My cousin met with his bankers on Friday. His banker told him they are not using the TARP money to lend because its too expensive; that they have to pay 5% to the gov't for borrowing this money. I did some searching and that seems to be right:
"Now, right off the bat, we already have a problem. Like the ‘bailout’, TARP is mis-named. It does not repair any assets. After the legislation was passed, the method of disbursement was modified. Instead of buying up the bad loans, which would take too long, a capital purchase program was created. The top 9 financial institutions in the US were ‘encouraged’ to sign up for a forced injection of cash that amounted to $125 billion; $57 billion then went to Super-Regional Banks like KeyBank in Ohio and Regionals like Sterling here in WA. The community banks, of which there are about 8,000, were left to mop up the rest. In total about $194 billion has been doled out to date to about 300 banks, with more to come.
It is very important for all of us to understand the terms of this agreement. In exchange for cash, each of these institutions agrees to pay a 5% dividend per year for the first 5 years, and 9% thereafter.
Why is this important? Because there’s a lot of hype right now about all this money going into bank vaults and not lending it to small businesses to relieve the credit crunch. Let’s debunk the myth. Mullah is a bank’s inventory, right? If they pay 5% for their inventory, they have to lend it out at more than 5% to make some dough.
biznik.com
So that makes residential loans out of the question......although there is a NC bank that's offering 5.5% loans using TARP money. But it seems to me the TARP money is doable when it comes to new construction loans and lines of credit. I don't remember what the interest rate on lines of credit typically are but construction loans usually had interest rates that were pegged 3-5% greater than residential loans. Do you know what the interest rate on your lines of credit are? |
