This story was originally published in The World-Herald on March, 15, 2008.
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Ralph Brown Sr. would no more make a subprime loan than he would rely on the federal government to insure deposits at the little ol' building and loan his father founded in 1922.
"Every one of these is a tragedy," said Brown, as he thumbed through notices of home foreclosures and sheriff's sales in the Daily Record.
"These are good neighborhoods, too. These people got loans for a lot more than they should have. . . . It's a sad thing. All you're doing is throwing people out in the streets."
In his view, some subprime lenders took advantage of unsophisticated borrowers, or people speculated too much.
"They weren't in it for the purpose of helping people own their homes, " he said of such lenders. "They're in it for one reason."
"Greed, " interjected his son, Ralph Jr., also called Skip.
Welcome to Metropolitan Building & Loan at 2739 N. 61st St. in Omaha's downtown Benson area. It is about as far as you can get from the woes of subprime lending, capital crises and government bailouts.
Collateralized debt obligations? Never heard of them.
Structured investment vehicle? What's that?
Credit default swap? Must be something bad.
None of those complex financial deals here, and no ballooning interest, introductory mortgage rates or 110-percent-of-value, zero-down-payment loans.
Instead of federal deposit insurance, Metropolitan relies on reserves that are four times the minimum for banks, plus in-person home appraisals, regular reviews by state banking officials and personal knowledge of their customers' finances.
Metropolitan is a mutual association, meaning it's owned by its depositors. It is the only state-chartered building and loan in Nebraska and the only institution without federal deposit insurance.
Metropolitan must meet the state's requirements for cash reserves and each year must send no-insurance notices to its customers, said Kent Plummer, a supervisor for the Nebraska Department of Banking and Finance.
"It's a little neighborhood entity," Plummer said. "They're very small. But they are resilient, I'll give them that."
Metropolitan has $155,000 in reserves behind its $950,000 in loans. The houses themselves are solid collateral because borrowers have built up considerable equity.
At Metropolitan, lending practices are as time-worn as most of the office equipment. Skip has a laptop computer for his law practice and preparation of tax returns, but Ralph Sr. uses a 1950s Royal typewriter. He rewinds the typewriter ribbon onto its spools by hand, a sort of previous-century rebooting.
Each of Metropolitan's 350 depositors has a passbook with deposits and dividends written down by hand.
Documents for each of the 75 home loans are stuffed into a fat envelope with a Polaroid photo of the house taped on the front. (Skip plans to buy several packs of instant film soon because it is being discontinued.)
What's the interest rate on home loans?
"Seven percent," Ralph Sr. said. Everyone pays the same, and the rate hardly ever changes.
How big a loan can you get?
That depends. When people pay down their loans or deposit more money, Metropolitan has more money to lend. If Metropolitan doesn't have money to lend, sorry, no loan.
"We don't make many loans," Ralph Sr. said.
Skip has to think back to the 1960s to remember a time when Metropolitan foreclosed on a loan and that, he said, was a case of helping a family deal with a parent with dementia.
Tom Rodino, one of Metropolitan's customer-owners, heard about it from a friend. Although the Omaha security worker has an account at a regular bank, he has a home loan and a loan on a rental house, plus a passbook for savings at Metropolitan.
Skip does his taxes and did a little legal work not long ago. He pays his utility bills there.
"It's a piece of history past," Rodino said. The lack of deposit insurance is odd, he said, but he figures the Browns are trustworthy.
"They're good people to deal with, and they've always been there for me if I'm in need of anything."
Ralph Sr.'s father, LeRoy, offered one of the first"openended" home mortgages, which means a borrower can pay it down but can borrow it again, up to the limit of the loan. That's as close to home equity loans as the Browns get.
The dividend rate varies depending on the money available after paying expenses for the tiny office building. Ralph Sr., who turns 83 today, no longer takes a salary, and Skip, Ralph said, receives "a pittance."
As for Metropolitan's lending practices, Ralph Sr.'s plan is to follow the practices that have kept the company going for the past 86 years.
"We do everything like it's supposed to be done."
That's how it was in Ralph Sr.'s favorite movie, "It's a Wonderful Life, " the 1946 classic that portrays the tribulations of a small-town building and loan run by Jimmy Stewart's character, George Bailey.
A George Bailey doll, a gift from a Metropolitan customer, is among the memorabilia that decorates the Browns' homey office. The collection includes souvenirs from Ralph Sr.'s years as a flight instructor in World War II and Korea and items from his radio-controlled airplane hobby.
He can quote lines from the movie and does a scary imitation of Lionel Barrymore, who played the villainous Henry Potter who tries to ruin George Bailey and his beloved building and loan. In the end, the town rallies to Bailey's support in gratitude for his efforts to help working people own their homes.
The Browns say Bailey's fictional success has inspired them for decades.
"It's a wonderful movie," Ralph Sr. said. "I must have seen it 50 times."