How Does IndyMac Failure Affect Daytona Beach Real Estate
The failure of IndyMac will have little affect on Daytona Beach Home and Condo owners. On Friday, July 11, 2008, IndyMac bank out of California was “taken over” by the Federal Government. This is the second largest bank failure in US history.
The bank informed Federal banking regulators that because of a recent run on the bank, in the form of deposit withdrawals, IndyMac no longer met capital requirements for banks. In other words, they don’t have enough cash or near cash .
What happens to depositors?
If depositors were under the $100,000 limit for FDIC insurance, they will get their money immediately. If they had over $100,000 at IndyMac, they are likely to lose 50% of the amount over $100,000. For IRA’s the amount insured is $250,000. The estimate is that all together, these people will lose 1/2 of one billion dollars, or $500,000,000.
The loss for taxpayers is estimated between $4 to 8 Billion. That’s a lot of money and I’ll bet that IndyMac is not the last to fail.
IndyMac was an active mortgage lender in the Daytona Beach area during the boom. Their business model was based on lending money to just about anyone, then betting that prices would keep rising to protect them. We all know that it didn’t quite work out that way.
If you hold a mortgage from IndyMac, keep making the payments. The mortgage will eventually be sold off, probably in the Fall of this year.
IndyMac recently cut about one-half of their staff, so I’ll bet that it’s a real mess there. I’m going to bet that with the Federal Government involved, the cost of this loss will be above the $4-8 billion estimate. When the FDIC gets into the books, it’s probably going to be worse than they thought.
The biggest lesson from the IndyMac failure, is to make sure that you do not have more money at any single bank above the FDIC insured levels. If you have more than $100,000 at any bank, it makes sense to spread it among enough banks to make sure all your money is insured.
How would you feel today, if you had $1,000,000 deposited at IndyMac. In the blink of an eye, you lost $450,000 (1/2 of the uninsured $900,000). Yes, you might get a bit back from the bank’s sale, but it will probably be pennies on the dollar.
The affect on Daytona Beach real estate is probably minimal, but it’s another lender out of the market and this whole mess can do nothing but make getting credit tougher.
Yes, we will get through all the effects of under-regulated banks. I hope we are all smarter for the next time.
Related posts:
1 response so far ↓
1 IndyMac is Under Goverment Control | Daytona Real Estate // Jul 12, 2008 at 5:06 pm
[...] More information can be found on a blog post I made: IndyMac Failure and Daytona Beach Real Estate. [...]
Leave a Comment