If you were looking for a sure-fire way into an argument, your most likely adversary these days would not be a neighbor, or an in-law, or even a customer service person at your local mega-retail establishment. More likely, your difference of opinion would lie with a banker. Utter the words “banks aren’t lending any money” around someone who works for a financial institution, and the next 20 minutes will be filled with phrases like “unfair claim,” “media bias” and “completely untrue.” But where there is smoke there is almost always fire; and the fact is, when it comes to lending money to individuals and small businesses, banks are walking a VERY thin line between keeping the country liquid and hoarding the nation’s capital. To make my case, I offer the following true story.
Back in mid-March of this year, I began to pursue the idea of borrowing a small amount of money for business purposes. I contacted the local branch of what has been my bank for the past 18 years, and eventually two more branches in the surrounding area, until I finally received a call back 30 days later (a sign of things to come?).
My meeting at the bank was scheduled for the end of April, and by all accounts the meeting went very well. I have a stable job, no credit card debt, money in the bank, equity in my home, and a credit score in the 800s. I was told by the loan officer that these were all very good signs, and if anyone should be able to get a loan, it was me. The next steps included appraisal of my assets, a check of my financial history, and a few levels of approval. When I was reviewing the papers to start the process, the loan officer penciled in a loan closing date of June 18th, but assured me things would need to go ‘horribly wrong’ for the process to take that long. With this in mind I signed the paperwork, locked in an interest rate, and handed over a $500 check to get the ball rolling.
Fast-forward to today, and you might be surprised to know that I still have not seen a dime. The last 12 weeks have been an absolute comedy of errors, delays, and oversights on behalf of my banker and the institution he works for. Although this is not an all-inclusive list, some of the more notable issues included the following:
- During the review of my assets the appraiser pulled the incorrect map for my primary residence, and noted that my house was in a flood zone. Based on this information, the bank attached a requirement to my loan that I immediately acquire a VERY expensive flood insurance rider. After making my banker aware of this obvious mistake, it took him 13 days to return my call, and another five to tell me there was nothing he could do to fix it.
- When I requested (multiple times) to see the closing summary in advance, I received the papers less than one hour before the scheduled closing. I quickly printed the papers and reviewed them in the car on the way, only to discover the loan amount—the whole reason I went to the bank in the first place—was off by 92.5%.
- After already being scheduled for the ”worst case” closing date, I was forced to wait yet again and apply for an extension on my locked in rate, because my banker took a last-minute week of vacation.
- Regarding the previous bullet . . . when I contacted my banker’s manager and asked if he would kindly sit in on my closing so I could keep the original date, the manager quite literally laughed in my face. Then he told me my loan was “not quite that high on his bank’s list of priorities.”
At this point, it is important to note something: I don’t bank at Pawn America. My bank is one of the largest, healthiest, and longest-standing financial institutions in the country. In fact, this particular bank sleepwalked through the recent “stress tests,” and has never been in serious financial trouble in its long and storied history. So this begs the question: why can’t I (or anyone else) get any money? Based on my recent experience, and a number of conversations with employees and customers within the financial industry, I believe the answer is threefold:
Reason #1: Banks are Finally Doing All of the Things They Should Have Been Doing 15 Years Ago. Gone are the days of loan officers encouraging people to push for 80/20 loans, sign variable-rate ARMs, and use their homes as cash machines . . . while encouraging them fudge their loan applications. Today, asset appraisals are being double-checked, employment histories are being triple-checked, and good credit ratings are no longer optional. The downside to the consumer? All of these checks take TIME.
Reason #2: Banks are Choosing to Remain Understaffed. At this point in time, there are statistically more people and businesses trying to get money than in any other period. Between historically low interest rates, unheard of home buyer credits and re-fi requests from struggling families looking to rework existing loans, there are nearly THREE TIMES as many customers in the banking pipeline. Yet for some reason, banks are not looking to hire additional staff. Why? To keep overhead down and stock prices up.
Reason #3: Lenders are Making Even More Stupid Mistakes than They Were Before. The lack of qualified people mentioned in #2 is causing bank employees to rush, which in turn results in an incredible number of mistakes during the loan application and approval process. This year, among my smaller group of friends and colleagues I have seen everything from typos to gross miscalculations—some of which caused loans to completely fall apart. The worst story? A couple who was 9 months pregnant showed up to close on their first home and was turned away, because their banker forgot to lock in an interest rate. Three weeks, $2,000 (unexpected) dollars and one baby later, the home is finally theirs.
It might not be fair, and it certainly isn’t right, but until interest rates move higher and the majority of foreclosure homes clear the market, you and your business must unfortunately expect slow, inaccurate and uncaring service from your lender. And the worst part is, they will continue to collect the same outrageous fees they’ve always been collecting.
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