How to Be Your Bank's Favorite Borrower

What if the Fed doesn't cut rates this year, inflation can't be tamed because the cost of fuel is too high, insurance rates don't come down, and banks can't find cost effective capital?

In spite of rates trending down right now, banks still don’t have the liquidity they need to make new loans.

If banks begin to stumble, or simply stop lending altogether, or both, you may end up with no chair when the music stops.

Logic dictates that a bank can't sell or foreclose on all of their loans. So how do you avoid being on the list of borrowers the bank doesn't mind offloading?

Here are very simple ways you can avoid being your bank's least favorite borrower:

1. "Bank" with your bank. If you don't have a deposit relationship with your bank then you're on a short list of clients that your bank could easily do without. How much profit do you think your bank makes on your loan with a 4% rate?

It's not really that hard to make the change, but borrowers don't move their deposit accounts unless they're forced to. I get that your lending bank may not offer you the highest interest rate for your deposit account, but Fidelity won't give you a loan on your property.

2. Don't be a ghost. It sounds ridiculous, but I see servicers sending out dozens of letters requesting the same documents (rent rolls, tax returns, operating statements, etc.) over and over and over, that go unanswered. Not providing these documents is an event of default, but the servicers don't get any reply at all. That will change when the regulators look at the loans.

3. Pay your loan payments, property taxes and insurance premiums on time. Auto debit your payments. The payment is the same every month.

4. Keep your property properly insured. I know premiums are going crazy, but you need to work with your lender, not against your lender, to find coverage you can afford that's acceptable to the bank.

The main reason I hear for a bank selling a note is that the borrower is "difficult to work with" or "we have no relationship with this borrower."

My advice is to maintain a good, interactive, transparent relationship with your banker if you want your bank to continue to prioritize your success. If you make your lender chase you for documents or pull teeth to get updates you probably won't get any favors from your banker when you need one.

Prepare for the worst and hope for the best. I'm hoping for a soft landing, but I still want everyone to be prepared if we don't get one. These simple tips can help you get a loan extension and avoid motivating your bank to sell your loan.

This advice should be obvious, but you'd be surprised at how many borrowers never learn a lesson. What are you doing to stay in good standing with your lender?

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