Thursday, April 19, 2012

Bankers' Math -- Part Sept

The first blog in my Bankers' Math series was three years ago and dealt with some of the self-serving manipulations my bank went through when my wife and I refinanced our mortgage.  Since then I've documented several excesses of the financial industry that I've encountered first-hand, and you can find links to these blogs below if you haven't read them.  Caution -- those readers with high blood pressure are advised against exposure to this material.

In this installment of "what-are-the-folks-who brought-us-the-great-recession-up-to-now" we return to mortgage refinancing, an ordeal we have just undergone once more.  We chose to endure this again because we could get a new mortgage rate that is more than a percentage point less than our old rate. Most personal finance experts say a drop of this magnitude is worthwhile -- provided the length of time it takes to recoup the umpteen bank fees and charges is reasonable.

In January we contacted our bank (Bank of Hawaii) and started the process.  Because of my tendency toward obsessiveness when it comes to keeping financial and personal information, we quickly got all the required records together -- tax returns for the last two years, mutual fund and investment statements for all of 2011,  payment statements from our pension funds, birth certificates, life history, retinal scans, DNA samples, diplomas, fingerprints, Kirlian photographs, urine analyses, etc., etc.   We completed the application by the end of January.  After 2 1/2 months BOH finally deemed us worthy of their blessing and we "closed" -- the bank's term for an hour-long session in which you sign several thousand documents, all designed to give the bank every possible legal advantage over you.

Of the many irksome aspects of this process, one stands out.  It occurred when we received the official Loan Approval Notice which said:  "We are pleased to inform you that your application for a mortgage loan on the terms set forth is approved, provided the conditions and terms below outlined are satisfied prior to the expiration date of the loan approval and loan closing."  (In other words, keep jumping through hoops until we tell you to stop.)  Some of the conditions listed were simply not under our control, for example "Lender (my italics) will provide customer with an IRS 4506-T to be signed at closing."  Huh???

But one condition was truly rankling:  "Borrowers must provide proof of liquid assets required for closing."  (The money required for closing had been spelled out in the application and amounted to just a few thousand dollars.)  We puzzled over this because it seemed obvious to us that we had already documented all of our assets, including those that were liquid. But bankers apparently see the world differently than the rest of us....

In our view the documents we provided with the initial application established the following facts that would seem to be relevant to whether we would be able to show up at the closing with enough cash:

  • Our financial records clearly indicated liquid assets five times greater than the value of the loan itself  and dozens of times greater than the estimated closing costs.
  • We had been through this process twice before with BOH and both times we successfully paid the closing costs.
  • For six+ years we'd faithfully made mortgage payments to BOH showing, one would think, that we have enough liquid assets to meet our financial obligations.
  • The appraised value of our house is twice the value of the loan we were asking for, clearly indicating we were not in over our heads.
  • We have no other debts of any kind -- no other obligations competing for our liquid assets.
  • We both have credit scores over 800 -- only obtainable if financial obligations are fully met over a long period of time.
So what did we do?  We printed a screen shot of our Vanguard accounts showing the up-to-the-minute balances and wrote a letter suggesting that this "proved" we had enough money to cover the closing costs. This seemed to mollify the bank and we oozed closer to a closing date.

However, about a week from D-Day we got a message demanding the latest statement of some accounts Karen has with DWS, a mutual fund company.  We had furnished a summary with the initial (now accepted) application, but apparently someone decided that wasn't enough and now they wanted a recent detailed, transaction by transaction statement.  I quickly complied and just for good measure I also sent the latest monthly Vanguard Statement showing transactions for all the rest of our mutual funds, and I even threw in a copy of our 2011 Federal Tax Return that I had just filed.  Again, the bank bean-counters seemed mollified and we continued oozing.

Until four days later.  "Please furnish the most recent monthly statement for your......[wait for it]......Vanguard Accounts(!!!!!!)  Yes, the very same information I had given them four days earlier!

I drew their attention to the fact I had just given them this statement (with great restraint, I might add) and we moved forward.  I never received an apology, an explanation or even an acknowledgment that they might have made a mistake.  But it's clear they weren't really looking at the information we were providing to them.

It's over, and I'm very glad to have it behind us.  But I have to think that if this is how we were treated -- someone with excellent credit and a solid financial status -- then people with even slightly less fortunate circumstances must suffer tremendous insults during this process. 
Other Blogs in the Bankers' Math Series:
Bankers' Math -- Part Six
Bankers' Math -- Part Cinq
Bankers' Math -- Part Quatre
Bankers' Math -- Part Trois
Bankers' Math -- Part Deux
Bankers' Math -- 29=31=$


Bob Z. said...

Would it not have been more fun to tell BOH where to stick it?

It would have been more fun to have a root canal sans anastesia that to go through what you went through.

You have uncovered the bigger problem with the somewhat rhetorical question about what the average person has to deal with.

Something is causing this behavior. Get to the bottom of that and you might have an answer to our economic woes. Policies that sprung from the idea that everyone should own a house regardless of their ability to pay for it led us into this mess. (Perfidious Democrats and complacient Republcans ironically working together).

You were at the tip of a very large iceberg (or a very large spear.

Your perseverence is impressive.

Regards, bob

Richard Sherman said...

Actually I had several fantasies like that along the way. At one point I would have enjoyed saying something like "since it seems BOH doesn't want us as customers anymore we'll just go to another lender.". Trouble is this would have cost us some serous bucks because a lot of charges had already been made that we were liable for. You can bet that if we look for a new loan in the future, though, BOH won't be one of our choices for lenders.


Don Parker said...

Sharon and I had a small mortgage, initially with a local Seattle bank. Subsequently the mortgage changed hands several times and eventually moved to Holland. At that point we decided to cut the hassle and pay it off. I've documented our pay-off but have little confidence that there will be no difficulties when we sell the house or one of us dies. Things are much less "user friendly than when I got my first home mortgage 49 years ago!

haff zane (ask D.Nord) said...

years ago, we too experienced the hassle from a bank in getting a home mortgage loan. We gave documents and rquested information only to find out that there were people who requested the information and people who received the information and neither of the groups were speaking to each other. Truly maddening. Process took four months, and all of it bank delay. A few years later, while I was on an elk hunt in the wilderness, my wife refinance the house, lower by 2.5%, by going to our credit union. Process too one week. We simply don't deal with Banks or Savings & Loans, for that matter, any more.

Richard Sherman said...

Others have told me they also have had good experiences with credit unions. Of course, these are set up to benefit the members, not to make big bucks for the owners and shareholders .

Our very first mortgage was with a savings and loan back in Ohio. We had our accounts there for 30+ years and were on first name basis with most of the staff. It was a very pleasant relationship that I didn't appreciate until we had to start all over when we moved to Hawaii.

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