Here Today, Gone on Friday? How Is YOUR Bank Doing?

There’s a lot of talk these days about the nationalization of U.S. banks, how good credit unions may be a safer place to park our money these days, and the “Texas Ratio” which calculates the likelihood of a bank’s failure. The Texas Ratio is a ratio that was developed by Gerald Cassidy and many other analysts now at RDC Capital Markets that they formulated during the Texas Savings and Loan crises back in the early1990s. It takes a bank’s non-performing assets and loans which include loans that are delinquent for more than 90 days, then divides this number by the bank’s “tangible equity plus its loan loss reserve”. If this calculation equates to a ratio of 1:1 – a number of 100 or great – it is considered a warning sign. The higher that number, the better the chances of that bank’s failure.

As much as I like to crunch numbers, I also like to use my time wisely! So rather than dig around and collect the data to calculate these numbers for banks we have relationships with both personally and through business dealings, I’d much rather have a list to check that someone else already did, although I probably will calculate these ratios for banks we have accounts with. I came across this link in a comment on an article on CBSMarketwatch that not only provides the names and Texas Ratios for several banks, but their locations are mapped, too. But, being the type who likes to check and double-check my data sources, I like having another information resource. http://www.click2map.com/maps/kwaldman/High_Risk_(Texas_Ratio)_Banks
http://bankimplode.com/list/troubledbanks.htm

So, now we can pay attention to banks who have accepted T.A.R.P. funds AND keep an eye on this Texas Ratio results list to see if we need to do any other “readjusting” so that: a) we aren’t supporting organizations whose business philosophies do not coincide with our own, and b) we don’t get thrown under the bus by the fast demise of a bank. For example, Silver Falls Bank was one the most recent Oregon Bank failures, having been taken over by the F.D.I.C. on Friday, and their Texas Ratio is reported at 176 on this list, but in January 2008 they were putting out positive reports on their stability! The FDIC will not publish their internal list that they keep, and as much as I would hate to see any “run on a bank”, nor do I want to find I can’t get to my money if I want to! Yeah, our deposits are insured, but who wants to deal with this?

Is this Texas Ratio an infallible predictor? Obviously not, since WaMu and Wachovia did not have Texas ratios that sent up caution signs, yet they have both failed for various reasons. So, how healthy is YOUR bank? Maybe you should check it out. http://bankimplode.com/list/troubledbanks.htm

See you out there!

Karen Cooper – OR/CA Mortgage Consultant – www.Quality4Loans.com

Distressed Homeowners Frequently Asked Questions

In conjunction with the Blog Post "Distressed Homeowners, More Help Is On The Way", here are some questions and answers:

Q. Can I apply even if I'm not 3 months or more behind on my mortgage payments?
A. Not for this program, but there may be other options available to you. Call your lender to see what options are available to you.

Q. Should I stop making my payments so I'll be approved for a Note Modification?
A. If you intentionally default on your mortgage, the lenders will not approve your request for assistance.

Q. What is a Note Modification?
A. A Note Modification is a change of the original terms of your mortgage loan. It could be a change from adjustable rate to fixed rate, a change in the length of your home loan, a change of the interest rate, a reduction in the amount owed on your mortgage loan, etc. with the intent to make your loan more affordable.

Q. I've already contacted my lender for help, and was turned down. Why should I try again?
A. Things have been pretty chaotic in the mortgage industry with the quickly escalating rate of foreclosures, closures and mergers of banks/lenders, changes to regulations, etc. It has taken some of the banks/lenders some time to figure out what works and what doesn't, what is required and what isn't. Make the assumption there may be a new alternative available to you, and call your lender to find out if you qualify for this new Note Modification program, or any other alternative they may now have for you.

Q. Will someone call or write me to let me know I will qualify for these Note Modification programs?
A. Some Banks/Lenders are trying to be proactive, but it will take some time to contact all the borrowers at risk of foreclosure. Be proactive, and call your lender - don't wait for them to call or write to you.

Q. I lost my job, and I earn less than I did before. Will I still qualify? What if I am still out of work?
A. Banks/lenders are working with current incomes and the current home values when considering Note Modifications. If your income is less than it was before, your mortgage payments have increased beyond what you can afford, you need to call your lender to see what options they have for you. If you cannot prove you have steady income to pay the mortgage, chances are your request may be denied, but if you have the means to pay something with reasonable modifications based on income you can prove you make, there may be help available. Even if you aren't yet 3+ months behind on your mortgage, call your lender.

Folks - are you picking up on the common threads here? There are options available for many struggling homeowners and Stay in touch with your lender, no matter what your circumstances are - struggling, starting to fall behind, or way behind. If you don't contact them, you may miss out on an opportunity that would help you to stay in your home. Isn't that the best solution for everyone?

See you out there!

Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com