One of the least convincing lines in any breakup is: “It’s not you — it’s me.”
But that’s essentially what Bank of America is telling potentially millions of former Countrywide Financial customers as it notifies them that their home equity lines of credit won’t be renewed as they approach the five-year mark.
“This decision was not based on your credit record or your performance in paying your home equity line of credit and will not adversely affect your credit score,” BofA says in its non-renewal notices.
“This decision was based solely on current conditions in the financial markets.”
That’s a fine how-do-you-do. You hold up your end of the deal and remain a customer in good standing, never missing a payment, never demonstrating greater risk. But your bank nonetheless says it doesn’t want your business any more.
And all because of “conditions in the financial markets,” which by virtually all accounts are improving as the recession wanes, and which allowed BofA on Friday to report $3.2 billion in quarterly profit.
“With each day that passes, the 2010 story appears to be one of continuing credit recovery, and our results reflect a gradually improving economy,” the bank’s chief exec, Brian Moynihan, said in a statement after the upbeat earnings were announced.
But that’s not the message West Hollywood resident Michelle Mindlin, 55, received last week when BofA informed her that her home equity borrowing was being cut off because of those pesky financial market conditions.
“What they’re saying is that they feel insecure about things for some reason, so suddenly I’m a greater financial risk,” she told me. “That’s absurd.”
Mindlin and her partner, Denise McCanles, purchased a condo for $277,500 in 2001. Four years later, they took out a $105,500 line of credit with their mortgage lender, Countrywide. They currently owe about $43,000 on the credit line.
“We wanted to do some renovating,” Mindlin said. “We mostly wanted a safety net.”
BofA purchased Countrywide in 2008. At the time, it said Countrywide had “a servicing portfolio of about $1.5 trillion with 9 million loans.”
Mindlin said she and McCanles are both working only part-time at the moment, which does make them a greater credit risk. But, as BofA’s letter makes clear, their personal situation wasn’t a factor in the decision to shut down their credit line.
The same applies to Mindlin having been diagnosed last month with ovarian cancer. She’s now undergoing chemotherapy.
They’re going through a rough patch, but that hasn’t affected their ability to meet their financial obligations. Mindlin said she and McCanles have never missed a mortgage payment and never missed an interest payment on their credit line.
“We feel pretty kicked-when-we’re-down by Bank of America,” Mindlin said. “We just don’t understand why they’re doing this.”
Jumana Bauwens, a BofA spokeswoman, was less than forthcoming when I asked for some clarification of what was up.
“Bank of America Home Loans has made the business decision due to the current condition of the home equity financial markets to end the draw period of Countrywide-originated home equity lines of credit at the five-year mark,” she said by e-mail.
“The contract given to customers at origination provides the lender with the option to non-renew at the end of the five-year period.”
OK. But what specifically troubles BofA about the financial markets? Why is it singling out former Countrywide customers for non-renewals? How many customers exactly are receiving non-renewal notices?
Bauwens wasn’t saying.
She said only that customers are being given two months’ notice that their credit lines are being shut down, and that “customers may continue to make interest-only payments on the amount outstanding for the next five years before the loans begin to amortize.”
Mindlin said this was like a twist of the knife on BofA’s part.
“I can’t use the credit line any more, but I can continue paying interest for five years before I have to start paying pay down the principal,” she said. “That seems like a pretty good deal for them.”
This isn’t the first time Mindlin and McCanles have had their credit line yanked back by a lender.
Countrywide informed numerous holders of home equity lines of credit in 2008 that it was suspending their access to additional funds. Most such people were told this was due to declining property values.
Mindlin said that when she and McCanles received Countrywide’s suspension notice two years ago, they challenged the move by compiling property data for their neighborhood showing that their condo’s value had not significantly fallen.
She said Countrywide subsequently reversed its decision and allowed them to continue accessing their credit line.
There’s no such wiggle room this time. BofA says it has the right to not renew home equity credit lines after five years. And that’s what it’s doing. Because of conditions in the financial markets. You know, those same conditions that seem to be so lucratively benefiting the bank’s bottom line.
Nobody begrudges BofA or any other bank the right to act in its own interest. And if the bank is attempting to lower its risk exposure at a time of regulatory flux, which seems to be the case, it’s entitled to do so.
But at least have the courage to tell customers what’s really happening, rather than offering a load of corporate claptrap that tells people nothing.
It’s not you — it’s me.
What a crummy way to end a relationship.
David Lazarus’ column runs Tuesdays and Fridays. Send your tips or feedback to email@example.com