cgallaway

Where Are the Bank Failures in This Financial Crisis?

In my view, I think the banks are playing this to their benefit. The Fed has bailed out many of these institutions more than we know....as low as 2% interest on loans to other banks? I am in no risk of defaulting on my mortgage, yet I am sure my mortgage company (Bank A), who got the money from Bank B two years ago at 6% now borrowed money from Bank C at 2% in order to pay back Bank A. I am still paying at 6%, so they are making a 4% profit off of me, instead of the 1% they were before (based on the 6% interest rate of my loan and the 5% interest rates banks charge each other at the time I closed on my house).

That money does not find it's way to the home buyer, and those profits go straight to the banks, giving them no reason to try to re-negotiate loans that are ready to default. If they were still making the 1%, it would be best for them to renegotiate loans to avoid mass foreclosures. Sure they might make 0.5% as opposed to 1%, but that is better than losing 1/4 of a million dollars/foreclosure (Chicago suburban market values as a point of reference)

Also, I don't see home values dropping that much. Every so often I check to see what homes are priced at, and a home that 2 years ago that would be priced at $250,000 is now priced at $240,000. Maybe it is the current owners, maybe it is the real estate agents, but for the interest rates rising, it can actually cost more to buy a home (given a 30 yr fixed interest rate) at today's market value, than it would have if you were to buy the same house 3 years ago at then market value.