the way the government participates in residential financing, we must decide how to handle the transition.”

Housing finance and mortgage crises come in cycles, and MacLeod said the current unsavory situation “will sort itself out. Credit standards are stricter, but “don’t ask, don’t tell mortgage loans” are long gone, he said. “But, I’d hate to see us go too far on credit restrictions,” he added. “I think the pendulum has swung too far, and mortgage loans are too difficult to make. Lenders lend; that’s what we do. We need to find equilibrium. When we put people in their own homes, we must help them stay in their homes; losing a home is as devastating as a loss in the family or a divorce.”

Despite the housing markets’ and financial collapses’ shattering effects on the country’s confidence, MacLeod remains optimistic: He sees the pain local families and single people — many who are first-time homeowners — are going through and tries to look at the positive angles. “You must consider that though your home’s value has gone down, maybe from $200,000 to $120,000, you still are getting the utility value out of it. You still live there. And its value will return.”

From June 1982 to February 2004, MacLeod held various positions at the Mortgage Guaranty Insurance Corp. in Atlanta and Milwaukee, including southeast director, north central director and national director. He has a bachelor of science degree in economics from the University of Tampa and a dual master’s in real estate, urban affairs, and city planning from Georgia State University and the Georgia Institute of Technology. He is a trustee of the University of Tampa (Fla.); the Allianz Funds, an assets management firm in New York; and the Hilton Head Preparatory School. He also is a board director for Sykes Enterprises, an international customer contact management company in Tampa.