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#523961 - 03/29/06 06:10 PM Deny Application Due to Unsuitable Tenant?
complyguy Offline
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complyguy
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Situation: Long-term customer wants to purchase a foreclosure rental property. Problem: The seller (soon-to-be tenant) of the property is someone whom we literally threw out of the bank some years back, and we want no involvement with her in any bank business or collateral.

Since our long-term customer is acquiring the property through foreclosure, he would have no basis for evicting her as a tenant until she fails to pay him rent. Since she is the owner of the property until the sale, there is no pre-existing lease for him to terminate. Due to a tenuous relationship between them, he is reluctant to force her to vacate the premises immediately upon settlement.

Can we deny this business-purpose application due to the presence of this person?

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Lending Compliance
#523962 - 03/29/06 06:17 PM Re: Deny Application Due to Unsuitable Tenant?
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Is the income stream from this tenant needed by the buyer to service the debt? If yes, then I see no reason not to decline. You want a reliable income stream to service the debt.
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#523963 - 03/29/06 07:27 PM Re: Deny Application Due to Unsuitable Tenant?
complyguy Offline
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kaybee - Cash flow is not an issue in this case, but thanks for the response.

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#523964 - 03/29/06 07:58 PM Re: Deny Application Due to Unsuitable Tenant?
Kathleen O. Blanchard Offline

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Depending upon your bank's experience with the tenant, and how much you like this borrower and don't mind annoying him, you probably can decline anyway. Your risk would be losing him as a client or a law suit if he loses the deal. Do you have counsel you can bounce this off of?
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#523965 - 03/31/06 08:22 PM Re: Deny Application Due to Unsuitable Tenant?
complyguy Offline
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complyguy
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Kaybee - Thanks, again. No, we do not have counsel (don't get me started). And no, we don't want to risk annoying the customer.

(Sigh) My dartboard is too full for another decision today.

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#523966 - 03/31/06 08:27 PM Re: Deny Application Due to Unsuitable Tenant?
Beagles22 Offline
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State of confusion
I feel for you. Unfortunately I don't see a reasonable cause to deny. I don't think you can deny customer A because of the tenant unless it is your bank's process to ALWAYS check out the background of all tenants in a rental application. Plus you probably can't inform customer A about your past banking relationship with customer B. Unless you can find a bona fide reason to deny customer A of their own accord, you probably have to take your chances at re-involving your bank with customer B.

This is purely the way I see the situation from a distance, not knowing all of the details. I wish I could tell you to throw the dart at deny!!
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#523967 - 03/31/06 08:46 PM Re: Deny Application Due to Unsuitable Tenant?
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
If you don't want to annoy the customer/applicant then it looks like you are stuck. If that weren't a problem, I think you could come up with a way to deny on a commercial deal since so many things can be "acceptable to bank".

Sounds like you are stuck. Good luck!
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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