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Finance & Stock Groups Forum Index » Financial Planning » bank exposure to real estate loans
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| Jan |
 Posted: Mon Jul 02, 2007 3:28 pm |
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wonder what the impact to consumers will be when the full impact on banks lending
habits is digested as banks apparently held about 25 percent of their total loans in
real estate in the 1980s but as of now are holding total loans in real estate at the
high percentage of almost 60. banks can't just unload this stuff and what will that do
to banks overall health? |
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| Guest |
| Posted: Tue Jul 03, 2007 3:16 am |
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On Jul 2, 5:17 am, "Jan" <t...@utrecht.sz> wrote:
Quote: wonder what the impact to consumers will be when the full impact on banks lending
habits is digested as banks apparently held about 25 percent of their total loans in
real estate in the 1980s but as of now are holding total loans in real estate at the
high percentage of almost 60. banks can't just unload this stuff and what will that do
to banks overall health?
What the status will be on future homeowners/refinancers or home
prices, who knows. However, some banks will definitely go bust so
researching the stability of your bank and perhaps moving money
somewhere else may be a wise decision. While FDIC will pay you sooner
or later, they can take their time if it's a nationwide crisis. You
won't get a cent of interest while waiting -- and you certainly can't
pay your bills with FDIC IOUs. Vanguard money market holding US
Treasuries could be the safest place during a banking implosion. |
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| Mark Bole |
| Posted: Tue Jul 03, 2007 3:16 am |
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Jan wrote:
Quote: wonder what the impact to consumers will be when the full impact on
banks lending habits is digested as banks apparently held about 25
percent of their total loans in real estate in the 1980s but as of now
are holding total loans in real estate at the high percentage of almost
60. banks can't just unload this stuff and what will that do to banks
overall health?
What I don't understand is why PMI (private mortgage insurance) hasn't
made this all moot? Isn't it common for the lender to be protected for
most risky loans as a result of the consumer paying the PMI premiums?
-Mark Bole |
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| joetaxpayer |
| Posted: Tue Jul 03, 2007 3:16 am |
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Jan wrote:
Quote: wonder what the impact to consumers will be when the full impact on
banks lending habits is digested as banks apparently held about 25
percent of their total loans in real estate in the 1980s but as of now
are holding total loans in real estate at the high percentage of almost
60. banks can't just unload this stuff and what will that do to banks
overall health?
It's a good question, but I doubt there are any clear cut answers.
Perhaps the only impact will be that they will improve their lending
practices, sticking to ratios (of debt to income) that make sense, only
offer 'full document' mortgages, and avoid a repeat of this issue for
the next 20 years. If I were clairvoyant, I'd have gotten rich in the
tech bubble, both the rise and fall. But I didn't need to be clairvoyant
to know that short term rates, when they bottomed out at 1%, would not
stay there for more than a few years. And banks were writing mortgages
at ridiculous loan to value, debt to income ratios, based on the teaser
rate. This was too obvious, an accident waiting to happen. Many of these
people couldn't afford the first adjustment, and I'll maintain that
giving them a mortgage under those conditions was criminal.
That said, these mortgages count for only a certain percentage of loans,
it's only the ones that were financed well beyond common sense that will
foreclose, and there will be some loss, 10-20% in most cases. One would
hope that this will not be a huge impact to any given single
institution. I'm sure there will be an exception or two, who loaded up
on nothing but subprime. That's too bad.
JOE |
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| Guest |
| Posted: Tue Jul 03, 2007 9:39 am |
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On Jul 2, 8:08 pm, Mark Bole <m...@pacbell.net> wrote:
Quote: What I don't understand is why PMI (private mortgage insurance) hasn't
made this all moot? Isn't it common for the lender to be protected for
most risky loans as a result of the consumer paying the PMI premiums?
Few pay PMI now. Everybody touts jumbo loans where you borrow enough
to get up to 20% in order to borrow the rest of the 80%. The 1st loan
up to 20% usually is at higher interest which explains why lenders
were jumping up and down to throw the money at borrowers. The problem
of course is this is the most risky loan for lenders since the primary
80% lender gets first dibs at the foreclosure equity. These loans at
the subprime level are being marked down to about 25 cents on the
dollar. (Some estimates say about 7 cents per dollar is fair price.) |
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| learnfpga@gmail.com |
| Posted: Tue Jul 03, 2007 6:04 pm |
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On Jul 2, 8:17 am, "Jan" <t...@utrecht.sz> wrote:
Quote: wonder what the impact to consumers will be when the full impact on banks lending
habits is digested as banks apparently held about 25 percent of their total loans in
real estate in the 1980s but as of now are holding total loans in real estate at the
high percentage of almost 60. banks can't just unload this stuff and what will that do
to banks overall health?
Can we go and ask banks what their current situation is in terms of
bad loans as a customer? Also are they required by law to declare
their loan situation in their annual reports? While I dont have too
much money in banks as I move most of it in mutual funds every month
but I know people who keep lot of money in banks as emergency funds. I
guess I can warn them about this. |
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| rick++ |
| Posted: Mon Jul 16, 2007 3:16 pm |
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Quote: On Jul 2, 8:08 pm, Mark Bole <m...@pacbell.net> wrote:
What I don't understand is why PMI (private mortgage insurance) hasn't
made this all moot? Isn't it common for the lender to be protected for
most risky loans as a result of the consumer paying the PMI premiums?
I'm my state, many mortgages were rebate-loans to fake out a 80%-90%
LTV
and avoid PMI. The price of a house a house is increased by 10% or
20%
wiht the surplus rebated to the buyer for a down payment.
Sometimes a civic or church charity did this in place of the seller.
In the old days banks would complain about over-appraised houses,
but not during the go-go years. |
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