Dilemma One: How to split?
I was excited. This quarter’s numbers were looking wonderful; I had made my threshold, and
just opened up $600,000 in new CD’s! Nothing wrong with a $600 bonus for a very small
amount of work, that’s for sure. This would mean that I could buy that new driver I’d been
eyeballing, just in time for the courses to be open. The quarter ended in 2 weeks, so I still had
time to look for more opportunities, and might even make enough for a new golf bag to show off.
Three weeks later, I was called into my manager’s office, and joined my manager Mark, along
with my coworker Amanda. She was a little upset, and seemed embarrassed about something.
Mark told me that Amanda had seen the new account report, and noticed a significant deposit
from a name she recognized, having spoken to the customer a month before.
The customer had called inquiring about CD rates, stating he had a few CD’s maturing, and
wanted to try and consolidate in one place. He was a little concerned about having all his money
in one institution, as he was concerned about being over the $100,000 FDIC insurance coverage
limit. Amanda was able to let him know that extra coverage was available with the proper
structuring of deposits, with co-owners and beneficiaries, to allow the entire $600,000 to
maintain FDIC insurance coverage.
Background
The bank that I was working at had an incentive program that was based on points. Points were
earned by opening accounts and loans, and were based on products sold and dollar amounts
opened. Once a threshold point limit was reached, in this case 20,000 points, the base bonus was
paid, and every 10 points additional resulted in $1 in extra bonus. Because CD’s opened with
new money (money from another bank or credit union) were earning 1% incentive, the $600,000
CD was worth 6000 points, or $600 because the threshold had been met for that quarter.
The bank itself was a community bank, with a very low turnover rate. The new accounts
representatives were all very experienced, and had worked together for years. We were friends
outside the bank as well, and often went out after the bonuses were paid and treated the tellers
and others who had helped us reach our goals to dinner and drinks. I had a huge amount of
respect for Amanda, and respected the fact that she had already spoken to this new customer, and
had actually told him to come in and see her when he was ready to open the new account. The
fact that he didn’t ask for her specifically wasn’t my fault, and I had done all the actual work in
opening the CD’s. There wasn’t a lot of work to open a new customer account, but it was
certainly longer than the phone call Amanda had shared had taken!
Mark and Amanda recognized the relative amount of work that each of us had done, and
Amanda was wondering if I would be willing to consider splitting the bonus for that customer
with her.
She’d spoken to him, but I’d done the actual work on the accounts. What should I do at this
point?
Business Dilemma Two: Missing Mortgage
I was in the process of renewing the Home Equity Line of Credit for Mrs. Johnson. I was
struggling a little bit with the file, as her income was much lower than when we had originally
done the loan. Mrs. Johnson had a home with a decent amount of equity on Island Lake, but had
lost her husband, and his income, a few years before. It’s our practice to renew loans in these
circumstances if the customer feels they can continue on making payments, as we’d really rather
avoid taking a home from an owner if at all possible. Neither the bank nor the owner wins in
those circumstances. We had spoken a couple of times during the renewal process, and she was
confident she could continue to budget for our payment in addition to the first mortgage and all
her credit card bills.
I was in the process of verifying value, income, and liens against the property, when I noticed
that there was no other lien against her house other than ours! There was no first mortgage
showing on the paperwork, yet I knew there was one on the credit bureau. What was going on? I
called Mrs. Johnson to ask if she’d be able to recently pay it off, and perhaps it didn’t reflect on
the credit report yet. She told me she hadn’t, and seemed puzzled herself.
Background
Mrs. Johnson lived on Island Lake, specifically on a parcel that was owned by Minnesota Power,
and leased from them. People who lived on these properties only had rights to the personal
property, not the actual real estate. These “Leased Land” leases spelled out the fact that
everything was considered personal property, including any structures on the land, and that the
homeowners had no legal right to the actual land itself. It’s a specialized type of property
arrangement that the lenders in the area were familiar with, and comfortable with, but most
outside, national bank lenders didn’t understand the nuances of. For that reason, it’s been
impossible to get a traditional, “secondary-market” type of mortgage. Property like this didn’t
actually get a Mortgage filed against it, as most people are familiar with, but rather a UCC Filing
(Uniform Commercial Code) was done against all the personal property on the leased land, and
that served as the security for a loan. The twist about UCC filings is that they have to be renewed
every 5 years, which is a very easy, automated process, as long as the lender knows what it is and
how to do it.
Apparently Mrs. Johnson had obtained traditional, secondary-market financing 8 years or so ago,
when lenders were hungry for new loans, and willing to be a bit more relaxed on lien
requirements. The loan had subsequently been sold, and the new lender didn’t know about
renewing the lien. Mrs. Johnson had become an unsecured borrower with her mortgage
company! If they re-filed a new UCC against the property, they would again be secured, but now
be in a second lien position behind our loan.
I spoke to her about this briefly when I renewed the loan with her, but got a call from her a
couple weeks later. She asked me what would happen if she sold her home. I explained the title
company would verify liens, and contact the lenders for payoffs. She reminded me about the fact
that there was no first mortgage lien filed, and asked what would happen to them. I told her they
wouldn’t get paid from the proceeds of the sale, but that she would legally still owe them the
money. She then asked about the implications of filing bankruptcy, and I could see she was
planning on leaving the mortgage company holding the bag! I explained that she should speak to
an attorney, and that she was asking legal advice I couldn’t provide.
Moving forward 6 weeks, I was contacted by a title company, asking about a payoff for our loan.
I sent the requested information, and asked if there was another lien against the property. The
title agent wasn’t aware of one, so I dropped it.
Now I knew that Mrs. Johnson was planning on selling the home, and leaving the mortgage
company with an unsecured debt, which would be charged off when she declared bankruptcy. I
had time to contact the first mortgagee, and they could file their lien online in minutes, if I could
actually get in touch with someone who would understand. What should I do at this point?
What Actually Happened?
Dilemma One-I gave Amanda the entire amount of points for the CD’s, rather than splitting it
with her. Not only was she a friend, but we were both professionals. She had specifically asked
the customer to come find her, and he hadn’t done so. While I had done the actual work to open
the CD’s, it was only a few minutes of time, and it wasn’t really the point. The only reason that
customer came in to open CD’s for that large of an amount was due to the fact that Amanda had
done her job properly, asked the right questions, and figured out how to make the customer
happy while adding value to our bank. He was her customer, and she deserved then entire bonus.
Dilemma Two- I didn’t make any attempt to contact the other lender. I didn’t feel it was my
responsibility to make sure that they were doing the job that they were supposed to do, as they
hadn’t done their due diligence when purchasing the loan.
Mrs. Johnson sold her home, declared bankruptcy a few weeks later, and was able to keep all the
proceeds of her home under the homestead exemption of the bankruptcy code. While it was a
large amount of money, she didn’t have any other funds to live off of, and would still be
struggling to pay for an apartment and other basics for the rest of her life.
Summary
From the first dilemma, once I had made the decision to just give Amanda then entire bonus, I
immediately felt it was the right decision. I knew she would’ve been just fine if I’d offered to
split it, as she had recognized the fact that I had done some work on the account too, and that I
deserved something for having done so. However, it wasn’t the money, but the respect that was
worth more to me. I knew that both Amanda and my manager would recognize the sacrifice, and
future situations would be dealt with in the same respectful manner.
As far as the second situation went, I did feel a bit bad for the lender, but also realized that my
first loyalty was to my employer, and my second, to my customer. She’d made the decision to
declare bankruptcy, not me. The fact that she was elderly, and would still struggle even with the
unexpected windfall might have influenced me a bit, however, I don’t believe I would’ve done
anything different if she had been 40 years younger. If I’d contact the other lender, the sale
might’ve fallen through, and we might’ve had issues with the loan going forward. My loyalties
required that I just do my job, and that doesn’t include baby-sitting mortgage companies who
didn’t do their homework.