People in Florida, particularly South Florida, have learned a lot about how banks work just by reading their newspaper or watching the news. There have been countless stories written and so much other media coverage of the banking industry related to foreclosure hijinks, including robosigning and mortgage fraud. This media coverage has exposed more than just issues related to homeowners or borrowers facing foreclosure and underwater mortgages. We all have become well acquainted with how banks and lenders work; how they conduct business and make money. Financial institutions aren’t the mysteries they used to be, no matter how much the lenders ask us all not to look at the man behind the curtain (remember that scene in the Wizard of Oz?).
Which means it’s no big surprise to Florida foreclosure defense lawyers to learn the results of the latest study out of the Carlisle & Gallagher Consulting Group (you can read the company’s release and request a copy of the study here). Seems that most folk in the United States today would be glad to get home loan from PayPal or WalMart. According to the research:
- 80% of U.S. consumers would consider a mortgage from a non-bank;
- 1 in 3 consumers would consider a mortgage from Walmart;
- 48% would consider a mortgage from PayPal.
Apparently, people have more trust in these two companies than they do in the bank down the road that asks them to trust them with their deposits and savings and other banking business. Florida real estate home owner attorneys have known for several years that people don’t trust banks like they used to do; apparently, there’s now a market developing to offer bank-type services by companies that are not banks. (Places like CostCo are also dipping their toes into the home loan mortgage business.)
Larry Tolchinsky’s Tip:
People don’t trust banks anymore – this latest study is confirming something that many Floridians already know. It’s not just Florida home owners who have had to negotiate with their lenders on foreclosures, or delinquent mortgages, or short sales, or underwater mortgages, or new home loans: it’s all their friends, and neighbors, and family members who have witnessed all of those bad acts.
If banks in Florida are about to lose business to non-bank competitors like WalMart, then these financial institutions need look no further than their own offices to figure out why. Money means trust. Lending money, borrowing money, holding money, protecting money: it’s all about trust. Banks haven’t been acting in a trustworthy manner and now statisticians are publishing reports that confirm this reality.
Heck, Florida Attorney General Pam Bondi is still distributing millions from a national settlement with the five big mortgage banks in a deal where billions of dollars were paid so these banks could avoid being sued by every state in the union. Is it any surprise that trust has lessened in banks?
The mortgage market isn’t the only way that WalMart and others are moving into traditional banking services. There’s also new things like Bluebird, a new offering by WalMart and American Express where many people can get the same kind of service they have from banks today, for much less or nothing at all. Lots of stuff at Bluebird is free (there’s no checking account monthly fee, no direct deposit fee, etc.).
However, one thing before everyone decides to dump their banks and run to WalMart for their home loan or savings account: there are lots of state and federal laws set up to protect people from the bad acts of banks. Add to that agency regulations and court cases (precedent) that all work together to protect people who are injured by evildoing by a bank.
Sure, it takes time and effort to pursue justice against a bank: you do have to mount an offensive, that may mean a lawsuit and a trial and an appeal before wrongs are righted. But the laws are there, on the books, ready to help you.
As these new alternatives hit the marketplace, it becomes important to consider what happens if things go bad for the customer.
- Can they get the same legal damages under state and federal law on a case against Walmart as they can against a licensed state or national financial institution?
- Are their funds protected in the same way?
- Are those mortgages going to come with the same legal protection just as if the borrower had borrowed from a traditional federally insured bank?
For example, the new Bluebird offering sounds great, but it’s not protected by the FDIC; deposits in traditional banks are protected by FDIC insurance. Could American Express and Walmart ever go under? Sound impossible? Well, American Express almost did go under a few years back (read about its bailout here), so that FDIC-guarantee does sound pretty important when you ponder that past history.
In the distrust of the traditional bank, we need to remember that there are laws out there that do apply to them and while those laws are working slowly, they are working (remember the Chuns?). Example: the new cases being filed across the country against banks who have been less than forthright in loan modification negotiations. People are winning their loan modification fights and foreclosure fights against banks who have proven to be untrustworthy. Before we disregard banks for non-bank alternatives, we all need to make sure that equal protections exist in case things go south, which will eventually happen; it always does.
Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at email@example.com, or (954) 458-8655. If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments. He’s happy to take your call.