The financial news continues to cover the story of banks that are in trouble because they either gave risky mortgage loans or purchased risky packages of poor mortgage loans. Just today the U.S. Fed agreed to let banks borrow $200 billion in Treasury money to keep them afloat. And while nearly every major bank around the world has been touched, at least one stands apart: ING.
In its March 17, 2008 issue, Fortune reports that ING has had just 15 out of 100,000 mortgage foreclosures in its 8-year history as a mortgage lender. This compares to 94,000 foreclosures at Countrywide bank in the past year alone.
The secret, according to ING Direct CEO Arkadi Kuhlmann, is that his company chose not to package and sell its mortgages to others. Instead, the company keeps all $26 billion in mortgages in house. This means that ING keeps the risk, and, as a result, is smarter about how they lend money to home-buyers. In other words, ING has embraced the challenge of risk rather than selling it off to others. This keeps the bank profitable, and keeps it from getting borrowers in trouble with unsafe debt levels.
The ING story is pretty amazing, as I'm sure its management and shareholders often asked the question of whether they, too, should cast package and sell the mortgage risk like all of their competitors. Kudos to the company for holding the course, as it now means that they are reaping strong returns while their competitors flounder.
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