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Bank VP Denied Loan

By Sally Maison
Published: Tuesday, October 6th, 2009

Creditors have been tightening their lending standards and a Los Angeles couple with high creditworthiness could well attest to that. A former assistant vice president for Bank of America and her husband were denied loan despite their solid credit score and excellent history.

Bank VP Denied LoanAngie Trujillo and husband Carl Heinzen jointly applied for a loan to refinance their mortgage. But the same bank where Trujillo has been an employee for about 40 years turned down the application to their surprise. The reason: they are considered incapable of paying their debts despite their average credit score of 786.

Finance analysts attribute the sudden economic downfall to loose lending practices wherein creditors grant loan to anyone regardless of their weak ability to pay. As a result, banks have been more prudent on their loan approval. But the Glendora couple thinks creditors have gone too far.

Trujillo has a $377,000 pension and $156,000 of saving in that same bank. She also deposits $10,000 monthly for the rental properties she owns and manages with her husband. Moreover, BofA declared that their home is worth $450,000 when it was appraised for their current loan of $280,000. Their credit scores also passed the ideal mark of 720. At the time of their application for a refinance loan, Trujillo’s score was 764 while Heinzen’s was 809.

However, those credentials were not enough to guarantee them a mortgage refinance. A company representative said that he is not allowed to comment on the specific issue. But he did give out a hypothetical explanation. He said that credit scores are just one factor in loan application. A verifiable and sustainable income is also a major component, which the couple lacks despite their considerably huge earnings.

Analysts point out that the couple’s income is not yet “verifiable, sustainable and qualifying” since rental income and severance pay do not factor in a loan application. Trujillo’s pension does not count because she has not started yet to draw her checks in order avoid being placed in a higher tax bracket.

The BofA representative said that the untypically tight standards are not company rules. Their decisions are merely influenced by the secondary market, where they sell off mortgages to generate profit, he added. He explained that the two largest firms in that market, Fannie Mae and Freddie Mac, have tightened their rules so they have to be stricter as well.

However, specialists tell consumers not to neglect their credit scores even if it does not totally decide a loan application. Low scores still mean high interest rates, experts say.

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