The first FDIC-insured bank fell in West Virginia, causing concern that more regional banks could close in the near future as a result of the coronavirus pandemic.
This possibility is putting additional stress on high-risk mortgage noteholders, as their mortgages are susceptible to being called, making the full amount due immediately.
This is near impossible for most mortgage holders.
Large-scale bank failures are not expected as the Fed has stepped in, but we may see more closures of smaller regional banks.
This is not likely to affect individuals buying a home for personal use, but may have more of an impact on real estate investors.
“Real estate investors who deal with large sums of capital and high-risk mortgage notes could face similar problems as Ramsey in the 1980s, especially if the coronavirus pandemic applies additional pressure on the financial sector.”