Chase Bank and the "You're Not Credit WOrthy" Judgement


Over the past 3 years, Anne and I have had some very revealing experiences that have taught us a lot about what the big banks are really about.   Probably the single most startling experience occurred when was purchased our Edmonds home back in 2016.

When I look at how banks treat their customers, I'm always mindful of what happened in 2008, when the people of the United States (AKA, their customes) had to bail out the big banks for ripping off said customers with their irresponsible sub-prime lending practices, on which they made trillions of dollars.    The banks were gambling at a roulette table in the casino of the US Treasury, which had kindly passed out "you can't lose" cards to everyone by allowing their bets to be insured.

Here we are in 2016.    We owned our home in Woodinville, and the home we were buying in Edmonds was going to require months of remodeling (years as it turned out).      We decided to take out a mortgage on the Edmonds house, something we had not done for some time.    We were not looking for a bridge loan mind you - we were looking to keep our assets balanced and not too real-estate heavy.    This would also give us the flexibility to sell the Woodinville house at an opportune time in the heating-up market coming on at that time.

We frankly did not think twice about getting a loan, we simply assumed that between assets and income we would qualify.    Perhaps I've given away the story.

Anee filled out the application at the bank.    She worked with a loan officer that somehow seemed to act inexperienced and brusque, something Anne would not normally have commented on to me, being a positive person herself.    Keep in mind that we were considered "private" clients at Chase (a program they had pushed on us quite heavily).

Within a couple of hours Anne called me to report that we had been summarily dismissed from consideration for a loan and were not "credit worthy". 

Huh?

I called the loan officer to get an explanation of what I assumed was a misunderstanding.   She explained that the primary reason we were not credit worthy was because we had not borrowed money in more than 10 years.  No, our monthly credit card charges do not count because we paid them off every month.

First Note To self.    Banks are only interested in you if you are paying them interest.  They prefer customers that are paying their usury interest rates on credit card debt over people that pay their bill every month.    Bear in mind that on average banks charge merchants 2% or more of the credit card charges you make every month on your card.    That is a lot of money, 

I mentioned in my first post in this series that it was uncomfortable to relate some of the details of this story, as it is TMI.     But the story doesn't make sense if you don't know that Anne and I have perfect credit scores (over 800), have paid off 4 mortgages together, and at the time of the application had no debt whatsoever as well as a decent portfolio of assets.   We felt we represented essentially zero risk to the bank, especially since the mortgage was only for half of the value of the property.

At the same time we were seekling this loan, a family friend who is a single-income household with no assets and a lot of credit card debt secured a mortgage with an absolute minimum down payment.

Second Note to Self.:    Banks are not interested in simply being paid back their loan with the contracted interest.   They are far more interested in making loans to customers that are far more likely to miss payments, incur late fees and penalties, refinance, and hopefully forfeit their equity through foreclosure.   

we met with the loan officer one more time, more from incredulity than anything else.    In that meeting she stuck to all her previous guns, but added that the fact that we had  a large line of credit at another bank was hurting us as well.    "What line of credit?" I asked.    Anne reminded me that Bank of America had, without our asking, given us a line of credit several years before.   We had never used it and it had no balance on it, yet the loan officer was acting as if it was 100% used in her calculations of our debt ratio, which in my mind was absurd.   I said, "No problem!  We can cancel the line of credit we've never used".    She still indicated we would not be credit worthy for her previously stated reasons. 

We had no choice but to walk away shaking our heads.    As we had already committed to purchasing the new home, we were extremely fortunate to be in a position to complete the purchase without the financing.    Owning two primary residence homes at the same time is a very uncomfortable position to be in.

Third Note to Self:    Being a "private client" at Chase doesn't mean squat, as my story will continue to show.

Our "team" at Chase was very indifferent to this entire scenario, and seemed unconcerned with the way we were treated by the loan department.     We certainly made up our minds during the process that were were clearly with the wrong bank.   Part of what surprised me throughout the process was how our deposits at the bank (IRA's, cash, etc.) did not seem to make any difference in the process.

In days of yore, customer funds on deposit were very important to banks, and determined how much money they had to provide financing to other customers.    Over the years, this has really disappeared as banks can leverage fewer and fewer total dollars on deposit to greater and greater amounts of money lent to the bank by the US Treasury - at 0% interest now for many years.    At the same time, banks can get away with more and more malfeasance toward their customers, a situation recently made worse by the current administration as consumer protections are being dismantled.

Fourth Note To Self:   The customers service motivations of major banks to keep depositors happy and to encourage as much capital on deposit no longer seems to be a  driver for the banks.

So what's on the other side of this picture - what could the bank be thinking?    Well, the most obvious is that I'm not retired 2 years later.    This was not my intent at this time in 2016.   Did the banks actuarial and data profile on me (Lord knows what information they have on all of us) show them the likelihood of my retirement?   Certainly, it is reasonable to assume that the banks will use all of the data available to them to forecast the future of those seeking financial services...but what result are they interested in?    Do they want good customers that are likely to pay off their loans without incident (and also without extra fees and penalties), or do they want customers likely to incur those extra charges?   Perhaps also the bank had access to the records that showed our history of paying off mortgages, and the "profit picture" of those early payoffs were not of interest to them.    They may also have elt we were just trying for a "bridge" loan, which was not the case.

...

After this had all happened, a very close friend related that virtually the same thing had  happened to him and his wife, by Chase, when attempting to establish home financing pre-approval.    He'd been with Chase for many years, with a comparable financial picture - but my friend is 20 years my junior, and in the heart of his career.   My friend moved all of his business elsewhere.

As a result of this and soon-to-follow incidences at Chase that I'll be blogging about, Anne and I also resolved to move our business elsewhere.

So why am I telling this story, revealing too much information?    Because I think something is wrong in the system, and I'm interested in knowing how many others have had a similar experience.    Of those few that get through this entire story, many will simply feel that I'm made because I didn't get a loan - which is certainly true.     Others will feel that I should stop whining because I "really didn't need the loan".    I would say that's not the case, and somewhat beside the point that we should have been able to. 

Above all, I feel that the banks are benefitting from free financing by the American taxpayers and their children and grandchildren, while at the same time  chipping away steadily at what they should be offering those same taxpayers and customers.

Whew.