Do not deal with this bank

[Sol Dubnov]

Why would a company that has "no appetite" for investment drag potential customers through application and appraisal expenses while not intending to invest? Here is a story of a community bank in California (I'll post the name later) that, to my opinion, was not truthful in its intent to make a deal and mislead us into spending money on appraisal, legal documents and time.

We own a small mixed use property free and clear which generates a nice revenue. So we contacted a bank for getting a loan (cash refi) in order to have money to fix another property. The bank requested and thoroughly reviewed all documents, rental contracts, building permits, county records, whatever you think of ... This all was done prior to ordering an appraisal that cost in the thousands. Since this is a mixed used, non owner occupied investment property, we really made an effort to make sure that the deal is falling within the bank's investment criteria and that there are no concerns that need to be addressed prior to spending money on the expensive appraisal.

Eventually we got LOI and pre-approval from the bank, a process that took many months, while being in constant communications with the bank's vice-president who assured us that the deal is going to go through

but not so!

After having completed the process, the bank refused to issue the loan. In numerous conversations with the vice-president we could not get any answer about what were the problems or concerns. The value was good, all legal documents where in place and we even got clarification letters from the appraiser that the property had no unusual problems or concerns.

BUT the bank just did not feel like doing the deal! Mr. vice-president told us that "in other times" this loan would have gone through, no problems, but now they back off from deals. Why, what and how this happened, he wouldn't explain. "It was the decision of the bank committee" he repeated, the same committee and underwriters who he assured that have already looked, analyzed and pre-approved the deal.

Of course we can not force someone to give us a loan, but my question is what can we do to recuperate the damages? Or more specifically:
1 - is this behavior a truthful action in lending? We feel deceived and mislead into spending large money with no reason for denial being provided.
2 - are we entitled to a refund for the cost of the appraisal? The bank after all is the customer of the appraiser, not us.
3 - how can we find more records about the lending policy and behavior of this bank? Is this in public records? I believe that backing off from investments or some other internal issues are behind the refusal, which means they were not sincere in their intent.
4 - what are the legal or consumer remedies for such a situation? We demanded to have the expenses paid back but where refused / ignored. Also we'd like to complain about the whole process and attitude.

please let me know what you think, and if I should provide more details about the bank and people involved.

cheers

[Kevin Yeats]

Loan originators at banks have multiple parties looking over their shoulders all the time. First the loan committee and then the bank examiners (regulators). My banker friends tell me that the regulators are being strict on the banks and requiring more capital for *risky* loans. Unfortunately, loan applications never come with a risk code label at the top. Regulators thus require more and more bank capital for these loans. The bankers and loan committees are thus faced with the choice of making a loan that will eventually require the bank to raise more capital or set aside more reserves OR buy essentially riskless but low paying Treasury Securities. Since the banks only have to pay 1% on deposits, many have choosen the low risk Treasuries.

The credit crunch at banks may eventually loosen. In the meantime, I work through nonbank private lenders who are not subject to banking laws.