Apr 18, 2008
The Impact Of Real Estate In U.S. Banking Services
The home sellers in the U.S. real estate market, who have been anxiously awaiting the results of their advertisements in the MLS Services, FSBO category and flat-fee brokerage arrangements, watch with concern the recent developments in the U.S. banking services.
Banking services are the back bone of real estate activities, particularly in the buying activity of prospective home buyers. It is no exaggeration to say that the main chunk of the income for the banks and financial institutions come from mortgage loans extended to barrowers for housing. Home owners pay back through regular monthly installments the principal loan amount with interest, at the rates and plans they chose while borrowing. So far as the transactions go smoothly, there is no problem for the banking institutions in re-cycling the funds to more and more new borrowers, who tap their doors for home loans.
Ever in the history of financial market, the banking service institutions have experienced a blow so huge to jeopardize their activities, as is being pampered at them over the last two years. The mortgage crisis that lashed early in the year 2006 has uprooted the very existence of a number of renowned institutions, doing business in the country continuously well and thereby earning the trust of the U.S. citizens. There was no sign of improvement in 2007 either and on the contrary, the situation turned worse by turning out millions of home owners defaulting in repayment of their home loans.
Even though these mortgage loans are secured ones, by hypothecation of the property loaned for as immovable security, the banking institutions could not convert them into currencies immediately. They have to wait for months, if not years, to initiate the foreclosure process in accordance with the foreclosure laws of the State. There is no guarantee that they will get back their loan amounts in full, mainly because the foreclosure sale is looked down upon by the buyers as a distress sale. Considerable discounts are the rule of the day for such distress sales. The properties listed for sale as foreclosures in the MLS listing services are not attracting targeted number of buyers, as they are skeptic about the condition of the properties and also have psychological set backs in buying a property in distress.
On the other hand these foreclosure properties with low prices and available in plenty have a dramatic effect on the whole real estate market. The prices of new and secondary homes have been pushed down heavily, hitting hard the home owners who have advertised their homes for sale in MLS listing services, FSBO category and flat-fee brokerage listings. The Banking service institutions are really in deep trouble now by the mortgage crisis, credit crunch and sluggish movement in the real estate markets.
