Is Your Bank in Trouble? - Then So Are You

Your community lender avoided the home mortgage problems of the big guys. They crow about it. But the alternative may be just as bad. If they get into financial distress on other assets they do have, your loan and livelihood is at risk. Does your CFO or accountant have a solid take on your lender? Are you prepared to consider a new relationship on your terms?

Small and mid-sized banks, those with assets less then $25 billion, have to a great extent been crowded out of the home mortgage meltdown. But not for trying. These banks were the natural home mortgage provider (taking over after the S&L meltdown of the 80's); they sat in their market, knowing the good neighborhoods and bad. The business became a big game however, where originators, many non-bankers, took over the lending portion, loosened credit standards resulting in a greatly expanded subprime home loan market. These mortgages were then sold to large administrators who managed and serviced the loans, but then packaged the assets to sell into mortgage linked investments. This new system drove out the smaller banks and forced them to seek other profitable assets.

For many banks this took the form of commercial construction and mortgage lending, as well as lending directly to home builders. These real estate assets are once removed from the direct mortgage problem the big guys have, but are now coming to roost. Signs are ominous according to the Comptroller of the Currency.

There are no hard and fast rules, but it is certainly time to examine your lender, and decide if their problems could cause them to pull the plug on your loan. Open up the dialog with those other lenders that knock on your door. Have your financial expert take a look before it's too late.