Special offer

Citibank ... I'll Make You Famous

By
Real Estate Agent with Homesmart

When shopping for a new home, every potential buyer has a wish list.  "X" bedrooms, "Y" bathrooms, pool, maybe a big, open kitchen with granite countertops and a nice patch of lawn out back.  Price range is of critical import, though largely as an isolating factor.  Once the parameters are established, it's a matter of falling in love.

When it comes to financing, however, most borrowers go into cold, hard number-crunching mode.  Very few look past the curb appeal when shopping for a loan.  They don't particularly care who they give their business to, provided that the math looks the most advantageous. 

"Your name is Stan, you have two kids and enjoy juggling flaming swords.  That's great.  Now what are your rates?"

To be sure, you want your lender to be competitive in rates and fees.  We all want the best deal available to us.  Your choice of lending institution should involve more than just the numbers, though.  It behooves you to know a little about the institution with whom you are doing business

I know, I know. You could care less about who holds the note.  You only care about the terms within said note.  Before laughing off my assertion, consider my own recent personal experience.

I took out a line of credit against my primary residence last year with Citibank.  I had several purposes for doing so, but that is not germane to this post.  What is relevant is that I earmarked a good portion of those funds for use several months ago ... only to see my account essentially frozen.  In the blink of an eye, the line was reduced to 1/4th of its original limit.  It seems that Citibank was running scared, and initiated blanket reductions to credit lines across the Valley.  No new evaluation nor appraisal of my specific property value.  No advanced warning.  Simply a letter in the mail informing us that per the terms of our agreement, they were exercising the right to unilaterally reduce the amount available on our line due to declining local values.  The effective date stated was prior to my receipt of the notice. 

Now, this peeved me.  Imagine if some poor schmoe was set to tap his line of credit for a purchase, only to get to closing and find his funds no longer available.  Yikes.  That was not the case here, but I have subsequently heard of this very thing happening.

I understand the rationale to a degree, and many banks had already stopped issuing new lines entirely (Chase, Countrywide, etc), but the heavy handed application of this new policy did not sit well with me.  It was especially frustrating that this institution was not interested in the least whether or not the current market value of my property still fell within Loan To Value guidelines (it did so comfortably, I might add).  Was I borrowing against the entire Scottsdale area or just my house with this loan? 

Life goes on, however, and I scouted out an alternative.  I located an institution that not only offers a terrific product, but peace of mind.  From the representative who handled my application to the manager who opened my new checking account, I feel very comfortable doing business with this institution.  That fact was magnified when I sat down to sign the docs on my new line of credit with Compass Bank yesterday. 

There in the payoff statement for my existing line was a $429 early termination fee from Citibank.  Nice.

Were they legally entitled to charge this fee because I was closing out the line prior to two years?  Unequivocally, yes. 

Did this same institution basically put a gun to my head to refinance only to pistol whip me upon doing so?  Undeniably, yes.

I had to admire the sheer audacity.

But I don't have to give them my future business.

My purpose here is not to bash Citibank, but to illustrate the importance of the institution that offers you financing.  It's not just about the front end costs.  It's also about how you are treated on the back end.  By all means, find the most favorable terms that you can, but give a little thought to the guy behind the giving as well.

 ----------------------------------------------------------------------------------------------------------------------

Shopping for a New Scottsdale Home?

Give me a call at (480) 948-9450 or drop me an email at paul@rayandpaul.com

Looking for a Line of Credit in Scottsdale?

Give Compass Bank a try.  

Ask for Linda Shoemaker, (480) 596-2617

 

 

Comments(33)

Mike Norvell Sr
Morris Williams Realty - Leesburg, FL
Norvell Consulting Group

Hey Paul ,,,I am sorry to see its moving across the country..One of my very well heeled clients was buying an investment property with me, and wrote a substancial deposit check off his credit line account.....It bouced...

Upon investigation, his credit line went from 400,000 to 50,000 in one day. He swears he had no notice. ( I guess we all believe him now)..This caused a problem when his escrow deposit was for 100,000.

This was nearly six months ago in Fl...I put out an email to many of my friends here locally, and many of them banged the creditl line for the cash. I know I had a credit line for years that funded the up and downs of cash flow in my businesses.

The credit crunch is becoming very real. It may be time to dust off the old 1980s how to books for arranging private money financing. All of my collection is on the top shelf again, ready to be loaned out for those who were too young to have survived this crisis last time.

best wishes

Jun 26, 2008 01:05 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

JESSE- Always nice to have a face ... and chokable throat ... to go with a service provider.

WILLIAM - Looking forward to your thoughts.  I hope you did not offer your guests a bowl full of chips and salsa, only to hastily remove the chips before they could finish ;)

GARY - You are right in that there was not much chance of me seeing this coming, but the truth of the matter is I didn't even really investigate.  I saw the terms, liked them, and proceeded with the loan.  Only after taking a shanking did I stop to consider the source of the funds for the replacement line.  Not only did I opt for a local institution, but a conservative one.  I don't see my line being affected because this bank has a dubious portfolio fraught with default risk.  My hope is that others learn from my ordeal.

ELAINE - I don't really have much I can add to what you said.  No, it's not particularly fair to pay the price for other bad loans that an institution has issued.  It is a business, and I get that they simply wanted to stop the bleeding, but the notification process could have been handled much better.  They left their borrowers hanging.  I was further displeased that my current market value was not even evaluated.  They obviously just wanted as many lines shut down as possible.  Throwing in the early termination fee was just deplorable.  Screw me once ... shame on you.  Screw me twice ... I will eat your liver with a fine Chianti.

PAM - Funny story!  I'm guessing those guys moved your hubby from the "nice guy" prospect file to the "potential unibomber" stack immediately!

BRIAN - Thanks for your input.  Your last point is a very good one.  As a matter of fact, I found Compass Bank's home equity product through my go to broker.  I called him up, told him my frustrations with Citibank, and he told me to speak with Linda at Compass.  It always helps to lean on the knowledge of someone who investigates these things for a living.

KELLY - It was a very short sided move.  It prevented borrowers in upside down properties from tapping any more credit, but it also shafted those with plenty of equity.  It may have stunted a short term problem for them, but at the cost of a lot of disgruntled borrowers.  Some of us happen to be in the position to spread the word of our experience amongst large circles of potential borrowers as well.  Oops.

C - They left me little choice.  Now that I was forced to do so, I won't be running any financing with them in the future.  Silly bank.

Jun 26, 2008 01:25 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

MIKE - That is a very real scenario for my market as well.  $100k in the balance over a bounced check from a credit line that had four times that amount before being unilaterally reduced without notice ... wow.  How crazy that we should be thinking about alternative methods of financing with interest rates, unlike the '80s, still low as can be.  The problem is that the low rates don't do many people any good.  They can't secure the financing.  Nobody could afford financing in the '80s.  Nobody can obtain it now.  Funny juxtaposition.

Jun 26, 2008 01:32 AM
Jason Crouch
Austin Texas Homes, LLC - Austin, TX
Broker - Austin Texas Real Estate (512-796-7653)

Paul - I have told you about my appraisal experience (which is still unresolved as of this writing).  This is just one more sign of the times.  I applaud you for not saying "Bank X" or "the bank we used", but rather just talking about your negative issue with Citibank in particular.  I am probably going to switch banks sometime in the near future, because we have had too many problems with Bank of America.  Talk to you soon -

Jun 26, 2008 01:35 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

JASON - The appraisal issue you speak of is one of the more maddening scenarios I can imagine.  I understand banks becoming more conservative in their lending habits, but changing the rules of the game entirely is counterproductive.  They don't make any money by hording it.  I particularly love some underwriter deciding that he knows an appraiser's job better than the appraiser.  I also like appraisal reviews which fly in the face of underlying guidelines, such as say ... mulitple comps?  I know you will write about this one when all is said and done.  I'm looking forward to reading it.  As for naming names, I have no problem pointing out bad service as well as good.  No need to protect the perpertrators of not so nice business practice in my opinion.  As long as it is not slanderous nor overly petty, I feel it our duty as agents to share such experiences with colleagues and clients alike.  Perhaps a little heat would even convince said institution to change future policy.  Though this is a bank we're talking about ...

Jun 26, 2008 01:45 AM
Adam Waldman
Westcott Group Real Estate Company - Hauppauge, NY
Realtor - Long Island

PAUL - Excellent post.  Just another case of "throwing the baby out with the bath water."  This reminds me of when the jumbo rates first skyrocketed overnight because of the sub-prime mess.  Huh?  So all non-conforming loans were now exactly the same?  Well-to-do borrowers in expensive areas like yours and mine were suddenly being punished because they didn't fall into some arbitrary number that Fannie Mae and Freddie Mac deemed "conforming."  How is it that people with at least 20% equity in their homes, with good jobs, good salaries and good credit scores were viewed in the same light as people with bad credit, no money down, terrible credit scores, etc.?  Just insane to make unilateral decisions without ever taking the facts into account.  Glad to see that you've found a bank that cares about its customers.

Jun 26, 2008 01:50 AM
Jeremy Blanton
Myrtle Beach Homes Blog - Myrtle Beach, SC
Myrtle Beach REALTOR®- myrtlebeachhomesblog.com

Unfortunately this type of thing has been happening a lot in our market recently...I had a deal the other week that had to be all redone to save it thanks to a bank reducing the credit line...gotta love it!

Jun 26, 2008 03:48 AM
Susan Mangigian
RE/MAX Preferred - West Chester, PA
Chester & Delaware County Homes, Delaware and Ches

Paul, this is a very good post.  A friend of mine recently tried to draw additional money out of her revolving credit account and was on the telephone with the bank manager answering a million questions and then was told she could only have a certain amount, which didn't total up to her credit limit.  I am guilty of not reading the fine print on these kind of documents when I am borrowing from a bank that I usually do business with.  It appears it's time to start paying attention.

Jun 26, 2008 07:19 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

ADAM - Banks are doing some very interesting things right now.  Believe it or not, I encountered another interesting practice by one one of the "big boys" today that might be fodder for another post.  I just can't believe some of the nonsense I am seeing.

JEREMY - I find it highly telling that you are the second commenter to relay such a circumstance.  You were quite fortunate to be able to salvage that deal.  For a lot of people, that credit line is not only the source of funds for a purchase, but a life raft in turbulent times.  Well, the sea is raging and they just sprung a major leak.  Not to fear, the Coast Guard should be along sometime next week.

SUSAN - Truth be told, I never considered such a possibility, so I didn't read every last clause either.  I knew the nuts and bolts of the agreement, but we are only programmed to look for key points.  Rate, term, total costs and prepayment ramifications.  Never figured I'd have to close the line early because they enacted another, seemingly inconceivable, clause.  We're probably stuck with such provisions regardless of the lender, but I will choose to work with a bank who demonstrates more judicious lending practices from here forward.  Don't make bad loans and you don't have to take it out on good customers.  Period.

 

Jun 26, 2008 02:05 PM
Virginia Hepp - Mesquite NV REALTOR
Desert Gold Realty - Mesquite NV Homes For Sale - Mesquite, NV
Mesquite NV Homes and Neighborhoods - Search MLS

Paul - Citibank is not on my favorites list right now - for a car loan I have.  They have the finest fine print I have ever seen.  They got me pretty good on a prepayment penalty, and I am extry good at buying cars.  I can't pay it off, trade in in, or even drive it off a cliff without a big fee.  My only hope is having it stolen - I keep the gas tank full and the keys in it on a big red fluffy key ring.

Jun 26, 2008 07:14 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

 This is something they do not tell you when they offer refinancing. I have seen it happen.

Jun 26, 2008 11:13 PM
IMNJ - Internet Marketing Specialist
Internet Marketing NJ - Red Bank, NJ

Unfortunately there is a significant amount if dirt in the unsecured portfolios of the world finincial institutions. Which was reflected by the harsh pounding these stocks took yesterday and today. Unfortunately debt is a significant issue for many Americans and these companies act like loansharks. Especially when there is blood in the water.

Jun 27, 2008 09:24 AM
Andrew Monaghan
The Monaghan Group - Glendale, AZ
CRS, GRI, EPro Associate Broker

Ive seen this more and more as values decline and banks want to stop the bleeding.

Jun 28, 2008 07:04 AM
Bob Schenkenberger
Colorado Realty Professionals - Greenwood Village, CO
Denver Real Estate

The "early termination" fee is laughable.  I guess they need to start making up the billions in losses, one equity line at a time.

Jun 28, 2008 01:55 PM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

We have a nickname for citi bank in New York. I won't say it on a public post but it rhymes with city.

Jun 29, 2008 02:17 AM
Jessica Cordell
Century 21 Hendershot Realty - Madisonville, TN

What a great post. It is a big wake up on making sure who you are doing business with. Jessica Cordell

Jul 02, 2008 03:42 AM
Pippa Mac
Chevaux Group Realtor, The Woodlands and Spring - The Woodlands, TX
The Woodlands TX Real Estate

Thanks for the info.  I had some clients contemplating doing an equity line and it is a great reminder to share with them.

pippa

Jul 03, 2008 07:05 PM
Sandra Carlisle (Ayers)
Berkshire Hathaway California Properties - Newport Beach, CA
Real Estate Marketing & Sales

We've been hearing about this out here too.  The OC is on the "declining values" list.  Until recently, buyers had to come up with an extra 5% down because of it.  The "location penalty" has now been changed.  I guess enough people starting moving their business elsewhere, so they quickly put a stop to it.

Great post. 

Jul 05, 2008 11:59 AM
Elena Martinovici
MY HOME GROUP 602-321-1273 - Phoenix, AZ
Associate Broker- Phoenix , Arizona

Paul,

Great post . I have a credit line with WF that I did not use much. Just got 30K out and put it in my Savings account. ( might be loosing $$$ in interest  ) but I am thinking to get out even more...  just in case .. times are bad now . did Compass do a full blown appraisal or was it drive by ?

 

 I have seen a lot of this going on lately and it is crazy , they should have never charged you the cancellation fee.  I would fight them until I get  it back.  does anyone have any news about Wells Fargo ? I know Countrywide canceled most of their credit lines.

I have been  trying to refi a loan I have with Chase because the rate is going to adjust to 9.69 % it is now 7.99 % this is in investment property that I was planning to sell before the note adjusted.  My credit is perfect but I can't do it  because the values are down from 2006  even tough my loan was only 75% of the purchase price.... and Chase will not look at a modification  because I am not late.... I don't want to be late. I want to protect my good credit and keep the property .... I think this is just crazy m banks keep talking about helping out and do loan modifications for the ones that are sheduled to adjust but they want you to miss payments first ..... what kind of BS is this ?  Oh and  guess what? lenders do not want to see self employer Realtors .... if you are one and go stated you will not get a loan no matter what....  they just don't like us any more....

 

Jul 08, 2008 09:49 AM
Anonymous
Patrick Warner

Paul, 

A couple in Cincinnati, Ohio filed a lawsuit over the early termination fee.  If anyone would like to see the complaint they can email me and i will send it to them.  Maybe you will get some portion of it back someday. Hang on to your records.  

Apr 21, 2009 01:19 PM
#33