Why Banks Stopped Lending

Real Estate Broker/Owner with Shepherd Real Properties

During the housing crash, which we are slowly recovering from, one thing that frustrated me the most was that banks were not lending.  I was working hard to stay afloat and get people approved for a loan, but to no avail.  People with good scores were being denied.  I didn’t understand to recently why that was.  I had drawn my own conclusion that they were just afraid and that no one would pay for their new homes and foreclosures would be worse than it already was at that time.



Now I have learned why banks had stopped lending.  It appears that banks issued a lot of credit lines to companies as secured loans.  And at the beginning of the crash, businesses feared that the banks would cut their credit line or that the banks would crash, so they withdraw all of the money available to them and this caused the banks not to have any money left to lend.  These companies literally drained the financial blood from banks and they ability to make new loans.


The more you learn, they more you know.




Elizabeth Mosley

Posted by

Elizaabeth Ann Mosley, BIC

Shepherd Real Properties


Comments (2)

Dan Pittsenbarger
Keller Williams Western Realty - Bellingham, WA
Improving Conditions

Interesting  Elizabeth. I didn't really experience the flat out denial of loans - I did experience and still do experience that it can be a lot of hassle and red tape to get a loan these days. And that much of it has to do with getting into the "box" for marketability and government backing/guarantees on the loan and little to do with the buyer's actual ability to make the payments.

Jun 01, 2015 02:05 PM
Elizabeth Mosley
Shepherd Real Properties - Charlotte, NC
BIC - Shepherd Real Properties

Hi Dan,

Thanks for commenting.  Yes, there is a "box" to fit into now, but during the first couple of months of the crash, a lot of pending loans didn't close,  then they changed the rules to what we now call the "box".

Jun 29, 2015 04:35 AM