On February 15th, the Georgia Banking Crisis was evident.
No one paid attention, so on June 10th, I brought it up again.
June 28th, I thought surely someone will pay attention to this stuff THIS TIME. Somebody?!?
Finally someone does a story on Georgia’s dismal banking system. On November 11th.
- First, Georgia has more bank failures than any other state in the nation.
- Second, the Chairman of the Banking Committee is a Hall County Representative. Seems natural to ask the local guy what the hell is going on, right?
- Third… NO LOCAL MEDIA HAS TOUCHED THIS STORY, including the AJC, which is rapidly becoming the Entertainment Tonight of journalism.
Representative James Mills, a Republican from Gainesville, chairs the House Banks and Banking Committee. He says Georgia’s banks are failing because federal regulators are putting undue pressure on local banks to balance their books.
“When a federal regulator comes and says this piece of property that was worth $1 million last year is now only work $500,000. So what do they do,” asks Mills.
“They turn to the small business man who has a loan out there and say, ‘OK, your payments can be the same, but we need $200,000 more dollars from you for our loan-asset ratio to work out because the value of your property has dropped.’”
Mills’ blames Federal Regulators for the banking meltdown. If this were true, wouldn’t Georgia have the same number of bank failures per-capita as other states? Wouldn’t the pain be distributed equally?
Yet it’s not. Georgia is the cesspool of bank failures. Mills’ has presided over a death spiral of financial regulation, all caused by his poor decision-making and dubious conclusions.
The money quote: Georgia’s banks are failing because federal regulators are putting undue pressure on local banks to balance their books. Because banks should never be pressured to balance their books, right?
November 13, 2009 at 12:51 pm
How dare you assert that businesses or individuals should live within their means by balancing their checkbooks.
November 13, 2009 at 3:18 pm
How dare you accuse James Mills of decision making!
So let me get this straight: Mr. Mills is accusing the federal goverment of picking on Georgia banks. Isn’t it obvious that the true problem lies with steroidic growth of Georgia banks. In Hall County look at the number of banks we have. There is no way the market can support that volume.
By the way, look at the number of bankers that write checks to James Mills’ campaign (Money spent because I don’t have a real job) fund.
Such is life. Maybe next year people will send him a message.
November 16, 2009 at 3:55 pm
Chris,
Georgia is one of the few states that have no judicial process to foreclose on a house.
Let me give you the street version.
If you miss a house payment, the bank doesn’t take you to court. They just take your house. Legally.
All the foreclosure requires is a letter to the homeowner. “Get out.”
November 16, 2009 at 5:46 pm
Well…Georgia courts do have a procedure to judicially foreclose. It’s just usually not necessary for banks to go through those procedural hoops because most security deeds in Georgia include a power of sale that only requires they give notice by publication and certified mail to the debtor for 30 days before the house can be sold at auction.
Now, very few banks granting mortgages are actually dumb enough to not include a power of sale in their deeds, so judicial foreclosures are rare. But they do happen.
November 16, 2009 at 6:11 pm
Sara,
You got me. I didn’t know that it ever happened or could happen.
I just knew that banks are not required by statute to use the courts when foreclosing.
Did I say that right?
November 16, 2009 at 6:24 pm
Right, they are not required by statute to get court approval to take your house, IF they include a power of sale in the deed. But I got the gist of what you were saying–many of the procedural safeguards of the judicial foreclosure process aren’t protecting borrowers here in GA, because so few defaulted loans go through the judicial foreclosure process, and non-judicial foreclosures are much, much faster and have fewer opportunities for the borrower to try and save their house. Essentially, they pay what’s due, they negotiate a new deal (if the bank is in a conciliatory mood), or they lose their house in a month.
November 16, 2009 at 6:47 pm
Sara,
Which banks are so stupid they don’t have a power of sale in the deed? I want to do business with them after I get out of bankruptcy.
I don’t see many if any banks in Hall County doing anything to help a homeowner out when things get bad. Not on a voluntary basis.
When people come to me about preventing foreclosure … the banks had not been willing to discuss using mechanisms like the Home Affordable program through HUD.
Pay what you owe or get out. In 30 days…
At least that’s what I hear from folks who are looking for help. Any help.
I think the process should be arms length … through a court process.
Not a Snidely Whiplash seizure.
November 16, 2009 at 7:41 pm
Usually it’s out of state lenders not familiar with Georgia’s lender-friendly laws. Or, the original mortgage was written by an out of state lender, and then subsequently purchased by a Georgia lender who got stuck with less favorable deed language.
November 16, 2009 at 7:48 pm
Also, the bank’s willingness to negotiate a new deal on a defaulted mortgage is usually dependent upon the quality of the property (and the neighborhood–is it seeing a ton of mortgages and properties that won’t sell, or is it a desirable neighborhood where a buyer might want to make a sweet deal?), the likelihood the borrower can actually meet the payment obligations of a renegotiated deal (someone who bit off more than they can chew but still has regular income is a better candidate than someone who’s unemployed or on the verge of bankruptcy), and the amount of money owed on the mortgage. I have seen cases where banks renegotiated rather than foreclosed, but it was usually when 1) they got some $$$ in exchange, and 2) the specific circumstances of the property meant it was financially more advantageous to the bank to NOT to be stuck owning yet another unsellable house, and 3) the defaulting borrower usually could pay some of the outstanding balance to call off the dogs.
November 17, 2009 at 9:12 am
Sara,
Usually the homeowner has to be able to handle the new ‘payments.’ That’s a given. Banks that are merely servicing the mortgage, how does that work for them?
And, how about PMI? Does having PMI on the loan push the decision making in one direction or the other?
I’ve had people asking that.
November 17, 2009 at 4:09 pm
Yeah, you are beyond the limits of my feeble brain there. Sorry.
November 17, 2009 at 4:56 pm
Beyond me, too. Had Hoped You KNew.
On the street, people are saying that banks don’t care on insured loans … FHA, Fannie, and Freddie owned loans.
Then, there’s a lot of red tape behind the corporate scene.
Lender makes the loan and owns the deed. Sells the loan. Now who has the deed?
In some states with a judicial foreclosure method, allegedly homeowners are asking to see the documents. Documents like the mortgage contract and the foreclosing ‘bank’ doesn’t have the paperwork.
That doesn’t surprise me that a bank can’t find paperwork with all the mergers, etc etc etc.
Thanks for sharing all that you do know. It helps.
November 17, 2009 at 5:19 pm
I wrote about the “produce the note” strategy awhile back on my blog.
http://sarawaraclara.blogspot.com/2009/02/habeas-notus.html
It was an interesting tactic, but mostly useful to delay the inevitable. Not very helpful in GA unfortunately, with so few foreclosures taking place in court.
November 17, 2009 at 7:02 pm
Very interesting link on your blog.
Thanks.
November 17, 2009 at 7:14 pm
Sara,
I don’t have a full answer on PMI or mortgage insurance and what it could be doing on defaults/foreclosures.
But, the insurance is only for a portion transaction, up to 50%!
So I still don’t know but it could be one of the factors.
January 31, 2010 at 12:13 am
This is some good information, I just finished up my paper for school and think i may need to bookmark or save this for the second class lol. You may have just made me a regular