Interview with a Banker – Why Banks Still Aren’t Lending

[Corey Dutton]

With the exception of community banks and credit unions, most would agree that banks still aren’t lending. “Hogwash!” some of you bankers who are reading this will probably say.

As a follow up to a post I did nearly 2 years ago, I did an interview with a commercial banker regarding new policies and procedures for lending in today's climate. Because most banks are still trying rid their balance sheets of residential and commercial properties, bankers are STILL cherry picking the loans they will do. And, even the most qualified borrowers are being turned away or are required to bring in PITI reserves for 6-12 months on new purchases!

How long until banks soften their grip on their cash? Will bank lending loosen up in 2012?

Please share your thoughts on this.

[Lance H.]

Being a banker I'm going to say "Hogwash"!!

I personally funded over 20 loans in the month of February. I also took out two loans for myself this month.

The reason people keep saying that banks aren't lending is because we aren't lending to EVERY SINGLE person who asks for money like it was in the boom. Banks are now actually lending to people who qualify to pay the money back.

I will admit maybe once a month one of my loans gets turned down that common sense would say we should give them the loan. Example: someone with 3 Mil in stocks/bonds turned down for 250k loan because he lives off those investments but withdraws money spiratically instead of in regular intervals.

On the other hand, 95% of my conversation about banks not lending go like below. You will think I'm joking or exagerating but I'm not:

Customer: I hear banks are starting to lend again I'd like to purchase a home because It's so much cheaper than renting.

Me: OK great, do you know what your credit score is?

Customer: No, but it should be GREAT! I filed BK, but it's been over a year now and I've only maxed out 2 out of the 3 of my new credit cards and I've made at least most of the minimum payments on time..

Me: Sounds good, are you currently working?

Customer: Well not officially at the moment. I have had a few jobs though up until a couple weeks ago. The last one was for about 2 months then I quit. Before that I worked for a long time for the same company like 4 or 5 months. I do some work under the table and collect unemployement now.

Me: Wonderful, what are you planning to put for a down payment?

Customer: Well I was looking to purchase the home for 350k, I want to use one of those 0 down payment programs and actually I was hoping you would give me about 50k at closing so I can buy a new car.

Me: Unfortunately I don't think I'm going to be able to help you with this loan.

Customer: You stupid banks, take our taxpayer money and then won't lend it out!!!