In the Studio: Hudson City Bancorp CEO Ron Hermance

Many banks are reeling from the no-money-down borrowers who reneged on their home loans, but it’s business as usual for Hudson City Bancorp, the CEO said.

Ron Hermance, who also serves as chairman and president, lends money the old-school way: He finds credit-worthy clients who can pay the loan back. (Yeah, imagine that.) And he never bothered with purely speculative markets like Florida and California either. He stuck with what he knew best – the New Jersey, New York and Connecticut areas Hudson City serves.

“It’s nothing different than what we’ve been doing for the past 10-15 years,” Hermance told Cramer during the CEO’s visit to Mad Money. “But in this kind of environment, of course, it looks special.”

Maybe. But Hermance’s clientele isn’t your normal borrower, it seems. The average down payment paid to Hudson City in 2007 was 41% of the home price, far more than the 10% or 20% – or even less – that other banks demand. “No one is going to walk away from a home when they put down 40%,” Cramer said.

Hermance admitted his strict lending rules mean that people could get better leverage from other banks, “but you’ll never get better pricing,” he said. Those higher deposit and lower mortgage rates are a direct result of Hudson City’s efficient business execution. While other banks spend 55 cents of overhead costs to generate a dollar of revenue, HCBK needs only a quarter to make the same amount.

Hudson City’s in a great position to steal market share, Hermance said, but there’s still “so much room to grow in our own footprint right now.” So he’s keeping his focus on the Northeast. He said he won’t consider a new market unless it meets the Hudson City demographic: “high income and good real estate.”

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