Do you stay awake at night trying to figure out why Banks have been given billions of government bailout bucks but seem unable to lend that money out again? Do you ever wonder why Banks take so long to approve short sales? The answer is simple…they are just like us!

Faced with the worst Recession since the 1929 stock market collapse, consumers have completely changed their spending habits. Instead of spending they are actually saving. In fact, Americans have gone from a “0”savings rate during the run up in home prices to one approaching 7% today. This is the highest rate since 1993! The reason for this phenomenon is simple; we are uncertain about the future so we want to have cash as a “cushion” for tough times. Banks want the same cushion but they have fancier name for it…”capital preservation” or “liquidity”. If the Federal Government gave you $20,000 right now would you buy something or put it in your savings account?

As for “short sales” (the sale of a property for less than what is owed on the mortgage), consider what a hard decision has to be made by the Bank’s Directors. Do we agree to a specified loss now or wait to hope for a better return? If the asset is performing now (mortgage payments are current), why move it to a non-performing asset and take a loss? Would taking the property back in foreclosure give us a better return? If you are “upside-down” in your home mortgage, you are probably agonizing over the same decisions Banks have to make. The difference is that they have thousands of them to make, shareholders to satisfy and regulators to report to!

The bottom line is that you can expect the mortgage money to start flowing again as soon as Bank Balance Sheets improve along with their outlook forth future. This should happen around the same time we feel confident enough to spend some of our savings!