| MegaBanks have automated procedures which are more about automated bureaucracy than regulations. If Computer Says No, nothing is happening. But Computer lacks any sense of context or local variation. By definition decisions are based on national stats which average a lot of behaviour. Smaller banks have people - who are probably experts - making contextual loan decisions. Someone's good character and work ethic - or lack of - is going to influence the decision. This doesn't make decisions infallible, but it's the difference between small-focus rigid decision making, and broad-focus community-dependent decision making. It's also why so many people are caught in the rental trap. Many of them are perfectly able to afford a mortgage, but they don't match the bureaucratic criteria on some relatively minor point, and so Computer Says No. It's also why credit scoring is so slanted. I have a perfect payment record, but no loan history because it's more than six years since I paid off all my debts. If I apply for a credit card I'll be marked down because I don't have a large existing credit limit. This is deliberate policy, because lenders don't want people like me who will pay off the balance in full every month. They want borrowers who won't. This prioritises immediate profitability - until the loan book blows up with a wave of defaults during a recession, because these borrowers are inherently riskier. |