bank exposure to real estate loans

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?

Reply to
Jan
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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.

Reply to
wyu

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

Reply to
Mark Bole

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.)
Reply to
wyu

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.

Reply to
learnfpga

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.
Reply to
rick++

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