Banks Show Little Appetite for Suicide

Banks Show Little Appetite for SuicideMore than a decade ago when the housing/credit bubble burst the focus on exiting the financial crisis was to bail out the banking industry. They were essentially insolvent and by not forcing them to “mark to market” their asset values to their new lows which would force them to declare insolvency, they survived. Banks had become reckless and in the eyes of the government and needed to be bailed out or the global economy would collapse and caveman days would return.

My friend and zen-goddess of the housing data vertical Ivy Zelman of Zelman & Associates paraphrased a quote by Howard Marks: “Capitalism without loss is like being Catholic without hell.”

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However, my thinking here is that the federal government is expecting healthy banks to take a bullet for the economy and the banks show little appetite for suicide.

Going into this downturn, banks were in relatively good shape and the government is leaning on them to facilitate saving small businesses and independent contractors. But the banks are not being reckless as I would assume the federal government wanted them to be in order to save the economy. Yes, the $350 billion dollar stimulus showed how the payouts were skewed to larger businesses and existing customers of the banks, but that’s how the legislation was written. There is another batch of money for SBA that was just put into law that hopefully will fix and redirect emphasis towards small business.

But the banks are doing what they didn’t do in the prior crisis, focus on risk management.

That’s because the banks are concerned about self-preservation and likely do not trust the word of the federal government in the execution of new rules to enable trillions of funds to be distributed to individuals and small businesses. Here’s a great summary by the Urban Institute.

In other words, the credit box is shrinking.

  • Mortgage rates are low but higher than pre-covid-19 despite the 1.5% fed funds rate drop
  • Credit score requirements are higher
  • Loan-to-value ratios are lower
  • Forbearance periods are followed up by immediate repayment
  • 20% down on jumbos is commonplace

These institutions are demonstrating that they are fully aware of the risk and won’t be the backstop on the crisis – the federal government will be forced to take the lead. So much for hell.

Jonathan Miller
Image credit flickr - Jim Papier
Jonathan Miller

Jonathan Miller

Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts.

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18 Responses

  1. Avatar Dave says:

    Things are going to get ugly Jon. Everyone hates banks. But they really are damned if the do or don’t. Fair housing dictates them to loan on shady loans they would most likely pass on. as an appraiser, I did predict the last housing crash in 08-09. I told all my clients, you have borrowers wanting all the bells and whistles in their new homes and want to max out their loan to get what they deserve. Then the bubble burst, many with all those bell and whistle homes mailed the keys back to the back and let them bit the loss. If you have zero “skin” in the game, why pay on an upside down mortgage. What has changed since then. FHA still loans 100 percent to people hoping they pay them back. I got news for everyone, get ready to pucker up! People pay $10,000 over list price and have seller pay $10,000 towards their closing costs because they don’t have a cent not only for down payment, but to pay closing costs. Didn’t we go through this 10 years ago. Humans really never learn from past mistakes.

  2. Avatar VA says:

    GSEs have stated no lump sum will be due at the end of forbearance. Now, if your mortgage is being held by some other entity, well that’s still up in the air.

  3. Indirect inside sources also report a senior manager of a collateral analytics department (in any normal world it would be called an appraisal review department) at Chase bank was recently fired right in front of all the other appraisers in that department.

    For years she had been a source of pressure (allegedly) on their own in house appraisers and review appraisers to ‘make the deal’. She, in turn, was under tremendous pressure from ‘loan origination’ to make sure deals were made.

    We should see more on this topic once the source sends me a bit more verifiable information. In my opinion its a credible source but with all anonymous sources care has to be taken not to impugn anyone.

    The point is that both open, public actions and reported internal goings on at the bank strongly suggest concern over security values and whether they have maintained adequate plausible deniability.

    It looks like the long running fantasy of “fire walls” between commissioned loan origination and administrative appraisal management is falling apart.

    Loosely related-an an eastern seaboard credit union was dumb enough to leave a paper trail and multiple witnesses to their malfeasance.

    Expect news in the near future of formal complaints filed against a major correspondent lender of that CU (with a high chance of repurchases or at minimum entire portfolios being reappraised); the NCUA; ASC, and state NMLS regulators for a loan officer purported to be responsible for about 65% of loan origination at that credit union.

    A VA regional Manager has also been documented crossing the line between legitimate management and inappropriate seller advocacy. We’ll probably hold off that particular complaint until after the Covid crisis is over.

  4. Avatar Julio E. Sune Jr. says:

    Recent opinion CNN:

    State of denial still. CNN’s Stephen Collinson put it extremely well (as he always does), when he stated the clear fact that Trump still doesn’t grasp the enormity of this:

    Humanity is facing three crises at the very least — medical, economic and social — that will cause financial and geopolitical reverberations for years. The grim state of the economy was underscored Wednesday morning when it was reported that first-quarter GDP fell 4.8%, the worst contraction since the Great Recession.
    Yet Trump says he sees “light at the end of the tunnel” and acts as if America is nearly home free.

    • Avatar Bryan says:

      Situations like this are always downplayed. They do not believe what they are saying but if they get a majority of the people to buy in the decline might be slowed a bit. Remember at the beginning of the Great Recession – the stated amount of anticipated foreclosures? The amount of time to recover? Both 25% or less of reality. This will be no different. All three crises will be exponentially worse than being presented. Just be prepared.

    • Baggins Baggins says:

      Name dropping the corporate sponsors! Want a pat on the back? Shall we play a game and trade these back and forth ad nauseam as others engage in a similar pattern of political rhetoric from the other side? Please let us not play that particular game.

      I wrote an essay about these problems just today, link below. Nobody knows what’s coming except the certainty that when markets get roiled like this, there will be winners, and there will be losers. Unless of course, none of this is organic and a certain group of people pulling the strings here, have been poised for this ahead of time.

      If people want to win this game, retaining their prosperity and liberty, the suggestion is not to play. All one has to do is break free of the corporate narrative, tune out the teleprompter. The illusion of choice, courtesy of the fed. Current stories include how these large companies used their ‘bailout money’ to buy out other companies in hostile take overs, balance long overdue books, bolster the corporate pay, all the while laying off the common workers, pilfering the pensions, grabbing the money ahead of small business. It’s not a red or blue issue. Turn off the corporate tv box because the sooner the people tune out, the sooner we can get back to living independent lives of liberty and prosperity.

      “Let them eat cash.”

      A quip on Marie Antoinette, a hopelessly out of touch aristocrat just pre french revolution. As the people starved she said, from her ivory tower; let them eat cake. That’s when the pitchforks came out and the revolution happened. It’s a powerful statement, adapted for our modern times. Let them eat cash. If you want someone to blame, look no further than who’s printing the money.

      I know that with the right set of factual disclosures, and a common love of Liberty, we can cast aside the contrived political narratives and land on the same page. If we could just get control of the printing press, nobody would ever be able to wield this much power ever again. Limited government. Power to the people. Constitutional rights. A fair share of our national prosperity for all. Sound appealing yet?

  5. Baggins Baggins says:

    Per the linked article. The importance home ownership plays in building wealth. Creating yet another government institution is perhaps not the best solution to get there. The land and home is the source of wealth generation. The ability to escape debt and actually own the land is the source of prosperity. It’s about time someone restricted the access at least a little. Not that it will matter because in the bigger picture for over a 100 years now, special interest subsidies have resulted in gross gains by moneyed institutions that have outpaced regular citizen wealth by a 100 to 1 and more. Nobody really grasps the scale of the totality of special interest subsidies over time. They are not too big to fail. A fair market for home lending will flourish without the government involved. Perhaps they’d finally care about honest valuation services instead of phoning the fed every time they take a loss and buying their way out of felonious behavior convictions. Hell indeed.

  6. Avatar Julio E. Sune Jr. says:


    Expert Perspective:
    “Unlike the stock market, home prices are not expected to drop because of the ongoing housing shortage and due to homes getting delisted during this time of crisis. For the past couple of months, we have seen the number of buyers grow as more people enter the market. Once the social distancing and quarantine measures are relaxed, we should see this temporary pause evaporate, and will have potential buyers return with the same enthusiasm.” – NAR® Chief Economist Lawrence Yun

    Expert report predicts up to two more years of pandemic misery
    (CNN)The new coronavirus is likely to keep spreading for at least another 18 months to two years—until 60% to 70% of the population has been infected, a team of longstanding pandemic experts predicted in a report released Thursday.
    They recommended that the US prepare for a worst-case scenario that includes a second big wave of coronavirus infections in the fall and winter. Even in a best-case scenario, people will continue to die from the virus, they predicted.

    “This thing’s not going to stop until it infects 60 to 70 percent of people,” Mike Osterholm, who directs the Center for Infectious Disease Research and Policy (CIDRAP) at the University of Minnesota, told CNN.

    “The idea that this is going to be done soon defies microbiology.”


    • Baggins Baggins says:

      We’ll all develop natural immunity to it and go on about our lives. Most flue’s behave that way and everyone gets them eventually. You don’t need a vaccine or tracking bracelet to stay safe. All you need to do is step out there and get it over with, unless you’re the 0.03% unlucky bastard, you probably won’t even know it happened. That’s normal life though. This thing did nothing to the average daily death rate.

      I take bigger risks walking down stair sets at old houses or just dealing with other peoples dogs and stuff. Changing the litterbox is more frightening. I recently developed a new phobia, fear of chinese produced face masks.

      You’re not reading news, you’re reading hopeful projections. Confidence re assuring statements from interested persons with bias whom is trying to keep everyone calm to avoid the worst and do their part to prevent a run on their market segment. Nevermind the volume of people whom will downgrade their employment position or be financially wiped out, and the rampant inflation which will follow. Shut the entire economy down for 2 months+, everyone stay home in their pajamas, and there will be no negative consequences. Forget about it, everythings going to be cool bro. We’ll even do it again this fall. Yea! More vacation! People listening to these alleged experts need psychological exams themselves. Hey do you have a deep freezer I can borrow? I’ll trade you masks.

  7. Avatar Dave says:

    You are so correct Baggins! There are so many others hazards we appraisers face every day.

    From angry people with guns asking us why we are taking pictures of their home for comp photos, to getting bit. I appraise amish properties a worry about horses kicking me when I walk the property.

    I slipped on a wet bank and snapped my knee a year and a half ago. Six screws and a plate and 8 months of rehab. This corona doesn’t phase me in the least!

  8. Avatar Julio E. Sune Jr. says:

    Why do I have an issue with banks? They have their greedy fingers in everyone’s money. No other industry has the power to deduct a bill or fees directly from your own bank account without so much as a notice.

    Jonathan Raymond

  9. Avatar Julio E. Sune Jr. says:

    How americas rich have turned pandemic into profit

    “The banks that were the largest recipients of bailout cash in the last recession have also done well, raking in $10bn in fees from the government loans, according to an analysis by National Public Radio… [but at the same time,] By 2016 — seven years after the end of the last recession — the bottom 90% of households in the US had still not recovered from the last downturn while the top 10% had more wealth than they had in 2007.”

    • Baggins Baggins says:

      How much profit do you suppose they’ll rake in when every person on the planet will be compelled by force of government to take their medical vaccine products? Brought to you by the same group that owns the patent. Who’s not seeing directly through this and is still buying it?

      I went shopping all over town again, without a mask. Nothing happened. The people in masks however, they looked absolutely miserable. Some wimpy guy was like this is the new normal. I said, no it absolutely is not.

  10. Avatar Julio E. Sune Jr. says:


    No more HELOCS

    “The 2nd Financial Crisis Of The 21st Century Begins! Chase And Wells Fargo Stop Originations Of HELOCs.”


    “We’ve learned our lesson from Japan and the Europeans; when you go to negative rates you start impairing the banking system. I think [negative interest rates] will be the last tool the Fed pulls out of its tool kit. The Fed right now is oriented toward ensuring financial markets work and work properly and stay working.”

  11. Baggins Baggins says:

    Julio, I’m not so sure about this Miami MFI website but it’s fun to read at least once or twice. Sadly, the second link is behind some cookie wall or something, could not read.

    Get Privacy Badger, AdBlock+, UBlock, MWBytes add on, and perhaps others.

    Privacy Badger is like the coolest new tool for Firefox, it’s super neat and easy to use. 2 thumbs up!

    We’ve been calling this for a while now. I need an reo manager refresher. Anyone care to name drop the active reo companies out there right now whom are sending defaulted requests out? And just like that, the bubble went pop.

  12. Avatar Julio E. Sune Jr. says:

    Hi Sir Baggins,,,,,
    Be careful with REO managers….Check them through, and google. Use the magic word for Google {feedback} Example: name of REO+feedback….
    Sorry about the 2nd link….???

    “Always verify, use supported/justified facts and never assume” [JS]

    • Baggins Baggins says:

      Know all about it and then some. It comes with the territory. It’s a special kind of work to be a repossession agent or involved in that.

      There is a very high probability that half of all the appraisals you did in the past 6 months could have claims on them within the year. This focus on remote inspection is simply a waste of time. All the details would not even be ironed out before the immediate threat was subsiding, and the supposedly temporary allowances and new protocols would swiftly become permanent. This is why we are hardliners on liberty and voluntarism. Give them an inch, they take a mile.

      “Boolean search operators” Online research in a pinch is simple and easy, once you know how the tool works. This nifty little chart missed one, the comma. The comma creates a hierarchy of preference in multiple search strings. It’s like using and, but instead of combining, will deprioritize the secondary call but still bring it and prefer it. Then you can get real zany and use the and to combine multiple prioritized strings consisting of various +,- and commas, within parenthesis, for that deep dive research. Then when your targeted in, hit a site specific search with the same thing. If it’s online, and the crawlers index it, there is somehow a way to find it. These big tech outlets though, they’re creating internal indexes and not letting the crawlers in anymore. Google now engages in steering search results and prioritization is for their friends and those who pay. Then on the other side of the abused process coin, too many blind port calls and random landing address penetration attempts. The net ain’t what it used to be. Thankfully I got most of this 10ware telemetry under control.


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Banks Show Little Appetite for Suicide

by Jonathan Miller time to read: 2 min