A FRIEND WALKED into a bank in a small town in Connecticut. As frequently portrayed in movies, the benefit of living in a small town is that you see many people that you know around town and often have a first name relationship with local merchants. It’s very personal and something that many equate to the New England charm of a town like New Canaan. As this friend, let us call him Dan, entered the bank, it was the normal greetings by name, discussion of the recent town fair, and a brief reflection on the weekend’s Little League games.

Dan was in the market for a home. Having lived in the town for over ten years, he wanted to upsize a bit, given that his family was now 20-percent larger than when he bought the original home. After a few months of monitoring the real estate listings, working with a local agent (whom he knew from his first home purchase), Dan and his wife settled on the ideal house for their next home. Dan’s trip to the bank was all business, as he needed a mortgage (much smaller than the one on his original home) to finance the purchase of the new home.

The interaction started as you may expect: “Dan, we need you to fill out some paperwork for us and we’ll be able to help you.” Dan proceeded to write down everything that the bank already knew about him: his name, address, Social Security number, date of birth, employment history, previous mortgage experience, income level, and estimated net ...

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