Posting opinions, letters and correspondence from far and wide. Even some to/from my elected representatives.

Wednesday, October 22, 2008

May Your Hearts Bleed for the Illegal Aliens!

Miriam Jordan of The Wall Street Journal today attempts to make us all feel sorry for Jose the Illegal Alien who can no longer get a real estate mortgage even though he has $100,000 in cold hard US currency (let's not even get into that little detail of how a 31 year old "vegetable chopper" come "sous chef" could end up with 100K worth of greenbacks).

Read the article here first then come back here and read on.

Now let's do the math using the numbers provided by Bank of Bartlett.

Bank of Bartlett made $20,000,000 in loans to illegal aliens with an average loan worth of $100,000. That means that the bank made loans to about 200 illegal aliens.

The quoted premeltdown delinquency rate was half a percent per annum which means that only one mortgage went bad out of 200. If the bank foreclosed and sold the property for half its value then the bank would recoup $50,000 of their $100,000 mortgage (not counting any additional costs).

If the loans were provided at 7% per annum then they would make $7,000 on each of the 199 good loans.

Their income from the those loans would be $1,393,000.

Their losses on the one bad loan would be a minimum of $50,000.

Therefore, their total net income would be a maximum of $1,343,000.

But look at what happens when the delinquency rate goes up to the quoted 5%. The math changes such that the banks income would be reduced to:

Income of $7,000 times 190 loans = $1,330,000.

10 foreclosed homes at $50,000 loss each = a $500,000 loss.

Total net income = $1,330,000 – $500,000 = only $830,000!

So their net income was reduced by roughly forty percent because of 9 delinquent illegal aliens!

And here we are assuming that the bank was able to sell all of those ten homes. If the bank can't sell the homes then their income could be cut down to as little as $330,000!

Let's assume that they were indeed able to sell all of the houses. Then lending $20,000,000 for an annual return of only $830,000 is just 4.15%. The bank would have been better off putting the 20 million into a CD in a small community bank - but hang on - they ARE a small community bank!

So should we be surprised that Banks are no longer willing to lend to illegal aliens?

A Bank that exposes itself to a risk of a 40% income reduction based upon a 500 percent increase in delinquent high flight risk customers shouldn't be making those loans in the first place.

And we shouldn't be expected to feel sorry for illegal aliens that cannot get a mortgage either.

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