First Citizens Bank Foreclosing on Honest, Hard Working Family
Holly Springs, North Carolina
When we decided to move to North Carolina in 2005 we decided to open our own small business. I enjoyed music and found a music store for sale in Cary, NC and decided to purchase the business. Like most small businesses, we got a loan from the Small Business Administration (SBA) through a bank, in our case First Citizens Bank.
Going through the SBA helps small mom and pop business to get approved since the loan is backed by the Federal Government. However, the rate is higher, in my case by 2%. The bank also required collateral which included my inventory, fixtures, adding them to my life insurance policy and added First Citizens Bank as the second lien holder on our new home in Holly Springs, NC.
At the time, my loan officer from First Citizens Bank assured me that once I am past the two year new business owner risk period they would be willing to discuss getting me into a conventional loan at a more affordable rate. Well needless to say, after making payments on time every month for two years, First Citizens reneged on their promise so it would seem I would be stuck in a high rate loan for the duration.
Anyway, business was good for the first three years, growing sales and gaining customers. Unfortunately, once the economy started going bad towards the end of 2008 so did my business. I cut expenses to the bone and added more hours to my shift to compensate for not being able to afford hiring more employees to replace the ones that resigned. Towards the end 2011 I started falling behind on the loan payments to First Citizens Bank.
Late in 2012 it was apparent the music instrument store I bought was no longer viable, I had fallen four months behind on my loan payments and First Citizens Bank grew impatient and started the foreclosure process on my business. I ended up closing the doors to my store October 6, 2012. The bank took my remaining inventory as well as $10,600 from my First Citizens Bank checking account.
My original loan from First Citizens Bank was in the amount of $295,000 and I had gotten it down to $120,000 over the seven years I had my loan. I did some research and contacted a firm that specializes in workouts with banks for SBA loans. They guaranteed they would be able to settle for $50,000 or less and get First Citizens Bank to release the lien on our home. I retained the firm September 2012.
Unfortunately, First Citizens Bank is taking a firm position and are not willing to settle and workout a deal with us. This is despite the fact that according to the Standard Operating Procedure (SOP) from the SBA that the bank should try to settle rather than foreclose on a primary residence (SOP 50 51 2).
Here is an excerpt from the document:
Policy regarding primary residence.
Both the DOJ and SBA have strong positions regarding foreclosing on homes. For SBA, a foreclosure action must be considered only as a very last resort. Concerted settlement efforts must first be attempted, and fully documented in the loan file. Similarly, the DOJ will not, as a matter of policy, proceed if a reasonable settlement is at all possible or if the result will cause a cooperative debtor a severe hardship. This policy is consistent with the Claims Collection Act which says that a compromise settlement must be attempted before steps are taken to deprive obligors of their residences.
It is clear to us as well as the firm representing us that First Citizens Bank has in no way considered a reasonable settlement. The consulting firm has successfully worked with dozens of banks before, saving the homes of their clients and have never had such an unwillingness to settle.
So here we are now, hoping for a miracle as First Citizens Bank has initiated the foreclosure process on our home. We would be left with nothing and no place to live. Is this the reward for starting a small business, working hard and trying to earn an honest living? What happened to the notion that small businesses are the fabric of our great country? What ever happened to compassion for people, especially during these extremely challenging economic times?
We would appreciate any help anybody can offer at this time. Prayers, guidance, maybe somebody knows somebody in the media to take this public.
Thank you for reading,
John, Ewa Agusta and family