Decision One and broker originated loans killed HSBC
I am a 30 year+ Beneficial employee who has seen several transformations of the lending business. Beneficial was a solid corporation for over 85 years but prior to the purchase by Household the company had become too cautious and slow to react to the market conditions and upgraded technology. Our loan-to-value ratios were far too conservative and our branch computer system was behind the times. Why most companies offered 95 LTV’s, Beneficial offered 80 – 85%.
We made our share of loans they were frequently paid off by competitors with more liberal products. Policy & technology changes were too slow in coming. Just prior to the purchase Beneficial was in trouble as a corporation and was desperately trying to find a buyer. The last company the Beneficial employees wanted to buy us was HFC. The purchase did take place and within a very short you could see what a mess HFC was.
Household’s technology was a complicated combination of several operating systems creating chaos for both employees and customers alike. Policies were changed frequently and without much thought for long term consequences. For Beneficial employees, we went from conservative lending to 100% LTV’s, side loans and stated value equity loans. These liberal lending practices was a recipe for future losses. Seasoned employees knew the loans were marginal but to keep your job you had to roll the numbers.
Collections were taken away from the branches and reassigned to out of state centers. Collection efforts by the centers was sloppy and unprofessional alienating many good, long time customers. Branch Managers were no longer able to make day-to-day operating and customer service decisions. Overall customer service suffered dramatically.
Stock values plumeted after the discovery of hidden losses not reported accurately to Wall St. We all thought the purchase by HSBC was a great situation. A reputable worldwide bank had come to the rescue offering us a lower cost of funding that would create more attractive products for our customers. While that did occur to a point, the demise of North American operations was the opening of Decision One and the purchase of broker originated mortgage loans.
The branch employees have known for years of the inflated appraisals and underhanded business practices of some brokers. With our already loose lending standards the last place to we needed to seek new loans were from brokers. So as we see the end of Beneficial its a combination of greedy lending practices on all ends of the operation. We got away from our core business. Now we are history.
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