bank down the street from my condo project… he was just take’n a walk and wandered in…
got this bit of info…
seems new banking laws require the bank to have assets equal to 100% of their real estate loans not sure if this is all but he did mention construction and commerial loans.. law use to be… 300 to 400% of assets… which means if the bank had a million in assets they could lend 3-4 million into the local economy
new rules require 1 to 1 which not only stops all new lending… they are not renewing current performing loans because they have to get down to the new required levels… so they are not renewing good loans from good customers… and are doing zero new loans…
seems some new fed banking rules ment to limit losses and behind the economy lagging…
also why banks are willing to agree to short selling some notes so they can get inline with the regs and start doing business again
I might not have gotten all the facts exactly right but it is as i understood it… from the guy who owns the bank…
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Replies
Pretty sure you heard it wrong.
I am not sure about the exact ratios, but that is essentially what my banker told me last year. Until those rules change, bigger projects are dead.
Even if you don't have the exact details correct, the basic premise is right. The banks have been struggling since the meltdown to meet the required reserve ratios. It's always been a critical number for them but now it's especially hard to meet.
A banker is a fellow who lends you his umbrella when the sun is shining, then demands it back immediately it starts to rain
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was talking with my buddy yesterday from a local bank. asked if they were shorting any lots. he said it was better for THEM to build on them than to sell them. In the NW, the banks probably own 80+% of buildable lots (my own WAG) Doubt theyre beeing too generous with the building contracts.
Funny you mention banks doing the building on their own foreclosed lots. We picked up a builder doing exactly that about 2 weeks ago. But that is 2's and 3's at a time.
But, lots here in PDX are comin back on the market for cheap. No one is talking prices but it is significant. The banks have thrown in the towel. These are 40-50 lot parcels.
The banks have been building specs in MI on foreclosed lots for a couple years now. One of the last houses I framed was for a builder who was commissioned by the bank to build on a lot in a foreclosed subdivision.
Frank told me that this particular builder had one of his best years ever last year...building for banks! Frank also told me that they are selling lots in one particular sub for 10k. Those same lots used to be 110k. MI is the crystal ball for the rest of the country. If I had money, I'd be buying gold.
Yes, a lot of the leveraging has been getting taken out of the entire system
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That is about what I have heard. Most new RE loans are being bought through the feds, IE feddie or Fannie, if I understand correctly.
I think your banker is BS'ing you. CLEARLY, the govt is changing its position re 100% loans that were being allowed "and even pushed in in impact defined areas. But, the govt agencies are trying to get the foreclosed and non-performing loans into the hands of people who can and will make the payments.
I'd be more inclined to think your banker represents one of those organizations that was way to liberal with their lending policies and is having there own asset/liability ratio problems. It's always convenient to blame abstractly blame some govt agency when you have an embarrassing in house problem.
The Fed (not the Obama admin) changed the rules for how much a bank could borrow to let out more loans, and this varies somewhat depending on the "rating" of the bank. Banks with a lot of questionable loans on their books are rated lower and have more restrictions.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz