“In a small bank, they want to know your name.
In a big bank, they want to know how much money you have.”
Two weeks ago in my writing about the government shutdown, I made a reference to an article in the SF Chronicle. One of the issues that the article brought up was that Wells Fargo needed the 4506T form to close mortgages; while, Citibank claimed that they did not need it. This little detail had become a huge issue in the mortgage industry during the shutdown. The 4506T is one of the forms that borrowers sign when they apply for a mortgage. This form authorizes lenders to request a copy of the borrowers’ tax returns from the IRS, to confirm that the 1040 on file has the correct information.
Because the IRS was closed during the government shut down, it literally stopped the process of loan approvals, or funding, since mortgages cannot be sold to the government owned Fannie Mae, Freddie Mac, FHA, and VA without confirmation from the IRS. It is unimaginable what effect this has on everything related to the real estate industry.
The reason that Citibank claimed that they did not require the form is because they offer portfolio loans (i.e. adjustable loans fixed for 3, 5, 7, or 10 years and NOT 30 or 15 year fixed loans), which are sold to the government owned agencies. The shutdown clearly marked the dramatic line in the banking industry, which started after the meltdown when the government had chosen to save Banks too big to fail, which as a result became even bigger. Those banks do not need to finance mortgages to generate profits anymore. They only offer mortgages to attract more depositors with their interest free money.
But the shift has already started. There are a number of articles like the one in the Wall Street Journal on September 3rd—“At Small Banks, Loans Rising Faster” and in the latest Consumer Reports magazine with the provocative article titled—“Dump Your Big Bank and Save”.
I am a strong proponent of smaller community and regional banks. We bank at the First National Bank of Northern California. After years of working with Wells Fargo and giving them millions over the years, they cut our business line of credit at a critical moment of our business. I refer my clients to Comerica Bank, where Leanne Gueco offers excellent service and good interest rates for lines of credit.
Though Government regulators come up with more and more consumer protection measures which affect the ability to secure the mortgage, it seems that somehow we always find solutions. We do work with a number of lenders who offer loans without the need for a 4506T form, and many other creative solutions, which I write about in my weekly “Today’s Special”.
P.S.
I used the images of the animals to bring smiles to your faces while I am writing about such a boring subject. Although big Banks earn enormous profits on Wall Street and do not care very much about you and me, the small banks are still very vulnerable. Most of the mortgage industry is blinded by the government regulations and is grateful for whatever food (mortgages) we can generate through government owned agencies. And I, with my little voice, try to bring you good news and joy when your mortgage is funded.
Do not keep me as a secret.
SMILE AND PLEASE SHARE IT WITH A FRIEND