Are your home-loan chances better at a smaller bank? (cont.)

Smaller banks try to distinguish themselves from the behemoths in two ways: by offering more personal service and by making at least some mortgages outside the standard mold.
With small banks, the emphasis is on relationships. As automation takes over many daily transactions, smaller banks offer the prospect of dealing with a human who can conduct conversations, recognize a face and listen to an appeal when a transaction goes awry.
Lenders commonly sell the mortgages they write, making their profit from the origination fees. They may separately sell contracts to "service" the mortgages. Servicers send statements and collect payments and late fees from customers.
Sometimes banks do their own servicing, but most often they outsource the job. Frustration with servicers is common. Many have been overwhelmed by the workload from foreclosures.
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Servicers are huge operations that use mathematical models for decision-making. They apply the same criteria to everyone. There's no room for personal judgments.
Big versus small
Community banks are benefiting from public anger over big banks' fee increases and Wall Street excesses. They're picking up new customers at an accelerated pace, according to a survey by J.D. Power and Associates.
After the activist group Move Your Money urged customers to transfer accounts from big banks to community institutions, The Wall Street Journal reported that the four largest U.S. banks lost $59 million in deposits. While that tipped the balance a bit, bear in mind that Bank of America alone had $417 billion in deposits in 2011.
All that aside, a community bank could be an excellent alternative if you are searching for more personal service or for individualized treatment of a difficult mortgage application.