What do you think is going to happen to lending with so many people defaulting on loans?
With so many people having financial problems right now, such as foreclosures and bankruptcies, what is the lending going to be like? The banks are not going to be able to process any loans due to so many people having bad credit. Am I wrong?
Tags: defaulting, Going, Happen, Lending, Loans, Many, People, think
Just look at credit cards.
Rates are going up.
Lines of credit are being slashed.
Accounts are being closed.
And this includes customers who have NEVER had a late payment.
Just look at the jumbo loan situation–you can’t get one. So people trying to sell expensive houses are stuck. Their target market is settling for cheaper houses they can get a loan on.
Regular loans and “loan modifications” are stuck in a quagmire of documentation. The process takes so long the documents get stale and are requested again.
banks will not be willing to lend to as many borrowers. they have and will tighten credit standards. borrowers will need more income, better credit and more collateral.
It has already started to revert back to the way banking was done in the 1970s.
The current problems occurred because the banks got every bit of legislation passed that they wanted and so therefore became very careless. First they were allowed to raise late fees, overdraft charges, and over the limit fees from about $10 to unlimited, next credit card interest rate limits were basically removed, and finally they got bankruptcy laws passed that they thought protected them.
The banks therefore felt secure that they could lend money to just about anyone (even people with very poor credit without the ability to pay) and even if they defaulted, the banks would always get their money back through the high fees and interest rates charged to the good customers.
Now banks are doing what they did in the 1970s. They are qualifying customers, constantly watching customers credit history and reducing the credit limit when debt gets too high, and limiting credit until the customer has proven that they can be trusted to pay on time.
However according to the IMF, US banks have lost about $2.7 trillion during this crisis. The only reason that the banks are afloat is because of zero interest rates, a fed discount window of $850 billion, an FDIC loan program of $500 billion, and another $1.2 trillion of other fed programs. With the banks able to borrow about $12 trillion from customers and government programs at near zero interest rates, this has allowed them to cover their bad loans and make a small profit of less than $100 billion (less than half the normal $200 billion).
At a $100 billion per year, it will take the banks about 27 years to cover the losses. However, when interest rates rise in a few years, those profits will likely again go negative.
vp
Is correct about good paying customers are getting punished and that is happened to me.
They credit rating standards will be lowered in a few years, but the debt acquisition company’s “debt buyers” will be a hot business. That is all I see online for employment “bill collectors”
not going to be fun times ahead.
It is just going to make it that much harder for people to qualify for a loan.
Banks will still be processing loans. There are always people who have the ability to get credit. You have to remember if you watch the news, they are not going to be telling you about all the people who are NOT facing a financial crisis.