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.