It’s A Rule: A Good Rant Is Cathartic

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Can you make a list of the institutions or people who employ “Make ‘em up as you go along” rules? To get the thinking process going, try bank tellers or low-level government employees. E.g.: Teller: “You need to include your middle name in the signature used to endorse that check. It’s a bank rule.” You: “But, that wouldn’t be my signature. I don’t sign my name that way. That’s my rule.” Who wins?

Someplace in the annals of U.S. Supreme Court decisions is a statement to the effect that long after the need for a law has expired, we find a new justification to enforce that law. We know it’s in there, and when we find the actual quote and the Justice who said that, we’ll post our (re)discovery.

So, now we’ll rant. Why do some, perhaps most, commercial lenders employ so many documents? Don’t any of the old ones (the documents, not the lenders) ever die gracefully? We have a notion, completely unsupported by any facts, that the industry suppliers of “stock” loan documents all engage in the following marketing process. They produce a grid listing themselves and three or four competitors across its top. Then, along the side, they list the 20 or so forms in their own offering with a check mark in their own column matching each such form. Their competitors’ columns are populated with a combination of green check marks and red X’s. This, of course, proves that the chart producer has the “best” loan document generating program.

Well, that doesn’t sit well with the X- ladened column holders. So, they add all of the “missing” forms to their own packages, and, for good measure, add a few the others don’t have. This infuriates each of the others, who then declare: “I’ll match that and raise you one form.” You get the idea.

Now, that’s only a start. For example, one of the documents is a “Corporate Consent to Loan” form. It is pre-printed (today, “pre-printed” means computer generated), and is on the loan document checklist. It doesn’t matter that the borrower is a proprietorship or a limited liability company. The bank “officer” MUST get this form executed. Of course, the officer (or closing agent) has no idea what is going on other than, “It’s a rule.”

Now, Ruminations knows this really doesn’t happen. NOT! (There’s our pop culture reference for today).

There are less obvious “checklist” items for which the reason for existence is known only to archeologists. Does a lender really need a copy of the canceled check for an insurance policy paid for eight months earlier even if it has a certificate saying the policy is still in effect? Doesn’t one subsume the other? Oh, yeah, each of us could make up a reason, one that starts with: “But, suppose …” We’d prefer to hear: “Oh, yeah, we don’t really need it.” [Except, it’s on the checklist and we really do need it because: (a) it’s on the checklist; (b) that’s the rule; (c) suppose we get audited: (d) no one else ever objected; (e) for as long as I’ve been here …; (f) etc.]

Isn’t there a rule that rants don’t have to be orderly and organized? So, here’s a related one. Ask, “Why do you need this?” and get this answer: “Because that’s our rule.”

While we are on a tear, is there a rule that once a new form is created, it can neither ever be eliminated nor integrated into another document? There must be.

At a time when a corporate filer was no longer required to stamp or emboss its seal on its federal tax return, the form still had a place for those filers who still wanted to show off their seal. Today, one will still find lenders (and others) who insist upon the placement of a physical seal on documents that don’t otherwise require one. [The word “seal” alone does the job in the limited circumstances where a “seal” has a legal implication.]

Apparently, it is easier (safer) to add than to delete. Do form documents ever get any shorter? Almost always – no. Kudos to those enterprises that periodically step back and revisit theirs, few as those enterprises may be in number.

Well, Ruminations is a rule breaker. Rants are required to be long and rambling. Today, we just rambled but have kept it short (for Ruminations, that is). We only wanted to light some kindling for our readers to benefit from as they throw their own wood on the fire. Join us in today’s rant theme by posting a comment.

Our last thought for today is that making up rules as you go along isn’t all bad. Take “Calvinball” for example. What is that? Click: HERE or HERE to find out.

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Comments

  1. Every time I obtain a commercial mortgage, I am tasked with providing archaic, non essential, repetitive documents that do not provide any insight to my credit or my ability to guarantee payment. When questioned, I am always told “ we need to check a box”.

  2. Ira, I could not agree with you more! What makes matters even worse is when lender’s counsel insist on sending a bulky package of multiple copies of documents for completion by the borrower. How, with a typewriter?? Requests to send documents electronically in MS Word format are rebuffed (we unscrupulous borrower’s counsel might tamper with their document), so we scan them in and use the “typewriter” feature in Adobe Acrobat to complete the forms. The whole process is archaic, annoying, insulting and wasteful. A pox on them all!

  3. Elliot L. Warm, Esq. says:

    I am mildly amused more than bothered at the insistence that there be resolutions for borrowing in cases where there is one manager or one managing member of the borrower and for which I will provide a “Certificate” in which the person is in effect authorizing himself or herself to sign documents. That works, because the checklist calls for a “Resolution,” and there it is.

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