A group of local lenders are not so sure of the plan’s success.
The Times Union interviewed some lenders and found out that they are not yet ready to embrace what Pres. Obama has been announcing in the past weeks. The report cites the lack of preparation among participating banks who will receive the bailout fund in order to increase their available lending to qualified borrowers. Among the criticisms include unresolved logistic issues, lack of details on underwriting guidelines, stringent credit requirements and the general risk aversion among banks in providing loans.
But we believe that the plan’s results will be thwarted severely by the upcoming bank stress test results this May 4. The test aims to determine the safety and security of the country’s 19 largest financial institutions. There’s also a growing speculation in Wall Street that Citigroup will be dead last in terms of ranking the institutions from the strongest to weakest. Then again, these fears can be allayed if the bank’s recent better-than-expected report of $24.8 billion revenue reflects in the results of the test.
So we can truly understand why the Time’s interviewed lenders are hitting back the Making Home Affordable program: if lenders themselves can’t seem to put their act together, how much more for the public who’d have to contend with rising consumer prices, spiking unemployment rates and falling home values?
Take note, Shilling believes that the government will be using more money when banks eventually fail to prove that they can resist shocks in the most trying economic situations. That’s more pain for taxpayers who are always at the expense when private markets fail.