Banks are in a very fragile state at the moment. The global economies are week, recession is looming once again, and banks have had to set aside billions to pay for Mis selling mortgage claims and payment protection insurance claims. America has also taken the unprecedented step to launch legal proceeding against these banks for the damage this scandal has caused the economy
If everyone takes their money out, the banks will collapse and people who did not yet take their money out will not be able to get it. This is not likely to happen now - lessons were learned after the last time - but the same sort of process is at work, and it has weakened the banks.
On top of this problem, banks are being hit by many claims of mis sold mortgages. This is the term for what happens when an agent sells a house to a person who cannot afford it. They might misrepresent how much the house will cost. They might make it look like the monthly payments will be at one amount when they are really going to be a lot higher. There are many ways that this can happen, but the end result is always that the person who owns the house cannot afford to own it, and they appeal to the banks.
This is basically just the product of agents who are trying to get a commission. They are not looking for the deals that would actually help their clients out at all. They are just trying to make a sale so that they can take home some of the money. Buyers need to be wary that this is happening. Banks also need to be wary, though, because it can hurt them as much as it can hurt the buyers. In some cases - when this happens to many people at once - it can actually hurt the banks a lot more than the people who own the homes.
The problem is that people just cannot afford to make their payments. They want to, but they cannot. They will come to the bank and report this. The bank can then take the home back. The person's credit will be ruined. However, as bad is this is for the person who is defaulting on the purchase, it also means that the bank will not get their money back. They will be further hurt at a time when they are already being hurt by the economy in general.
In some cases, people might even try to take the bank to court. If they feel that the bank lied to them or changed the data so that they would buy the home even though they could not afford it, they could have a good case. This can make the banks pay out money that they do not have becoming victims of their own mortgage mis selling.
With mis sold mortgage complaints crippling already weakened banks, there is no telling how bad things can get. Again, it is doubtful that the financial situation will get as bad as it was in the 1930s. However, this is certainly not a situation that is looking very good. Just because it will not be as bad as the all-time low does not mean that something does not need to be done soon.
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