BEWARE: DIVORCE IS HAZARDOUS TO SINGLE MOMS’ CREDIT-WORTHINESS

PNC bank has a new policy, I have been told by a trusty loan officer in the higher ranks of that enterprise, that child support no longer counts as income for the purpose of obtaining a home equity line of credit or small business loan.  This is true even for very large amounts of child supports. I was told, straight-up, that married female applicants whose husband’s who have jobs, earning the same amount of money as an ex-wife’s child support allotment, are much more credit-worthy than single moms who are receiving regular, provable, court-ordered child support.  Is this prejudiced against single moms?

In my line of work, I see lots of mother’s whose husbands leave the marriage — without warning.  Of course, those husbands take their jobs with them!  As a mediator, though, most of my clients are decent people that pay their child support obligations. Nevertheless, even women who have upstanding child-support paying ex’s, and are seeking a loan, can no longer count that cash-flow as part of their income.  This is absurd considering the same woman could have counted that same amount of family income as cash flow, for purposes of obtaining a loan, if she were still married to her children’s father – even if he spent that money foolishly and contributed nothing to the family.

I was also told, by my PNC informer, that no amount of money in the bank is worthy of consideration when it comes to approving a loan – unless that money is in PNC’s own coffers and can be used as direct collateral.  That means that people who are responsible and work hard to save their money and put it in the trusty hands of a good broker, are considered, at least by PNC Bank, to be a greater credit risk than people who spend every penny they have with no thought for the future. Essentially, PNC prefers loan applicants with a low-paying job, with no hope of putting anything away for the future, over a person who has a pile of dough at the ready.

This doesn’t make sense.  People are losing their jobs right and left.  There is no security in an individual’s employment.  However, if a person defaults on a loan, the bank can get a judgment against that person and garnish their bank or brokerage account.  When is the last time, though, you ever heard of a bank forcing an employer to keep a person on the payroll so that that person could pay off a loan?

And, finally, we all know that the equity in your home is worth nothing to the bank.  They don’t want your home if you default.  They have enough homes to keep them busy for a long time.  They have so many homes, that they cannot even afford to heat and cool them properly and residences across the nation are molding and rotting as a result.

So, if you want to start or grow a business with a home equity line of credit or a small business loan from your local bank – as was the norm for many, many years – forget about it, unless you have a regular paycheck, with at least a three year record of earnings– even if you have a hefty court-monitored source of cash flow, a flush bank account and tons of equity in your home.

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