Bank foreclosures for sale signs are everywhere. Although it means pain there is another side to the story – bank foreclosures for sale means affordable houses for many. So there are always two sides to the coin.
But there are such staggering numbers of bank foreclosed homes that it is no longer a question of one or two families suffering but the whole nation is in recession. To prevent the number of bank foreclosure homes from increasing, the government has started many bailout programmes but so far there has been no improvement of the situation.
This abnormal increase in bank foreclosures for sale was caused by the banks forgetting their primary role of bankers. Basically there are two types of banks – commercial and investment banks. It is the blurring of the lines that has caused this mess. In many areas the good old fashioned banks are functioning as of yore with hardly any bank foreclosure listings on their lists.
The commercial bank accepts deposits for savings accounts and issues cheques. The Federal Deposit Insurance Corporation guarantees these deposits up to $100,000. To get these guarantees from FDIC the commercial banks have to follow certain rules.
The customer deposits money in the commercial bank. The commercial bank now lends out money to applicants who need funds for various purposes – to own a house, make repairs to it, buy a car etc. Companies borrow to meet their needs – from the dry cleaner down the road to the multinational corporate. The banks generate money by giving out loans at a higher rate than the rate of interest it gives to its depositors. Loans are treated as private contracts made directly between the banks and the borrowers. The rate of interest is determined by the banks depending on the credit history and income of the loan taker.
The investment bank does not have a list of deposits made by clients. It acts as a middleman matching those who sell stocks and bonds with those who buy these. Lately investment banks have been trying to act as one-stop banks and this has led to the confusion and chaos that has resulted in innumerable bank foreclosures for sale.
Spiking in the number of bank foreclosed houses for sale are also because of removal of traditional regulations in a computer age without new regulations being introduced to tame new transactions.
Unless the increasing numbers of bank foreclosures for sale are controlled the health of the economy will not improve.