Dr. Val FarmerDr.Val
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Rural Mental Health & Family Relationships

Banking 101 And The Foreclosure Issue

May 17, 1999

I received another hard hitting response to the column I wrote which featured a farmer's account of his foreclosure by a lending institution.

I swear I woke up and it was 1985 when I read your article, "Avoid Foreclosure At All Costs."

Your terms, "you are in a war," "hire the very best bankruptcy attorney you can," "lender’s hatchet man," "the lender’s axe guy," were just great. Why didn't you fit in Posse Comitatus, American Farm Movement, FBI standoffs, PCA office and bank closings, and the lack of economic prosperity?

What's wrong with you bleeding heart liberals who think you can borrow money and never pay it back? You want capitalism without failure, which is like Christianity without hell. Why is it that the family farm espoused by politicians, radical farm groups, clinical psychologists and family business consultants should be excused from the normal course of business life and death process when a failure is experienced? I believe all the other businesses in this country are exposed to the same process without the intervention that farmers are.

Look at your points within the body of this article! "When you break the provisions of your loan contract." Why did you do this in the first place? Did you convert collateral, make unwarranted machinery and vehicle purchases or was it just the "need" for winter vacations, casinos, or keeping up with the Joneses? Why didn't you keep your lender in the circle? I've yet to see a bank that wants to close any business person out.

Believe me, it's a very unpleasant experience. I believe the truth of the matter is that you created the environment where, "there is no friendly chat." Ask yourself the question, "Where does the fault lie?"

In my 26 years of banking, I can't recall one borrower who ever paid one cent of legal fees for their own foreclosure. Obviously, you recognize and I realize that all loan documents read that way, but my experience has been that the bank has usually gone so far with the borrower that the bank does not get fees, much less interest, and in many cases a big loss of principal.

Your one sided approach to lawyers is a dandy. My experience with bankruptcy attorneys is that their specialty is stone walling, not returning calls, not responding to written requests, hiding behind the bankruptcy court and its procedures and creating an environment of no communications. You obviously failed to recognize that time is money and money not working is a loss to a bank.

I think the truth of the matter is, most banks would get out of many of these bankruptcy deals with losses and write offs if we could just get the borrower and their legal counsel to actively work the case. I would invite you to my town for a course in banking 101 if you think we like to put our loans on non-accrual, paying attorney's fees, charging money to loan loss reserves and using staff time for under productive hours in dealing with uncooperative, non-communicating borrowers and their lawyers. It appears to an outsider that it is strictly a loss of principal, but you don't realize that it's double and even quadruple jeopardy with the items outlined in my previous sentence.

Mr. Farmer, I went through the 1980s. I had my bank taken over by the American Farm Movement. I lived through six months of death threats called into my house during the middle of the night against me and my family and my fellow employees. I carried a pistol for a year and, by the way, with law enforcement approval. I don't want to see anything like that happen again and will leave my occupation, which I thoroughly enjoy, if it ever happens again.

When I see an article like yours promoting a general disregard for the obligations contracted with, by, and between consenting adults with no force laid on either party, I know why our country has dipped to the low point it has regarding ethics and morality. We have created an environment where no one keeps a simple contract, can tell the truth or communicate with one another from the President of the United States to professional ball players, husbands and wives and borrowers.

There are too many lawyers and too many lawyers turned politicians alone with too many clinical psychologists with pen in hand ducking anything that speaks of failure. We've pounded on the need to be successful in this country to the point that our value system has been completely abandoned. We find no good in character, honesty, truth, fair treatment, respect for others and their rights and a host of other things you fail to recognize in the body of an article you should be ashamed to have published.

In the end, I believe that your article advocated an environment that was detrimental to all aspects of society in rural America during the middle 80s. - a Minnesota banker

I am not advocating a return to the environment of the early 80s. I believe in honesty. I believe in repaying debts. I don't want capitalism without failure. I believe in dialogue and negotiations.

I felt the dilemma of a farmer wanting to settle, experiencing delays and the unfairness of paying for the opposition attorney needed to be told. Your point that you don't recall a single instance of this ever happening is reassuring. Thanks for your insight about delays and non-communIcation from a lender's point of view. Despite all the negativity expressed in the original column there was a statement to which you and the financially stressed farmer both agree, "You should never let foreclosure begin."