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Banks mostly out of picture in the foreclosure fray

Sunday, September 23 at 12:00 AM

By Don A. Childears

Subprime lending and Colorado home foreclosures conjure bad images for most people. The good news is your bank probably is little affected.

Meaningful distinctions between regulated banks and less regulated mortgage lenders that aren’t banks are critical on these issues.

Subprime lending (to those with lower credit ratings) has a legitimate role and has helped many Americans own homes. Problems arise when the process of determining who gets credit and on what terms is faulty, and when there is an undue concentration of risk in any one kind of lending. Thankfully our banks aren’t much affected by either of these.

Colorado’s foreclosures are overstated. It’s a major issue but we’re not No. 1 or even close. For a year headlines have proclaimed Colorado’s No. 1-in-the-U.S. foreclosure rate. It’s undeserved.

A recent Colorado Foreclosure Analysis of Colorado foreclosures in 2006 shows nonbank mortgage lenders filed 77 percent of foreclosures (nationally they made 42 percent of mortgage loans) whereas banks originated 58 percent of home mortgage loans but account for only 22 percent of foreclosures. The study found Colorado foreclosures are overstated since our unique public trustee system counts categories that account for 32 percent of foreclosures here that aren’t counted as foreclosures in other states.

In Colorado, a stunning 80 percent of troubled borrowers calling the nonprofit Colorado Foreclosure Hotline have a successful resolution; only 20 percent result in foreclosure or bankruptcy. The Colorado Bankers Association strongly recommends the free hotline certified by Housing and Urban Development at www.coloradoforeclosurehotline.org or by phone at 1-877-601-4673 (HOPE). It has helped thousands of Coloradans.

CBA provides consumer tips online at www.financialinfo.org. In addition to usual financial advice on identity theft, credit, loans, etc., we recently added timely ones on Repayment Problems, Possibly Foreclosure; Being a Smart Homebuyer; Predatory Lending and more.

These distinctions about banks are critical:

Banks foster relationships; they want healthy customers involving many services (checking, savings, credit/debit card, car loan, student loan, business loan, mortgage loan, 401K, safe deposit, etc.). Banks’ long-term and broad-based customer relationships promote customers’ financial health rather than maximizing profit from one or few transactions.

Prudent credit granting practices are used; many loans are retained by the bank which has ongoing contact with the customer.

Banks have diversified loans and income sources and diverse, strong balance sheets.

Banks depend on earning public trust and prosper as a result; without it they don’t.

As a heavily regulated business, banks have rigid capital requirements, are subject to hundreds of regulations regarding loan quality and bank health, and are routinely examined to assure safe and sound banking practices and compliance with laws such as three new Colorado foreclosure laws enacted this year with our support.

We thought the public should know.

Don A. Childears is the president and CEO of the Colorado Bankers Association.

READER COMMENTS

The mortgage lenders get their money from the banks one way or another. The result in the long term is a bleak outlook for banks regardless of what Mr. Childears says. I would also like to point out that though banks may say that "Banks’ long-term and broad-based customer relationships promote customers’ financial health rather than maximizing profit from one or few transactions.", it is not apparent to many of us who have had accounts at one bank for many years, with accounts in excess of $50,000, that the banks value us at all. There is no customer service to speak of in large banks. There is no concern to keep a depositor as a customer and there is nothing but disdain for the everyday working man who has a bank account. Mr. Childears, due to his position has probably not experienced this, but personally I have experienced no desire on banks' part to maintain their relationship with me and all of my friends and acquaintances express the same feelings. The banks are in business to service only their biggest customers and the everyday man on the street who is working to make a living and has a few dollars saved can just forget about getting any sort of customer service from his bank. Mr. Childears is very much out of touch with reality in what he says.

Posted by art on September 25, 2007 11:14 AM

Are these the same bankers that made "liars" home loans to criminal illegal Mexicans? Gave them credit cards too? Are these the same bankers that deny loans to black folks?

Personally, I want Mr. Childears to run an errand for me. The Denver SBA and Colorado Enterprise Fund (CEF), recently robbed me and my family of a federally backed $150K business loan.

I earned this benefit because I served America for 23 years in 3 nuclear powered subamrines, 4 surface combat ships, and 3 deployments to Vietnam. I didn't see Bush, Tancredo, Salazar brothers, Denver SBA CEO DeHerrera, or Alan Ramirez (CEF), during any of my NAM visits.

I was told by one of Ramirez's subordinates, that I qualified for the loan. I must have flunked Bush's, Denver SBA's, CEF's, Tancredo's, and the Salazar brothers' "color" test. After I was told I qualified, Ramirez decided abruptly that I didn't qualify. Silly me! I didn't know Ramirez was elected or politically appointed. I think the Mexican Mafia is stealing from unsuspecting black folks. Tancredo told me it would take him 45 days to resolve my issue. This draft-dodging and racist wanker, doesn't realize I never told America to wait 45 days for my service.

Where is my black posse (Obama and Congressional Black Caucus) when I need'em?

James J. Tenant
Lt. Commander, USN, Ret.

Posted by draftdodgingisntafamilyvalue on September 23, 2007 08:28 PM