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Loan Rangers

In Memphis, sometimes a good credit rating doesn’t mean much.

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All I wanted was a new roof. To protect my biggest investment. To keep my family safe and dry. To keep the insurance company from canceling my policy. All I wanted was to be responsible, but the bank said I was a bad risk. My credit rating — which is so good even I'm amazed — was meaningless. But I'm getting ahead of myself.

According to credit-rating company Trans-Union, Memphis has the worst credit in America. Once, I would have taken that to mean that the city is full of congenital deadbeats lounging around in Cheeto-stained underwear, drinking beer, and scratching lottery tickets. But that wasn't the picture that ran through my head when I first read about Memphis' financial woes. Instead, I thought about Phil Gramm, the Texas senator who, in 1999, slipped the Commodity Futures Modernization Act into an omnibus spending bill, turning the banking industry into a vast casino, unencumbered by Depression-era safety regulations. I thought of financial-services companies that thought it was a good idea to bundle risky derivatives and give them AAA ratings. I was reminded of an out-of-control banking system that didn't have enough sense to deny badly structured loans to people who couldn't afford them and — based on my own recent adventure — now lacks the sense or the wherewithal to make good ones to people who can. And by people, I mean me.

My story begins in 1999, when, for a bargain price, I bought and renovated a 2,700-square-foot gothic cottage north of downtown. The historic home, known as the Dave Wells house, was built in the 1870s. Wells is known for creating common cause among the area's ethnic groups and driving the Ku Klux Klan out of Memphis. The home where he was born and lived his entire life is a thing of beauty, on a corner lot with poured stone columns and a big bay window. Over the past 10 years, I've made a number of improvements and watched as the surrounding neighborhood improved to the point of being almost unrecognizable. Last winter, however, took a toll on my roof. The damage was mostly cosmetic, but it was time to replace the roof anyway, and it seemed wise to do the work as soon as possible.

I hate asking the bank for money. It's like a long, slow proctological exam. I remember, before getting my first mortgage, being asked to write a letter to the bank explaining why I'd let some bill of less than $100 go to collections. The letter was bogus, because I couldn't remember anything about the error, which had been cleared up shortly after it was made. When asked about how a fully repaid student loan had been managed, I explained that my parents had taken it over as a graduation present in lieu of a trip abroad. "Is Mommy going to pay your mortgage too?" the banker asked in mock baby talk. It was humiliating, but at least that loan went through. My most recent visit to a lending institution resulted in nothing but praise for my family's exceptional financial management ... followed by a big "screw you."

The banker almost wet himself with joy while looking over our financial information. He offered us $10,000 and a 3.7 percent refinance on our home that would barely extend our term. Better still, he offered us a significantly lower monthly payment. "Wow," my wife said. "That's so much better than I expected."

"Well," the banker answered, explaining that the loan wouldn't close for a month and could possibly still be denied, "you guys have done everything exactly right."

To get the roof work started, we did a balance transfer from our credit card. The 26 percent interest rate was ridiculous, of course, but it was only a one-month bridge loan. What could go wrong — for the couple who had done everything exactly right?

A lot, it turned out. The banker broke the bad news to us gently. It wasn't our fault the loan wasn't approved, he said. There was just a lot of empty housing in our area, and some of these "comparable" homes — none of which were actually in our neighborhood — were selling for as low as $5,000. The pictures included in the list of comparables showed small boarded-up houses in serious disrepair.

We paid off the credit card transfer in one month. We had to dip into our retirement savings to do it, but at 26 percent interest, there really wasn't any choice. There's a reason why we have great credit, after all. We pay. And we always have.

So Memphis has the worst borrowers in America, eh? What does that say about our lenders? That's a front-page story.

Chris Davis is a Flyer staff writer.

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