Poor mortgage oversight continues to haunt the consumer banking industry. A recent article from The Wall Street Journal highlighted the consumer banking industry's struggles in trying to sort out the massive amount of home foreclosures. The high volume of foreclosures has caused members of the consumer banking industry to shift much of their focus to their home mortgage branches. The home mortgage branch represents one of the most profitable services provided by consumer banks. The focus on mortgages may allow banks to keep up with the high volume of foreclosures, but it is also drawing attention away from the other services provided by banks (Reilly, 2010). This is making the business of home mortgages less efficient and less profitable (Reilly, 2010).
As far as trends in the industry go, the future does not look any brighter for the consumer banking industry. All home mortgage providers in the United States were given a negative future outlook by one rating association (Reilly, 2010). This is clearly an indicator that the consumer banking industry still has a large task on its hands as it tries to sort through all of the issues surrounding foreclosures. This is bad news for the industry as it tries to recover from the financial crisis. In order to become more profitable, banks are going to have to sort out the problems with foreclosures and make this a profitable service once again.
This article mirrors what I found out during my informational interview. I interviewed a man from Wells Fargo's Home Mortgage Branch. He told me that he has noticed that his local branch at Wells Fargo has had to shift much of its focus to the Home Mortgage Branch of the business. This just serves as further proof that the effect of the foreclosures is being felt even at some of the most basic levels of the consumer banking industry.
-Justin Schaffer
http://online.wsj.com/article/SB10001424052748704405704575596531820563978.html
I completely agree. Recent articles suggest that the these companies are facing charges of hundreds of millions of dollars in lawsuits surrounding faulty mortgages and fraud. While the industry shifts its focus to these mortgages, it will be interesting to see which companies can both handle the past problems and tackle the new. I believe that this is also why bigger banks have the advantage within the industry. They simply have the man power to both address mortgage concerns while also brainstorming innovative ways to make profit amid regulations and low consumer spending.
ReplyDeleteThis seems reasonable, I read on the WSJ that the mortgage and credit card portfolios continued to bear very high net charge-offs for the big banks. However, the economy is turning around and people are starting to pay thier mortgages I wold not be that pessimistic.
ReplyDeleteI actually based my blog for this week off this Justin. I hate to say it but I am pessimistic Marcello. Week after week the credit card interest rates continue to hit new record highs and they show no sign of stopping. And some people are starting to pay off their mortgages but at the same time a lot of people are defaulting on them. The economy is still way to unstable, and sadly I think it’s going to take more time then we think to fix it.
ReplyDeleteHopefully, banks will be able to recover from these foreclosure issues and find other ways to make money. The third-quarter results indicate that banks are beginning to make money again, so foreclosures are clearly not completely preventing banks from gaining strength.
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