It’s impossible to avoid troubling economic news these days. What started with a warning about interest rate resets on adjustable rate mortgages over a year ago has accelerated into a sub-prime mortgage meltdown that is threatening the United States economy and indeed, is beginning to have adverse global impact.
Major financial institutions that gained the most by creating and marketing so-called “hybrid” mortgage products are giving back much of their gains due to unprecedented foreclosure losses. In fact, one of the country’s largest home loan originators recently announced its sale to avoid failure, and it is not likely to be the last such transaction we see before this is all over.
Like most of our community bank peers, Lakeview Bank avoided making sub-prime mortgage loans because they violated almost every tenet of safe and sound banking practice. The failed sub-prime mortgage industry has reinforced the relevance of “old-fashioned” banking principles that insist on down payments and verification of the borrower’s ability to repay the loan. The three primary “C’s” of credit—character, cash flow, and collateral—are as important today as they were one hundred years ago.
Unfortunately, there will be many innocent victims of this financial crisis. Retirement accounts invested in the stock market, for example, have seen serious declines in their value regardless of whether their holdings were at all related to the mortgage industry. As in past market downturns, we can expect a flight to quality as investors seek to stop their losses and stabilize their portfolios. For those people, insured bank deposit products such as money market accounts and certificates of deposit offer an excellent safe harbor.
With a guaranteed rate of return and the comfort of FDIC insurance, our depositors are assured that their investments will remain 100% intact and be available when needed.
We would be happy to provide you and your portfolio the same kind of assurances!
It’s impossible to avoid troubling economic news these days. What started with a warning about interest rate resets on adjustable rate mortgages over a year ago has accelerated into a sub-prime mortgage meltdown that is threatening the United States economy and indeed, is beginning to have adverse global impact. 
