The Middle Peninsula League of Voters took a look at consumer credit last Thursday night—from home mortgages and small business loans to credit cards and short-term payday loans—during a forum at the Mathews Memorial Library.

Robert L. Bailey, CEO and president of Colonial Virginia Bank, and Mike Poole, senior mortgage banker with Atlantic Bay Mortgage Group, participated in the forum, which was moderated by retired Del. Harvey B. Morgan. League member Eunice Hyer organized the event. Representatives from several other institutions—including a check cashing/payday loan office and a credit union—were also invited, but did not attend.

The forum began with Bailey and Poole introducing themselves to the audience and explaining the changes they have seen in the financial industry in the past few years.

Bailey assured potential borrowers that, in spite of the recent tightening of credit as a result of the downturn in the economy, "the loan window is still open." However, he added, there is no question that lending criteria have returned to the standards of about 30 years ago, when he entered the banking field.

Bankers, he said, have gone back to relying on the "five Cs of credit"—Character, Capacity, Capital, Collateral and Conditions. The first C, character, refers to a borrower’s reputation, based upon such factors as credit history. The second, capacity, measures a borrower’s ability to repay a loan by comparing income to recurring debts. The lender will consider any capital the borrower puts toward a potential investment. Collateral, such as property or other large assets, also helps secure the loan. Finally, the conditions of the loan, such as interest rate and amount of principal, influence the lender’s desire to provide financing.

"There is no one-size-fits-all" for determining whether a given loan is approved, Bailey said. Since it’s hard to cover all the bases, a borrower needs to sit down with a lending officer, he said. Additionally, he said, "we want to know what the fall-back positions are" to ensure that the business can keep going if rosy projections don’t hold true.

It is definitely more difficult to secure a loan today than it was before the housing bubble burst in 2008. "This bubble was built on easy access to credit," Bailey said.

"Greed has driven a lot of this," Poole said, and the loan officers were certainly complicit in it. It was said that "if you could fog a mirror, you could get a loan," he said, in the days before the recession.

Poole discussed one such case of a property owner who would run up his credit cards every year, then take out the equity that accrued during the past 12 months just to pay off his credit card debt.

"The availability of credit in our country certainly helped our lifestyle," Bailey said, and while some credit is a necessary and good thing, if you get over your head (like the man in Poole’s story), "that’s how you get in trouble."

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