About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (April 14, 2020)

handle is hein.crs/govcvys0001 and id is 1 raw text is: Researh Sevice Bank Exposure to COVID-19: Mortgages and Consumer Loans April 14, 2020 The COVID- 19 (coronavirus) pandemic has caused financial hardship across the country. If COVID- 19 causes borrowers to miss payments, it could have negative consequences for banks. This Insight examines the exposure banks have to household repayments, such as mortgages, credit cards, auto loans, and other consumer debt. The main business of a bank is to make loans and buy securities using funding it raises by taking deposits. A bank earns money largely through borrowers making payment on those loans and securities issuers making payment on securities, along with charging fees for certain services. In addition to accepting deposits, a bank also raises funding by issuing debt (such as bonds) and capital (such as stock). Unlike deposits and debt that place specific payment obligations on a bank, payments on capital can generally be reduced, delayed, or cancelled and the value of capital can be written down. Thus, if incoming payments unexpectedly stop, capital allows a bank to withstand losses to a point. However, if a bank exhausts its capital reserves, it could face financial distress and potentially fail. Mortgages and Consumer Loans A significant portion of a typical bank's assets consists of loans to households, which households use to purchase houses, cars, and other consumer goods. Some loans are secured by a home, such as mortgages and home equity lines of credit (hereinafter home loans). Other types are used to make consumer purchases and can be secured, such as auto loans, or unsecured, such as credit cards (hereinafter consumer loans). Home loans and consumer loans can be pooled into groups (securitized) and sold to investors or other banks. Many banks own a significant amount of mortgage-backed securities (MBS) that are backed by the federal government through government-sponsored enterprises, such as Fannie Mae or Freddie Mac. Arguably, banks are also exposed to losses on these securities. However, due to the government backing, these securities are not be covered in this Insight. For more information on government-backed mortgages, see CRS Insight INI 1316, COVID-19: Support for Mortgage Lenders and Servicers, by Andrew P. Scott and Darryl E. Getter. Congressional Research Service https://crsreports.congress.gov IN11336 CF'S NStGHT Prepaimed for Mernbei-s and Committees 4 o. C- --q .. . . . . . . . ...-----------------------------------------------------------------------------------------------------------------------------------------------------------------------

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most