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Comment by zzleeper | Hacker News Reader

> They gave me a mortgage rate much better than any other bank was offering

Isn't this why they got in trouble on the first place?

Not really, no. Like SVB, FRCs problem was just having too high a percent of uninsured deposits (rich customers, basically). When rumors started that they were next, unlike SVB they were actually a healthy, well run bank. But no bank can handle losing more than half their deposits. It killed them.

My understanding is that SVB also invested a significant share of those deposits in bonds which are reasonably conservative, but they bought so many of those bonds at/near the peak of the bond market such that they couldn’t liquidate them to cover withdrawals. Banks are supposed to keep a certain ratio of insured:uninsured deposits as well as liquid:illiquid investments and SVB broke both of these rules and regulators let them do it.

And a reason that banks have had so many withdrawals is that their deposit interest rates have not kept pace with money market rates, so a lot of people, especially if they had a lot of cash in a bank, have been moving their cash to money markets.

But long-term Treasurys are liquid, they just lost value. Be careful not to equate the two.

And bizarrely, capital requirements don't require banks to account for duration risk, which is what screwed SVB (and is screwing a lot of other banks now).

It’s the combination. Either factor by itself might have been ok, but when 80% of depositors are not insured and the bank has a liquidity crunch, it can spiral out of control quickly.

Yikes regarding the low appraisal waiver... This is the entire point of appraisals - to protect the bank from over-lending and the taxpayer from the moral hazard of having to bail out poorly run banks.

Without knowing the details of why it got waived, it's hard to know whether that was reckless or not. And remember, it wasn't (unrecovered) mortgage defaults that sank FRC.

Do you think the mortgage originators working on commission trying to push deals through are able to assess if waving an appraisal reckless or not? Why even have appraisals?

No, I didn’t argue that straw man.

yeah this sounds weird, i was under the impression that every bank will give you the same rate regardless of where you go

That's not my experience and understanding. Rates can vary substantially between Banks. Are from the US?

Today's 30-year Treasury rate is about 3.8% which put the bottom limit and the average 30-year mortgage is 7.5%. This gives about 3.5 percent spread. How much of that you can negotiate back will depend on Bank policy

The spread between interest rates on 12mo. CDs between the two banks I use is over a factor of 100

yup

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