Just as an aside, the fact is that a lot of banks in the US are making a LOT of money these days. Was reading earlier that several banks have now paid off their TARP and other government loans…to the consternation of some who wanted to hold those loans over the banks collective heads to ensure proper behavior in the future.
-XT
Well, not only are we forgoing a loss, but it costs the bank time and money for the banker to sit with you, go over your account, discuss your finances and what you may have done wrong, etc. If a personal banker is making (roughly, depending on experience and the market) $15 per hour, and they spend a half hour with each customer that wants fees reversed, not only do we forgo the $35 per overdraft fee, we lose the banker’s salary. I’d say our bankers, on average, see roughly 4 customers a day that want fees reversed. That’s $30 per banker per day the bank won’t see again. If we’re still charging the fees, then we’re not out as much.
We’re going down to 4.89% for 30 year fixed now… it’s a shame my bank isn’t in your market. Just WI, parts of MN and IL.
The best mortgage deal I could arrange (my partner and I have recently bought a flat recently) was a tracker rate of 4.14% above the Bank of England base rate (currently 0.5%). It currently costs the bank probably just over 0.5% to raise the finance for that, but they are charging 4.64% on it. How are they not making money? 
That is a nice rate, but I suspect that there are at least 2K in closing costs (more common is about 3K) and that I’d have to pay at least one point or maybe 2 to get that rate. Right? I have had offers lower than that for 30 year fixed and 15 year fixed rates, but they always involve me investing 5K or more up front. Since it will take me 3 - 5 years or more to make that amount up, in this economy it’s not worth the risk to pull that much out of savings to do this.
/fail
You cannot get a loan or even a home equity line without excellent credit (which few have anymore). Period.
I have been working on my debt and by the end of January, I will have all of my debt paid off except a $20k student loan. I will have a credit card for the first time in 15 years (a huge gap in the score) and 10% down on a house with payments less than my rent. Oh and I’m a math and special ed teacher with master’s in both so my job is probably one of the most secure on the planet.
As soon as they pull my score, they tell me that they can’t give me a mortgage until I have a score 620 or above and clean credit for a year. End of conversation.
620 is excellent credit now?
LOL, seriously. “Excellent” is generally 750+. 620 is “not in the shitter”.
While generally I agree, I was surprised when a family member needed to buy a new car from another family member (who manages a large dealership). The buyer recently had what was effectively an incorrectly placed ding on his credit (and was going through the legal process of having it removed) and because of this, he dropped from 8something to 710. It was literally his only ding in 20 years.
So, buyer was concerned that this would negatively effect his ability to get the top tier financing on the car. Other family member laughed and said they consider anything above 690 top tier “excellent” credit.
Not only 620 but no hits on the CR for a year e.g. no late payments.
People here are getting confused by the term “bank”. A bank typically means a commercial bank and possibly a thrift. People here are inculding investment banks and other financial institutions under the term “bank”. You are correct although banks may used deriviatives for risk management purposes and do so fairly commonly, typically interest rate hedging.
A good portion of the proceeds used to pay bank TARP funds have come from equity issuances. Many banks are still losing money, particularly those with large commercial real estate exposure.
Well, what sort of loan loss reserves should they put on a residential mortgage these days. Plus, they obviously have fixed and variable operating costs to factor in.
Well, just like I said, ignorance. First of all, again, the bigger concern is over small business loans as politicians are linking a lack of small business loans to the unemployment rate. Second, as has been stated, a 620 credit score is marginal, certainly not excellent.
You have a skewed version of reality. Not having late payments for a year plus a 620 FICO score doesn’t mean you have excellent credit. I believe that the average FICO score is closer to 720. Where I come from, far below average usually doesn’t mean excellent.
This is still by no means “excellent” or even “very good” credit. And obviously you are below even that. You are by no means a good candidate for a loan in this market, really.
You don’t mention what other debt you’re going to have paid off, but it looks like you haven’t had much debt other than government debt (student loans which typically cannot be discharged even in bankruptcy) and this raises a huge red flag.
While from your standpoint, you might have a good case to get a mortgage, from the bank’s standpoint, the risk just might be too high given your credit rating. I don’t know what you did to get it under 620, but you’re going to spend some time getting it back up where it needs to be before anyone gives you a decent loan.
To get back to the OP. A banks biggest source of profit is the interest rate spread (the spread between interest they collect on loans and investments and the interest they pay to depositors for savings and checking account holders). In a declining interest rate environment, banks are typically more profitable. As interest rates decline, they immediately reset the rates they pay to depositors, while the interest they collect on loans is typically fixed over a certain period of time. So as interest rates fall, their interest rate spread increases.
The banks are off and running with the same kind of risky crap they sold before. They have jacked interest rates out of sight. They have increased overdraft and other fees like crazy. They are loaning only to extremely safe borrowers. Their standards are elevated so high many businesses are having difficulty keeping up with payroll. They are cleaning up. They got tax money from the government at zero percent interest and lent it out with a guarantee of profit. How could they not clean up.
So, the banks are doing “risky crap” by lending only to “extremely safe borrowers?” Please explain that?
Also, interest rates have not been jacked out of sight. Most borrowers are borrowing at historically low rates right now. Credit cards aren’t the only kind of loan, and the vast majority of banks don’t even offer them as a product.
Do pardon me while I fall down laughing. First, if you’re having four people per “banker” per day, then you’re one of those banks that tries to trip up their customers into unnecessary charges. When they reverse the charges, they acknowledge they were caught out in shenanigans and show that this part of their business is predicated on the expectation that nobody will bother to complain.
Second, never once in my life have I spoken with a “banker” who makes the decision to reverse the charge and looks/sounds like they make anything approaching twice the minimum wage. These are front line peons who give in as soon as I question the charge.
Third, the only person spending half an hour out of their life is me, as I’m put on interminable hold: again, as soon as I actually get someone on the line, it’s resolved within thirty seconds.
And fourth, how the fuck do you “lose the banker’s salary” while I’m talking to them? What, are they consultants charging by the minute? Does your bank “lose” money every time someone comes in to inquire about an account or ask about opening a safety deposit box? If they’re front line CSRs, their jobs are to deal with the public regardless, no different than the guy who gives me a basket at the door at Wal-Mart. “Lose the banker’s salary”, my ass.
And fifth, your bank knows damn well that if they don’t reverse the charges in many if not most cases, they’ll be losing those customers’ business for good. The bank shouldn’t be regarding itself as some patrician institution dealing with wayward child-like peasants who can’t put their pants on straight.
It should also be noted that few (if any, I don’t know of any) community banks received any type of TARP funds. These are the banks that are generally pretty invested in both A&D (Acquisition & Development loans) and CRE.
There are a lot, and I mean a LOT of community banks out there that are still losing money, still re-appraising collateral on a semi-annual basis, and adjusting Loan Loss Reserves up quarterly to account for it. Many of the banks I know in the Pac NW have capital ratios below “Adequately Capitalized” as defined by the FDIC, and several are well below 5%.
The closure of banks is just starting, and it’s not because they’re making money.