Banks refusing to lend: Why Our Auto Loan Was Turned Down

OK, now I have proof that banks are turning down lending for frivolous reasons, just like Barack Obama said yesterday. We got an "Explanation of Rejection" letter for an auto loan in the mail today.

Now I don't want to claim that taking out an auto loan is the best thing to do right now. But our old car was breaking down too much and we found a steal of a deal on a used 45K miles Toyota Tacoma that we can really use to save money on doing some work on our house.

We applied for auto loans -- we have little debt and high income -- but were turned down except for high interest loans. We accepted the high interest loan because it's a simple interest loan that we can pay off early without penalty at any time.

But here's the kicker: we just got the letter in the mail today on why Capital One turned us down for an auto loan, and here's the explanation: "Year applicant's mortgage originated".

So just because we have a mortgage that originated in the past few years (at the height of the housing bubble) they assume we're poor credit risks. Actually, we sold a house in one high-appreciation market and bought another house in a similar market, and use some of the proceeds from the one house as a down payment on the mortgage, which was a low interest simple conventional loan. So we are not under water on our mortgage and we have a low interest conventional loan that is not going to balloon or reset on us.

The fact that we were denied an auto loan simply because of the year our mortgage originated, without any other rationale, supports what Obama said yesterday and what others have been saying: banks are not interested in lending and are making irrational decisions to refuse to lend.

Banks are making more money on Wall Street and options trading than risking lending in a recession they helped create, and their refusals to lend are helping shut down the economy even more.

Excuse my language, but fuck 'em. The whole threat that led to the bailouts last year was that if the banks fail, they can't lend and the economy will shut down. Seems like they're not really lending anyways and as far as I can tell, we should have let them fail.