Small Banks Step Up Loans as Big U.S. Lenders Reel. Stated gain loan.

CHICAGO (Reuters) - After years of intense game from pre-eminent lenders, U.S. community banks impart the quarters critical time and honesty crunch are pushing borrowers seeking traditional, safer mortgages back their way.

"We avoided the nutty practices of the increase years because it doesn't behoove us to bring into being a slum in our own backyard," said Frederick Willetts III, governor managerial of Wilmington, North Carolina-based Cooperative Bank (COOP.O: , , ), which has just under $1 billion in assets. "Now we're conjunctio in view of an uptick in obligation in the defunct 60 days and I look for that to accelerate. Executives from community banks from around the territory recognize the same tale: they refrained from contribution the economical to start, high-risk loans so everyday on Wall Street -- adjustable figure mortgages (ARMs), Option ARMs, interest-only or stated- revenue loans -- which have resulted in the lodging sector meltdown, even though it payment them firm during the boom.

"We unquestioned that it wasn't in the fire of our bank, our community or our borrowers to come forward those types of loans," said Marc Stefanski, ranking supervisor of Cleveland-based Third Federal Savings (TFSL.O: , , ) , which has $10 billion in assets and was founded by Stefanski's forefather after the Great Depression on the precept of "reasonable risk, logical merit of return." Third Federal saying its pay out of Cleveland's mortgage buy and sell plummet from 55 percent in the first 1990s to around 11 percent just over a decade later. "But while we missed out on the boom, we're not tribulation the bust either," Stefanski said.

Many community banks -- there are thousands of them across the realm -- mean their allowance volumes have risen in the whilom two months, with more consumers coming in seeking unfledged loans or to refinance a high-cost mortgage from a big lender. Some lenders have launched refinance programs to servant demoralized borrowers. Chicago-based community incident bank ShoreBank aims to refinance 2,000 loans in the next 18 months.

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