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Writing is an adventure. To begin with, it is a toy and an amusement. Then it becomes a mistress, then it becomes a master, then it becomes a tyrant. The last phase is that just as you are about to be reconciled to your servitude, you kill the monster and fling him to the public.

— Winston Churchill

If You’ve Got a Heartbeat…

I am a fourth-generation entrepreneur who grew up believing banks are a necessary evil. I clearly remember sitting around the dinner table and my father ranting about the cost of credit or relaying stories about how he’d argued with a lender to ensure lower interest rates or negotiated some sort of deal for one thing or another. Bankers were not our friends. They were simply people we had to develop relationships with out of necessity, not because we expected them to have the interests of our family business at heart, but because capital improvements and capital purchases required capital and business is cyclical.

That respectful disdain is something I carried with me into adult life. I’ve always felt banks, like car salesmen, have goals that are disparate to mine. Everyone comes to the table wanting to make a deal that’s in their best interest. I want to buy a car for the least amount of money possible. A salesman wants to get the highest price he or she can. A bank wants to make a return on its investment and I want to pay them as little as possible. Opposite goals at the negotiating table and a little voice inside my head that belongs to my dad, have always made me skeptical when it comes to financial negotiations.

When we were shopping for a new mortgage two years ago, I was determined to find the best rate possible. We came to the table from a position of strength, and I shopped mortgages like someone might shop for a car. I perused institutional websites, called loan officers,  visited branches and asked for proposals. During a call with Wachovia, a bank that became a market casualty last week, I asked the loan officer for a list of documents they’d require if in fact we decided to do business with them. I’m self employed and the paperwork process can be different than someone who’s drawing a paycheck they don’t sign. Well Mrs. Sanders,” he said, “it really just depends on how high of an interest rate you want to pay. Basically, if you have a heartbeat, we’ll lend you money.

I’m not at all surprised that Wachovia fell on tough times. Like Washington Mutual Inc., which was seized by the federal government last week, Wachovia was a big originator of option adjustable-rate mortgages, which offered very low introductory payments and let borrowers defer some interest payments until later years. Delinquencies and defaults on these types of mortgages have skyrocketed in recent months, causing big losses for the banks. Obviously, the if you’ve got a heartbeat rule just isn’t working out.

While mortgage delinquencies and foreclosures abound, I’ve had little sympathy for people who borrowed money based on their pulse and not on a solid financial statement, but the other day a friend said something to me that twisted my thought process. While discussing the current mortgage debacle she said, “…as a consumer, when I go to a financial institution and they advise me on lending, I want to be trusting just like when you go to the doctor.”

I was floored. I had never, not even once thought of it from this perspective. Trust a lender? Is that possible? But the more I think about it, the more I understand that for many, many people there is a certain implied trust they bring to the lending process. If a bank approves a mortgage request, even one that seems outlandish and unaffordable, the borrower is lulled into a sense of comfort and tricks themselves into believing he or she must be making the right decision. They really can afford that payment, they think, after all the bank thinks so, and the bank is supposed to be the expert. People are thankful when a loan request is approved, not skeptical.

My history and experiences don’t allow me to see the lending process in that kind of a light, but because I happen to think my group of girl friends are cool broads with great critical thinking skills, my friend’s statement did at least help me to develop a bit of empathy for neighbors with for sale signs in their yards. Not a lot, but even a tiny bit is more than I had a week ago.

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18 comments to If You’ve Got a Heartbeat…

  • When we got a mortgage in the early 90s, before this mess, we had to work to get what we wanted. They checked us carefully, and I was surprised when things got so lax around 2001. Such as when somebody wanted several thousand to buy a snowmobile, what kind of crazy bank would loan for that? But they did, and a lot of people with shaky income and credit got snowmobiles and the rest, or houses way too expnseive, and what do banks end up with when there is trouble? A mess it would seem.
    BTW–we paid off our first house in about 8 years, and when we sold it we got this one for cash, with leftover money for savings and improvement. I earn doodley squat and so does my wife, but we sure as heck don’t spend what we don’t have and if I wanted a snowmobile? I would save for it.

    garys last blog post..Celebrity News with the regular guy

  • Amy

    I agree that the bottom line is that as consumers we need to know what we can afford and make choices accordingly BUT I do think that there is huge truth in trusting that the financial lenders are not going to give you more then you can afford — there really needs to be more of these skills taught in school for those of us out there whose parents were not as ‘teaching’ as your dad (or maybe we just were not listening).

    I really think that a lot of children of today think that if you have a credit card you can buy anything — we need to stop this mentality and teach our children how to take care of themselves! Maybe your dad could hold a class!!

    Amys last blog post..Advice – Who Wants It?

  • Tricia

    Gary: I know a lot of people who have financed their toys, and I agree with you. I’m not sure why people are so eager to pay interest on a depreciating “asset”. We have created a consumer-driven, instant gratification culture, and although I respect people’s different decisions regarding how they want to spend money, I profoundly disagree with borrowing or lending that leaves me holding the proverbial bag.

    Amy: OMG. My dad in front of a classroom? Now there’s a thought. He’s a wonderful and smart man, but I still remember the ONE time he tried to teach me how to drive.

  • Awesome post! I love the ‘Foreclosure’ sign ;) .

    This post really speaks to the problem that underlies this whole mess: the ‘common sense’ approach to personal finances has been lost somewhere, by a _lot_ of people. I agree with Amy – your Dad should teach a class! Or as parents, we should all teach our kids about how to live within their means. It’s a hard lesson to learn, for a lot of people. And I also agree with the ‘trusting banks’ issue: wasn’t WaMu’s slogan for years, ‘The Friend of the Family’?

    goodfathers last blog post..The Bank of Floyd

  • Excellent post…i recently heard a story about someone who borrowed enough to buy an $800K house, knowing full well she couldn’t afford it…who loaned to her, i have know idea…but honestly, accountability please!…

    thistles last blog post..Even more random and insignificant facts About meme…

  • Jan

    Beloved is also a financial skeptic and bargains like a madman when it comes to loans, whether it be our mortgage, our car or our business’ line of credit. He takes nothing for granted and trusts no one on the other side of that desk.

    Me? I don’t trust doctors, so I’m even more appalled by what your friend said than you are.

    Jans last blog post..Friday Randomness #4

  • Tricia

    Thistle: Absolutely outrageous, from both sides. I continue to be amazed by these kinds of stories.

    Jan: It sounds like Beloved and my dad would enjoy a beer together. I just want to clarify: I’m really not appalled by what my friend said. She and I have different backgrounds, so it was really interesting to hear a different perspective. Different experiences often equal different expectations. I think it’s helpful to learn from each other, especially if we’re going to work together to change the idea of “easy credit”, and I need feedback that takes my mind out of its own loop, and friends are in a unique position to do that for us.

  • Very cool post! And I love that you were able to “see the other side” so to speak…empathy is a wonderful quality.

    I grew up believing that you don’t buy things that you can’t afford, so I too, have had little sympathy for people who live beyond their means. Especially today, because now I’m PAYING for their bad decisions (both the bankers and the lenders) and it doesn’t seem fair because we followed the rules, saved our pennies, didn’t even tempt ourselves by looking at homes “outside our range”, plopped down 20%, and pay our mortgage on time. But you’re absolutely right…people DO tend to trust people with authority. For instance, I shy away from drinking tap water, but my husband thinks that if it comes thru the faucet, it must be safe. Because whatever agency regulates water safety makes sure of that. It shocks me that he places such faith in the government…but he does.

    thatcoolbroads last blog post..Cool Broads aren’t knee jerks

  • Gary, my husband and I are in the same position as you and thanking God and our good wisdom for it every day. I also agree financing things with low resale value that depreciate quickly is insane. Especially considering the total the person ends up paying for the gadget once all is said and done.

    Tricia, excellent post. So very true.

    Lisa Ps last blog post..Economy May Not Be So Bad

  • Jan

    Well, I sorta was saying that tongue-in-cheek. The written medium is not good for interpreting inflection.

    I still don’t trust doctors, though.

    And you are such a sweetheart.

    Jans last blog post..Friday Randomness #4

  • donna

    Dad says that he is to old and to grumpy to give a class. so you will have to give the class for him. He feels that he has taught you well and you should be able to do it.He will be avilable by phone for any questions that come up. So go forth and teach. All children should be taught a class in money mang.

  • I want to have sympathy for people being foreclosed upon, but I’m having a hard time of it. I do seem to summon some sympathy when I see the amounts of loans being foreclosed upon. I live in crazy California, so I realize we have higher mortgages because of higher home costs. I’ve managed to feel bad for the ones foreclosed upon with mortgages smaller than $300,000. I’ve seen amounts in excess of $1 million. That’s just beyond belief for me. Beyond.

    patoiss last blog post..Seriously, ROFL!

  • I hate to sound like a total heartless fill-in-the-blank, but I have a hard time with it, too. Mark and I have sacrificed a lot for me to be able to stay at home with the kids and we do better than most, if not all, of our friends. When we were looking for a house we went well below what the bank told us we could afford. To me, that’s just common sense. But I know people who bought $250,000 just because the bank said they could. To me that’s just idiotic. So while I may not have as nice of a house (and it’s a nice house, I just didn’t think a bathroom with a whirlpool tub and tiles imported from Mexico was all that important), Mark and I are at least financially secure.
    Great post! I’ve been thinking of tackling it myself, but seeing as some of my “friends” are also my family… well, that might not be such a good idea.;)

  • I’ve never really thought of it that way. Maybe back in the 50s, during the Martini lifestyle trusting your banker was alright, banks were more localized then. Today, they are giant comglomorates just out to make themselves more money. The only good to come from this economy crisis is that it has suddenly made this election about real issues and less about about what Sarah Palin’s hair is doing.

    jenboglass (steenky bee)s last blog post..The Spin Cycle: Time Trials…and Tribulations

  • (Tricia–I posted a pic of the yellow lab teapot so far!)

    garys last blog post..PAR-TAY!!!!!

  • Jen

    I think it’s a mutual responsibility. We qualified for $150k for our home. We bought an $88k home because we knew what we could afford and what we couldn’t (fixed rate). So while I think some people are just idiots, I do also think the lenders are idiots.

    Jens last blog post..Master Manipulator

  • This is an excellent perspective, and while I personally would not want to borrow money for a mortgage that I didn’t KNOW I could repay on a house that I KNEW was a good deal, I can totally see how others would trust their banks. I’m even going to go so far as to say that a glass half full kind of person might be more trusting. Bottom line, the buck stops with the borrower, huh?

    Cheri @ Blog This Mom!s last blog post..I’m Giving Away Free Pot for My Birthday

  • Great post! We have 2 properties back home which we still own. Though we’ve migrated, we’re very cautious with buying a property here cuz of the economy meltdown. Whatever that’s happening in the US, we are feeling it here too. According to babes, his company is now freezing all hiring for the time being until the economy turns around. So, we decided to wait. Besides, we have those IF feelings still in us. IF anything happens with this pregnancy, we’d need funds to start the IVF process. So, we’d rather not be slaves to the banks, just yet.

    ps saw your comment on my blog. You don’t have to apologise. I totally get you. One trip to baby gadget land has just totally put me off. But I’ll have to make my trip again. I’m thinking maybe a bit much later. :) I need to recuperate from Ms Pavarotti. :)

    Brandygirls last blog post..MAKING BABIES LIKE ASIAN INSTANT NOODLES?

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