Last January 22nd another Miami bank was closed by the regulators. Premier Bank, whose portfolio was heavy with commercial real estate, had the dubious honor of being the first bank closed in Florida this year.
Every bank in Miami that threw caution to the wind could be next. These bankers forgot basic Economics 101 principles and disregarded what they taught in their own credit training programs. They lent money to, it seems, everyone who asked and, looking for profit, they hurt their borrowers and themselves. What were they thinking? The following are real cases where some details have been changed to insure privacy.
A small business who wanted to buy an office condo? Sure. Did the bankers stop to figure how much money they needed to generate every month to come up with $6,300 for mortgage payments, $1,000 for maintenance, and $450 for taxes, in addition to salaries, insurance, etc.? That business went bankrupt, of course, and that property is now a foreclosure for sale at 50% of the previous purchase price.
The newbie developer who bought land to build 26 condo warehouses in a rather inaccessible location surrounded by similar finished projects went to his banker and got a loan for his nonsensical idea. Only three units sold upon completion and the borrower cannot repay the bank. Well, duh. Did the lender check out the site and count the number of new warehouses in the vicinity?
The maintenance contractor who bought an apartment building for $850,000 to convert it to condominiums also got a loan, never mind that he knew nothing about what he planned to do. But his banker should have known. After spending $150,000 additional on renovations he wasn't able to sell one single unit and is now engaged in a battle with his banker that neither of them will win.
The young couple who spent all their savings on used airplane parts to sell on the Internet and a small warehouse to store them? They got the money, too: enough for the used parts, plus the building, plus one condo in Miami Beach and another one in North Miami. Did anybody stop to think that these people had little experience in what they were trying to do? They are now bankrupt and not making payments.
These are just some examples of the loans our bankers made by the thousands. What were they thinking? Any bank in Miami who approved similar transactions could be next in line.
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