The Loan

This post was originally published on September 6, 2005 in I Hate My Developer 1.0


Well
here's where it gets interesting folks.



We
need money to get the porch project started but it would seem that we may not
be the best credit risk at this point.


Let's go over what we know so far:

  • We can't find our bank account or records prior to June 2003
  • Association accounting was sketchy at best and hadn't been properly formatted
    on a spreadsheet
  • Several unit owners were severely delinquent on their assessments.
  • As an association we were hemorrhaging money from a bloated budget


Financially attractive, no?

Now let's all talk about that dirty word that isn't supposed to exist either in
lending or the real estate market in general---redlining.

Redlining can be defined as unfair discrimination based not on the risk's characteristics but on its
location. The term is commonly associated with an insurer's refusal to consider
insuring any home or business within a specific area marked by a line drawn on
a map.

Or

A lending practice, now illegal, where banks
drew red lines
around communities of color and low-income communities and
refused to make loans in those neighborhoods.

I strongly suspected that we weren't an attractive loan risk as I work for a
bank and have gone through the mortgage and refinancing process several times.

The way our record keeping and cash flow was, our application wouldn't make it
through underwriting at any of the big downtown banks. Even if
we did look good on paper and had a sizeable reserve fund, I suspect we'd still have a
problem getting a loan.

Knowing the set of obstacles that we would face with a mainstream financial
institution---even with good financials---it was up to us to find someone who
understood the special needs of a small association with a cash flow problem,
infrastructure issues that also happen to reside in an emerging neighborhood.
But nonetheless saw the great potential in both the condo association and the
Woodlawn neighborhood.

Not too tough of a job, huh?

After researching our options and speaking with some institutions, I
discovered our friends at a small bank named Shore Bank.

Shore Bank, which was formerly known as South
Shore Bank, is a bank based on the south side of Chicago and is a strong advocate of community lending.

When many of the LaSalle
Street banks weren't even attempting to originate mortgages or commercial loans
on the south and west sides of Chicago, Shore Bank was (and is) filling that
void.

After a few phone calls we received the loan paperwork, completed it and turned it back in.

As an association we significantly tightened up our
financial ship and started adhering to standard business practices. In short
we're treating our condo association less like a club and more like a business.

Our loan officer has given us every indication that we're on track to get the
loan but as far as I'm concerned, the loan isn't done until the check has cleared. After all, we turned in our application in either late
June or early July and have yet to get a solid answer (fingers crossed).

I'm optimistic that this will work out but I still want the money in the bank
so we can get to those porches.

The year is winding down and more than likely we won't be able to have our new
porches built until next year.

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