Archive for December, 2010

The National banks’ return to “customer service”: Real or Hoax?

Thursday, December 23rd, 2010

Articles abound lately extolling the large national banks’ desires to return to “customer service.” However, as these banks face shrinking revenues from their once-profitable credit and debit card fees, and the myriad of other changes that will be occurring in the post Dodd-Frank world, how can we trust that their so-called return to great customer service is truly genuine?

 Is this really a change of heart?

As one of the founders of a true customer service oriented community bank, I find the actions of these national impersonal organizations to be not only reprehensible, but disingenuous. For banks like ours, this behavior is the “gift that keeps on giving”… As more people begin to see through the national banks’ actions, customers will flee and come to us – where they will feel the authenticity of customer service.

Wise consumers have moved in troves to community banks as their trust in this “talk the talk, but don’t walk the walk” environment has existed. In fact, the recent Associated Press article describes national banks placing more “customer service” representatives on their floors. Is this a true commitment to customers, or will this simply create more opportunities to grab wallet share from customers? We can’t compare this strategic move to help sell the customer more, with the same efforts employed by our true customer service-oriented banks who genuinely wish to serve you better.

 At the end of the day, the large nationals only see ones and zeros, with algorithms that understand how to maximize profitability at all costs, whereas the vast majority of community banks see people, like you and me, and truly care about their customer’s needs and lifetime desires. A true customer service oriented bank is motivated, not by the dollar signs at the end of the day, but by knowing that each customer is walking away happy, satisfied and confident that his or her financial needs are being met.

Life Jackets for Underwater Loans & the Economy

Tuesday, December 14th, 2010

 Millions of Americans are struggling to stay afloat as they deal with mortgages that are technically underwater.  What is missing here is a relatively easy solution that would help boost the economy and provide a life jacket to these homeowners through the use of the government’s balance sheet!

 Approximately one in four homeowners in the United States currently hold mortgages that are technically underwater where the amount they owe on their loan is actually more than their home is worth now, even though the ability to pay is not impaired.

Without much fuss and possibly without any cost to the Treasury, owners with mortgages that cannot be refinanced because the loan to value on their home has dropped to levels below that which a bank can legally refinance, would now be able to take advantage of the lower rates available.

 If the government provided a guarantee and the policy necessary to allow for such a program, many homeowners who currently are making their payments would be now free to refinance and in some cases reduce their monthly payments by 25 to over 50 percent. The program should not permit a government paydown or a cramdown of the loan balance; just the use of its balance sheet to allow the rate to be reset without triggering a now required principal reduction. All the government would be providing is the guarantee on the portion of the loan that is above the normal Loan-To-Value. In the event of a sale, the owner would still be responsible for any shortfall, and the government could add a warrant that if in the future the home is sold for a profit, then the government would share in the profit to cover its exposure.

That release of free monthly cash flow would benefit the economy in many ways. It would allow for:

  • More spending
  • More saving
  • And probably most importantly, an increase in confidence.


Banks, likewise, who participate in this program could be given tax free interest income on these type of loans to incent them to seek out and make every effort to find homeowners that qualify. Those incentives should only be provided to those banks that retain the mortgages on their balance sheets in order to give the incentives to the issuing bank, and not some class of disinterested investor. The program could also include State Tax incentives that would reward banks headquartered in the respective state in order to keep all the ancillary benefits that would accrue in the work required to re-underwrite all these mortgages locally.

Banks would hire staff, lawyers would get more work, title companies, appraisers, would all benefit, and local economies would rebound. The additional pressure of contemplating strategic default would be eliminated, and home prices would stabilize.

Removing this amount of uncertainty would greatly improve the economy, and could establish a working framework on which to build the structure of resolving all the defaulted mortgages in foreclosure…The government holds a life jacket, it just needs to use it before more homeowners drown.