I do not how many of you "feel" about what banks are actually doing these days, but it is my opinion they are not willing to lend at all. They seem to be able to come up with any excuse not to do a loan. This ranges from non business like pre-approval conditions, to underwriting guidelines no one seems to know about (at least not up front), and lousy appraisals because appraisers probably get "warned" by banks to be very conservative. But all of it contributes to the FACT, that very few loans take place, which has an impact on the rebounding of real estate values. I have several examples I can share with you, but here is just one of them. An owner wants to refinance a fourplex trying to take advantage of the low interest rates. The property has a debt service coverage ratio of more than 1.5. So why are banks not willing to refi this proeprty? Beats me. There is no "logical business reason". Banks demanded only a 1.2 DSCR since 2000, There is almost no risk for the bank in this deal, and eyt they will not do this loan. That shows you truly how banks are refusing to do loans, even when there is no or very little risk at all.
They created this mess, and now are unwilling to help us out of this mess. So why are they not lending? Wells Fargo said in an interview there is plenty of money to lend, but there are not using that money to lend. Which makes me believe there are other factors why banks are not lending, and here is one. As long as the keep the toxic assets ( real estate) on the books, they can borrow at the fed's discount window at 0.45% and reinvest that money in 10 year treasuries at 2.45% (thus a NET spread of 2%, without having to put this on their balance sheet, with an absolute zero risk, and without having to use people to administer it). Anyone?
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