Mortgage Rates are Prevented From Going Lower by Banks Who are More Interested in Profits

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Tobias Nergarden of Real Estate Marketing Insider comments on the lack of lower mortgage rates due to bank interest in maintaining higher profits

Mr. Nergarden of Real Estate Marketing Insider issued his warning regarding banks keeping mortgage rates higher in order to maximize profits today, and his opinion is that this will harm home sellers because the banks are raking in record profits while a lower interest rate might create more buyers for anyone looking to sell a home or advertising real estate.

According to Peter Eavis' article in The New York Times, mortgage rates are lower than they have ever been and could be lowered by another half a percent. His article goes on to say that the reason that banks like Wells Fargo and U.S. Bancorp have not lowered them is because they are currently making a lot of money on housing sales and they want to maintain these profits. Executives at the Mortgage Bankers Association claim that these profits are necessary because it costs more to approve a mortgage than it did in the past. In other words, it is necessary to hold people to stricter standards and investigate them more thoroughly, which costs money, labor, and resources. Others claim that high standards should not cost that much and that the lack of competition is allowing these banks to earn massive profits with little incentive to lower rates.

Wells Fargo is the fourth largest bank in the United States, but it held the highest credit rating in 2007. Even after the 2008 financial crisis, when all banks were downgraded, Wells Fargo was not downgraded as much as others. Interestingly, the original Wells Fargo was absorbed by Norwest in 1998, but the Wells Fargo reputation and recognizable logo were considered more useful for marketing.

U.S. Bancorp, like many of the world’s large banking institutions, was born from a series of mergers and acquisitions between smaller banks. The name comes from the United States National Bank of Portland, which was founded in 1891 in Portland, Oregon. U.S. Bancorp is the fifth largest bank in the United States, and is one of the survivors of the 2008 financial crisis, which ended with many smaller banks being absorbed by larger ones.

The Mortgage Bankers Association (MBA) is an organization designed to represent and stand up for everyone involved in the process of real estate finance. The group achieved a certain amount of notoriety in 2010, when, after some members claimed that a strategic default on a mortgage was morally wrong, the MBA defaulted on the loan for its own headquarters.

Real Estate Marketing Insider today commented on the news that mortgage rates, while low, are kept higher than they could be due to banks wanting to maintain their record profits. The banks claim the money is needed to achieve higher standards, but others disagree and claim that it is not that expensive to achieve these standards.

About Real Estate Marketing Insider:
Real Estate Marketing Insider aims a providing a publication that will give real estate professionals the tips, strategies, and analysis that they need to succeed in their field.

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