The following is dramatized but the facts are true.
I just had reason to talk to my county's office of records this week. This is where they record titles, liens and other real estate related items. I would love to be a reporter to flesh out this story because it illustrates what banks are doing - and not doing - to facilitate consumer lending.
First of all, I lucked out with the clerk I got. She was not only pleasant on the phone but extra helpful, saying that it would be OK to call her direct line to follow up and she would pre-prepare the document I needed so I would not have to wait when I got there. Wow!
Then she tells me of all the horror stories relating to banks and the information they demand from consumers. There were plenty of people scrambling to get copies of documents or proof of release of liens/judgments. Basically, they jumped through hoops yet it was not good enough for the loan officers.
One story was really good as it was a lien on a man's property. He went for a loan and was denied due to this lien. The problem was that the man lived in Michigan and the lien was on property located on Long Island. The man never lived, worked or owned anything on Long Island. You would think the bank would work with the guy to clear it up but no. Sorry, fella, no loan.
Next, someone needed a proof of a tax lien release and got a signed letter from the county on county letterhead and embossed with the raised county seal. Not good enough! They wanted a book and page number where it was recorded. Hmmm. Seems reasonable enough. They don't trust the applicant and want to search the record themselves.
The problem is that the county does not use book and page numbers for tax lien releases. It is used for some other federal judgement stuff but not what the man needed to prove. The info on the original county letter was all anyone needed to search the records.
Bottom line - do it our way or no loan. Since the county does not do it that way you would think the bank would check that out.
Last story. A lady needed to pay a debt and wanted to take out a home equity loan. She told the bank up front why the loan was needed and the bank officer said "no problem." Wrong. The problem was the debt was a tax lien on her house. The bank will not lend is there is a tax lien in senior position to their loan - again something that makes business sense. But did they tell that to the lady up front? No. It took more than a month for that info to reach her and by then it was too late to try another way to finance her debt. Here comes the interest and penalties.
Again, it makes sense for the bank to protect themselves. But it did not matter that the house was worth a few hundred thousand more than the mortgage, requested home equity loan and tax debt combined. Or perhaps the bank could have told the lady on day one that the lien would have to be removed by other means first.
Remember, the loan was to satisfy her tax debt and remove the lien. The loan was rejected and even though she found other financing, the loan was past 30-days after being killed. In other words, she had to start over with a new application. Both the chicken and the egg died.
Maybe it is regulation or just plain fear of getting stuck with bad loans but banks are not really trying, are they? I heard from a friend that their existing bank would not increase his existing home equity loan and he would have to re-finance with fees upon fees. Nevermind the equity in the house was five times the loan needed. He figured out a way not to need the extra cash.
Recovery my elbow.