Local Market Monitor Helps Liberty Bank Navigate a Complex Residential Lending Environment

Local Market Monitor (LMM) provides timely assessments and forecasts of more than 300 Metropolitan Statistical Areas (MSAs), 2,000 counties, and 20,000 ZIP codes across the U.S. Cammarota’s past experience with Local Market Monitor convinced him that it was the solution Liberty needed to make data-driven residential lending decisions and policies, particularly in the uncharted waters of the post pandemic market. “I have been a big fan of Local Market Monitor since my time working at a previous bank, so, I suggested we get this tool on board at Liberty,” he says. And it has proven to be a wise move.

Cammarota and the residential lending team at Liberty Bank depend on Local Market Monitor’s proprietary Equilibrium Home Price model. This award-winning tool monitors the extent to which actual home prices are higher than the Equilibrium Home Price, which provides a measure of how much price adjustment will eventually take place and also measures the risk that actual home prices will fall. This was essential insight during the past few years’ market fluctuations.

“Approximately two years ago, we began monitoring Local Market Monitor values as part of our ongoing credit risk management and to make policy and guideline adjustments as needed,” Cammarota recollects. “In a fluctuating lending environment, such as the one our nation has experienced over the past few years, having the latest, most accurate residential real estate valuation data and risk projections were essential to Liberty making the best-informed business decisions to ensure our bank’s continued prosperity.”

Cammarota continues: “The information provided by Local Market Monitor has helped us gain a really solid understanding of the real estate market. From an ROI perspective, it enables us to better monitor our portfolio’s risk and make data-informed policy and guideline decisions to manage credit risk of new originations. It is the primary tool we use when we’re looking at loan-to-value from a policy perspective.”

The pandemic real estate bubble created by low home inventory coupled with supply chain issues that drove up building material prices has begun to subside, but Liberty Bank continues to find value in their use of Local Market Monitor’s data and forecasts.

“Even today, post-pandemic, every person I share an LMM report with is excited about the information that it captures,” says Cammarota. “I have a quarterly credit risk review meeting on retail lending, and I always pull Local Market Monitor’s home value information from at least one MSA to share with our credit risk and retail lending teams during that meeting. It’s information our teammates find very useful and informative.”

“From a risk management perspective, Local Market Monitor is invaluable,” Cammarota continues. “It gives us the ability to get down into a very specific geographic area with their ZIP by ZIP Analysis and Investor Metro Analysis.”

Liberty continues to find even more advantages to tapping into Local Market Monitor’s data and tools. “LMM’s portfolio tool [which allows you to upload your bank’s portfolio numbers and run forecasts] is outstanding,” Cammarota explains. “As markets fluctuate, it is definitely a tool we will continue to rely on.”

As Liberty Bank approaches its bicentennial, they know that data-driven retail lending decisions will help ensure financial success in their next 100 years. And having the right partners by their side is crucial.

“The Local Market Monitor team is great, very responsive,” observes Cammarota. “If I ever have an issue, they’re extraordinarily responsive and helpful, and I’m very grateful. You just don’t find that. I, and many others, don’t look for vendors; we look for strategic partners, and I definitely put Local Market Monitor in that category.”

But as Cammarota notes, the biggest benefit of his access to Local Market Monitor is the platform’s data and forecasts for specific local geographies, which are especially critical to a bank like Liberty.

He expounds: “A regional or national bank can look at general indices, or some big banks even use their own indices to adjust their portfolio values up and down. But for a smaller bank like Liberty, Local Market Monitor has improved our ability to manage credit risk effectively. From a retail lending perspective, it gives us a really strong understanding of what’s happening for new originations but also on the portfolio. It’s an incredibly helpful, time-saving tool.”