by Lex Shan
As many know, California’s Department of Financial Protection declared Silicon Valley Bank (SVB) insolvent on March 10th. The same Department named the FDIC as a receiver. Although SVB was better known for financing tech companies, this financial institution was also a significant mortgage lender, and its collapse may affect the Bay Area’s real estate market.
A brief history of SVB
SVB was founded in 1983 in response to the needs of technology companies. It then grew into one of the most important financial institutions in the world, with more than $212 billion in assets.
SVB was a part of many successful tech companies, including Apple, Cisco Systems, eBay, and Google. It also helped fund some of the most iconic events in technology’s history, including Facebook’s initial public offering (IPO) and Twitter’s IPO.
In addition to supplying capital for startups and large corporations, SVB provided personal banking services and mortgage loans to customers through its network throughout California and Nevada.
How Large Was SVB In Mortgages?
About $8.3 billion of SVB loans are personal residence mortgages. These loans will change hands. The FDIC will have power over all obligations and money owed to the failed bank. All loan customers must continue to make payments.
It is too early to say what exactly will happen to the mortgages held by SVB. In the meantime, refinancing an SVB mortgage will be complicated, pending the FDIC’s final decision about the future of SVB.
How will the collapse of Silicon Valley Bank affect San Francisco Bay Area home prices?
We are not sure yet — it will take some time to see what happens to house prices after a big bank like SVB goes under.
Remember that the Bay Area real estate market is unique because it has a very tight inventory of homes. So, few homes are on sale even with one less mortgage lender in the market. On top of this, the bank was responsible for financing a significant portion of new home construction in the area, so there might be even fewer new homes available.
But on the other hand, the collapse of SVB has pushed mortgage rates down very fast. As a result, experts expect the Fed not to raise interest rates to help calm down markets. This means that homebuyers could get lower monthly payments from other lenders, enabling them to afford their first home or to move to a larger house.
We are ready to help you sort out this crisis.
At The Cal Agents, we have a team of experts with various economic backgrounds. As a result, we can understand the implications of market upheavals as profound as this SVB one and guide you through it. We also work with trusted and preferred lenders in the area.
Whether you are an SVB customer or not, we invite you to book a free consultation in our meeting room, via Zoom or phone. Just click here to schedule an appointment at your convenience.
In times like this, it is very important to know the value of your assets. If you want to know the current value of your home, we also provide a full complimentary report* with:
- The estimated value of your home
- The demand for homes in your neighborhood
- Your home’s current net worth
- Your loan information, including principal vs. interest paid
- Estimated rental income potential for your home
- And much more!
To get your report, just click here, enter your email and home address, and you will get your report in minutes. We can review the information together and see if it is a good time for you to sell.
