As I was proofreading this issue, I came across Greg Goebel’s article, which appears on page 32. It’s a wonderful piece, and I dare not give away any surprises on this page. Suffice it to say that Greg, a fellow Floridian, top-tier credit customer and careful financial planner, has had some difficulty in closing a slam-dunk home loan. Actually, “some” difficulty doesn’t suffice. It has been a nightmare.
I can sympathize. My wife and I recently applied for a mortgage for a larger house, and we thought it would be easy. We paid off the mortgage on our current home early, and it was the third such loan we entered into with the bank I have patronized since I was a teenager.
Last November, months before we applied, a vice president at the bank took a look at our finances. This is a man I know well and have often relied upon for expert advice. After noticing that 2013 was a particularly good year, he suggested we pre-fund our retirement accounts — held by the same bank — for the following year. It was no small chunk of change, but paying ahead would reduce our tax liability. Great idea!
Now, at the time, we weren’t even thinking about moving. But our home has gone up in value, there are so many good deals out there, and with a young son and occasional visits from the in-laws, a little more room wouldn’t hurt. Plus, we have the luxury of renting out our current home and hoping the value will continue to increase.
In March, we decided to go for it. We headed back to the bank to meet with the V.P. and a loan officer and get the process started. In all modesty, I must say that, like Goebel, we were in a good position. We planned to pay off the new loan in a matter of years, not decades, and our relationship with the bank goes back 40 years. Well, like Goebel, I soon learned that, when the banking and lending departments collide, the customer gets hit from both sides.
A pencil-pushing analyst in another state raised a red flag. Our income had, technically, decreased from 2012 to 2013. You guessed it: The difference was all that money we pre-paid to our retirement accounts. … with the same bank. … on the bank’s advice.
By early April, we had made little progress. They asked for an audited financial statement for 2013 and the first quarter of 2014 — in the middle of tax season. My accountant just laughed. We also have our personal investment portfolio at the same bank. The vice president of that group called to offer a line of credit that would more than cover the home loan, but the interest rate was two points higher. Don’t tell my bank, but Plan C is to pull enough of my savings from their coffers to fund it myself.
In today’s regulatory climate, I shouldn’t have expected this mortgage to go as smoothly as the first three. But I believe the banks have overadjusted. There is no flexibility. I can’t even guess what this means for applicants who have no other choice but to grind their way through the process. I realize there is more fluidity in auto finance. But if this experience has taught me anything, we have a long way to go to reach equilibrium. At least I know I’m not alone.