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> They gave me a mortgage rate much better than any other bank was offering Isn't this why they got in trouble on the first place?

downrightmike 3y ago
yup
blitzar 3y ago
[flagged]
- VagueMag 3y ago
  The biggest problematic asset on their books is actually the interest-only mortgages, which were only extended to fairly high-income borrowers.
  - blitzar 3y ago
    My comment is actually citing a real world 2008 case from The Big Short By Michael Lewis (undisclosed bank writing the mortgage however). It was an interst only mortgage. History doesnt repeat itself but it often rhymes. In 2008 the teaser low rate that the fruit picker got went up, and they got wipped out, in 2023 the teaser low rate that regional banks bought government bonds at went up and they get wipped out. In a way it is poetic.
    - firesteelrain 3y ago
      That wasn’t the only reason. It was a cascading effect from junk mortgages and a bubble burst on the inflated housing market that people were unable to sell their homes. So they had to change laws under Obama and things started to get better about 2012-2014.
      - geoduck14 3y ago
        > to sell their homes. So they had to change laws under Obama Obama was behind some of the legislation that led to the problem, back when he was a senator
      - tekknik 3y ago
        We now have a new mortgage rule requiring those with good credit to secure a mortgage for those with bad credit by charging them fees on the mortgage. Here we go again.
- ummonk 3y ago
  Their non-performing assets are only 0.06% of total assets.
slashdev 3y ago
Not really, no. Like SVB, FRCs problem was just having too high a percent of uninsured deposits (rich customers, basically). When rumors started that they were next, unlike SVB they were actually a healthy, well run bank. But no bank can handle losing more than half their deposits. It killed them.
- throwaway894345 3y ago
  My understanding is that SVB also invested a significant share of those deposits in bonds which are reasonably conservative, but they bought so many of those bonds at/near the peak of the bond market such that they couldn’t liquidate them to cover withdrawals. Banks are supposed to keep a certain ratio of insured:uninsured deposits as well as liquid:illiquid investments and SVB broke both of these rules and regulators let them do it.
  - prirun 3y ago
    And a reason that banks have had so many withdrawals is that their deposit interest rates have not kept pace with money market rates, so a lot of people, especially if they had a lot of cash in a bank, have been moving their cash to money markets.
  - SilasX 3y ago
    But long-term Treasurys are liquid, they just lost value. Be careful not to equate the two. And bizarrely, capital requirements don't require banks to account for duration risk, which is what screwed SVB (and is screwing a lot of other banks now).
  - slashdev 3y ago
    It’s the combination. Either factor by itself might have been ok, but when 80% of depositors are not insured and the bank has a liquidity crunch, it can spiral out of control quickly.
stainablesteel 3y ago
yeah this sounds weird, i was under the impression that every bank will give you the same rate regardless of where you go
- s1artibartfast 3y ago
  That's not my experience and understanding. Rates can vary substantially between Banks. Are from the US? Today's 30-year Treasury rate is about 3.8% which put the bottom limit and the average 30-year mortgage is 7.5%. This gives about 3.5 percent spread. How much of that you can negotiate back will depend on Bank policy
- aidenn0 3y ago
  The spread between interest rates on 12mo. CDs between the two banks I use is over a factor of 100
cpursley 3y ago
Yikes regarding the low appraisal waiver... This is the entire point of appraisals - to protect the bank from over-lending and the taxpayer from the moral hazard of having to bail out poorly run banks.
- SilasX 3y ago
  Without knowing the details of why it got waived, it's hard to know whether that was reckless or not. And remember, it wasn't (unrecovered) mortgage defaults that sank FRC.
  - cpursley 3y ago
    Do you think the mortgage originators working on commission trying to push deals through are able to assess if waving an appraisal reckless or not? Why even have appraisals?
    - SilasX 3y ago
      No, I didn’t argue that straw man.

downrightmike 3y ago

yup

blitzar 3y ago

[flagged]

VagueMag 3y ago
The biggest problematic asset on their books is actually the interest-only mortgages, which were only extended to fairly high-income borrowers.
- blitzar 3y ago
  My comment is actually citing a real world 2008 case from The Big Short By Michael Lewis (undisclosed bank writing the mortgage however). It was an interst only mortgage. History doesnt repeat itself but it often rhymes. In 2008 the teaser low rate that the fruit picker got went up, and they got wipped out, in 2023 the teaser low rate that regional banks bought government bonds at went up and they get wipped out. In a way it is poetic.
  - firesteelrain 3y ago
    That wasn’t the only reason. It was a cascading effect from junk mortgages and a bubble burst on the inflated housing market that people were unable to sell their homes. So they had to change laws under Obama and things started to get better about 2012-2014.
    - geoduck14 3y ago
      > to sell their homes. So they had to change laws under Obama Obama was behind some of the legislation that led to the problem, back when he was a senator
    - tekknik 3y ago
      We now have a new mortgage rule requiring those with good credit to secure a mortgage for those with bad credit by charging them fees on the mortgage. Here we go again.
ummonk 3y ago
Their non-performing assets are only 0.06% of total assets.

slashdev 3y ago

Not really, no. Like SVB, FRCs problem was just having too high a percent of uninsured deposits (rich customers, basically). When rumors started that they were next, unlike SVB they were actually a healthy, well run bank. But no bank can handle losing more than half their deposits. It killed them.

throwaway894345 3y ago
My understanding is that SVB also invested a significant share of those deposits in bonds which are reasonably conservative, but they bought so many of those bonds at/near the peak of the bond market such that they couldn’t liquidate them to cover withdrawals. Banks are supposed to keep a certain ratio of insured:uninsured deposits as well as liquid:illiquid investments and SVB broke both of these rules and regulators let them do it.
- prirun 3y ago
  And a reason that banks have had so many withdrawals is that their deposit interest rates have not kept pace with money market rates, so a lot of people, especially if they had a lot of cash in a bank, have been moving their cash to money markets.
- SilasX 3y ago
  But long-term Treasurys are liquid, they just lost value. Be careful not to equate the two. And bizarrely, capital requirements don't require banks to account for duration risk, which is what screwed SVB (and is screwing a lot of other banks now).
- slashdev 3y ago
  It’s the combination. Either factor by itself might have been ok, but when 80% of depositors are not insured and the bank has a liquidity crunch, it can spiral out of control quickly.

stainablesteel 3y ago

yeah this sounds weird, i was under the impression that every bank will give you the same rate regardless of where you go

s1artibartfast 3y ago
That's not my experience and understanding. Rates can vary substantially between Banks. Are from the US? Today's 30-year Treasury rate is about 3.8% which put the bottom limit and the average 30-year mortgage is 7.5%. This gives about 3.5 percent spread. How much of that you can negotiate back will depend on Bank policy
aidenn0 3y ago
The spread between interest rates on 12mo. CDs between the two banks I use is over a factor of 100

cpursley 3y ago

Yikes regarding the low appraisal waiver... This is the entire point of appraisals - to protect the bank from over-lending and the taxpayer from the moral hazard of having to bail out poorly run banks.

SilasX 3y ago
Without knowing the details of why it got waived, it's hard to know whether that was reckless or not. And remember, it wasn't (unrecovered) mortgage defaults that sank FRC.
- cpursley 3y ago
  Do you think the mortgage originators working on commission trying to push deals through are able to assess if waving an appraisal reckless or not? Why even have appraisals?
  - SilasX 3y ago
    No, I didn’t argue that straw man.