Sticking with more traditional banking practices while institutions in other parts of the nation tried riskier loans has helped southern West Virginia and Southwest Virginia avoid the rash of mortgage foreclosures dampening America’s economy, area loan officers said.

In 2007, investors who financed new homes by getting subprime mortgages with adjustable interest rates began to have problems making their monthly payments when the interest rates on them increased. Since then, the foreclosure issue has been the focus of many debates and economic forums. With interest rates at their peak, things were not looking too rosy for home owners in the long run.

Mike Day, a loan officer with MCNB Banks, said consumers with such loans might have signed up thinking they would always be paying $400 on their mortgages each month, only to see these payments jump to $650 a month. Such increases can tighten family budgets and lead for foreclosures.

“On top of that, gasoline prices are on the rise and natural gas prices keep rising. Everything is on the rise,” Day said. “It’s a tough world to be in financially now.”

However, Day and representatives of other banks in the region said they have not seen an increase of home foreclosures.

“Really we haven’t seen any, mainly because we don’t deal in those loan packages,” said Collection’s Manager Lawrence Reed of the Bank of Tazewell County. “We’re still a little more conservative. Past conservative products carry you through the tough times.”

Hal Absher, director of secondary mortgage lending for First Century Bank, said staying away from subprime loans may have looked “dumb” once, but now it’s proven to be a “smart” move.

“We’ve been a conservative lender,” Absher said. “We haven’t had subprime loans, so we haven’t seen the spike in foreclosures, thank goodness.”

One vision area bankers keep in mind is the Sept. 1, 1999 collapse of the First National Bank of Keystone in McDowell County, one of the biggest financial failures since the Great Depression. It is an example of what can happen when financial institutions use questionable practices, Reed said.

“When local banks start thinking there’s a get rich quick scheme out there, somebody gets burned,” he said.

All in all, this is one of those parts of the country that has been fortunate enough to not be too dramatically affected by foreclosures. Unless interest rates come down, the threat of foreclosures increasing will continue.

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