A few months ago, I made a comment in my monthly “Spall” column about a credit story that’s, well, rather personal. However, it’s one that might help fabricators understand that business will continue to remain as unusual and uneven.
When home buying falls off in the U.S. economy, remodeling usually increases, which is good news for stone fabricators. It might’ve been for one shop close to my residence, as my wife and I trotted off to a local bank across the street from our residence last August for a home-equity line of credit.
Frankly, we hadn’t planned to use the money for any special purpose. We’d had a line of credit – a small one – for the past 10 years with Wells Fargo, and walked it around the block a few times for very short-term (three months or so) loans.
The application process took a matter-of-fact tone until the loan officer, in doing the instant background checks, found our credit scores and the various retirement accounts that – due to bank buyouts and mergers – happened to roost under the Wells Fargo roof. All of a sudden, we were best pals with the bank, getting its top-rated accounts and credit cards.
The home-equity-line application then wound its way through Wells Fargo, with the usual requests for more and more paperwork. And, each time, I received the usual answer that the equity line would likely be approved. (I should add here that the local bank employees were a friendly and helpful bunch, which helps to foretell what’s going to happen with this tale.)
A confession here: We live in a condominium that’s actually on a Native American reservation, with the land owned by the tribe member. This can complicate some financing, but nobody at the bank seemed see this as much of a problem.
Meanwhile, as the application moved along, the bottom fell out of Wall Street, mortgage lending and the general credit market. However, we weren’t seeking some sub-prime jumbo nightmare of a loan; we just wanted the opportunity to borrow against equity. And, the request was well within the safety zone of retained equity and current home value.
As the financial markets continued to crumble in late September, we heard back from our local Wells Fargo branch, as the loan officer passed along the word from the Consumer Credit Group somewhere in the corporate structure. We’d asked for a $100,000 equity line of credit. Wells Fargo countered with an offer of a $100,000 equity loan.
There’s a big difference. We wanted to occasionally tap our condo’s equity for items like, say, new countertops; we’d take a small chunk and pay it back, as we’d done with Wells Fargo during the past decade. Wells Fargo wanted to toss a hundred grand in our laps, all at once, with the interest clock on the full amount ticking from day one. It’s money that we didn’t need.
We countered with an offer to take less of a line of credit at a short amount of time – maybe another 10 years, just like the first one. (Nobody really pinned down the length of time on the equity line with the new application.) Finally, our local officer came back after a few days to tell us that, no, it’s either the full loan or nothing at all.
I realized this was a decision of someone higher up the corporate food chain, so I didn’t get upset with the local person when I said I’d take nothing. But I did offer this at the end of our conversation: “We asked for just a home-equity line, and the end result is that Wells Fargo is trying to shove $100,000 cash at us when we didn’t even ask for that. Isn’t this the kind of stuff that screwed up the economy in the first place?”
A week or so later, Wells Fargo sent the rejection letter. I read it when I came back from Marmomacc; maybe it was the jet lag, or just the total absurdity of everything about the upside-down economy, but I broke out laughing when I read the reasons why Wells Fargo – yes, the bank that had held a line of credit for the past 10 years on the same property – wouldn’t approve the line this time:
“We do not offer credit of the type or on the terms requested.”
“Our policy does not allow us to accept the type of collateral offered.”
Yeah. But if we want to go in the hole for $100,000 all in one swoop, all of a sudden, we’ve got great terms and collateral.
The point of all this is to illustrate a key point: Consumer credit is hard to find, even with customers who would’ve breezed through an application in any reasonable economic climate. If fabricators want to do business in remodeling this winter and spring, they may need to jump in the process to partner with accommodating bankers, credit unions and other lenders … and maybe create their own credit market by carring some customer balances.
I don’t hold anything against Wells Fargo about the whole thing. In fact, I wish them well in the competition with the new bank across the street that just opened up about six weeks ago. It’s a Wachovia branch and … yes, I know, Wachovia’s owned by Wells Fargo, who just built their own bank across the street some eight months ago.
With the logic I encountered in my own experience, though, it seems to fit right in with the firm’s corporate thinking.
You can read up-to-the-minute news on the dimensional-stone trade and search the archives at www.stonebusiness.net, where you can also find this blog at the Main Menu under the clever title of “Editor’s Blog.”
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