JUNE 2020
THE OFFICIAL MAGAZINE OF GERACI
Steve Pollack
ANCHOR LOANS
INSIDE:
CORONA VIRUS
Private Mortgage Lending
COVID-19
Force Majeure Contract Clauses
Economic Cycles and Coronavirus Digital Marketing Strategies COVID-19
FIX-AND-FLIPS CORONAVIRUS ERA June 2020 Originate Report 1
2
CONTENTS JUNE 2020
Features 16 Could the Corona Virus Provide the Next Boon
for Private Mortgage Lending?
By Edward Brown, Pacific Private Money
24 What Real Estate Investors Should Know About
Economic Cycles and Coronavirus
By Lou Forino, Gauntlet Funding
6
26 Selling Fix-and-Flips in the Coronavirus Era
By James Bowie, Alta Capital Group
12
28 [COVID-19] Force Majeure Contract Clauses
By Anthony F. Geraci, Esq., Geraci LLP
34 6 Digital Marketing Strategies to Guide You
Through COVID-19
By Ruby Keys, Geraci LLP
16
Who To Know 6
Anchor Loans: Steve Pollack
Graham Womack, Contributing Writer
12 Wisdom From The Ceo
Brian Mingham, Founder & CEO of CFSI Loan Management
18
18 Industry Spotlight
Justin Brogna, Thrive Lending
In Every Issue 36 Lender Connect Highlights 38 Lender Directory
28 June 2020 Originate Report 3
Revenue diversification
Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial
TODAY’S MARKET OPPORTUNITY: •
•
•
100 billion dollar non owner-occupied investment space SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial Diversify product offering and add new revenue opportunities you may be missing out on Legally compensate your most prized relationships (Realtors) for referrals
WHAT TO LOOK FOR IN A BROKER + CAPITAL PARTNER RELATIONSHIP: • • •
Concierge across product offering with underwriting, training, service and support Dedicated call center for loan origination support and fund control Marketing materials provided including product tear sheets, pitch decks and web banners
In today’s market, refinancings have limited availability and there’s not much new housing inventory to lend against. For mortgage Brokers, this means the obvious; there are a lack of transactions in the market to profit from. For shops that are only doing refinance or traditional mortgages, opportunities only come around every 5-7 years. You’ve got to have a big client base to have volume. With financial products across SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial, the sales cycle is faster, there is significantly higher recurring business, and a few lenders have teams dedicated to helping you succeed.
BROKERS, PARTNER TODAY
4
Think of it as a new product offering which results in the diversification of your potential revenue. All of this is well within reach, and much easier than you may think. The NON-O/O investment space is a 100 billion dollar industry that has come full circle since the last market downturn. Over the last decade private lending has been growing, and the comeback of property investors is at an all-time high. Here’s what it takes to do these types of loans and a good private lender will handle these things for your Brokerage… • • • • • • •
Review and process loan applications Document collection Facilitate Appraisal Coordinate Title & Escrow Complete underwriting Facilitate Funding Pay you
Traditional Realtors and Mortgage Brokers have the misconception they need an NMLS license to be a lender in this product space. The main point in dealing with a private lender is while they primarily fund SFR’s, these loans are governed under commercial guidelines. Thus we are not governed under RESPA, TRID or TIlLA. These loans are funded only into business entities allowing 7-10 business day closings and can pay anyone under a Brokerage license a referral fee or commission on the HUD at closing. There are two avenues a Brokerage launching this type of product to Real Estate professionals can expect to see. You can be a Correspondent Partner (the lender would fund in your name)
http://triumph.capital/brokers
or an Origination Partner (the client would see the lender’s name on the HUD). Most deals are funded under a single set of product guidelines allowing training, underwriting and servicing to be easily understood. CORRESPONDENT PARTNER (CP): You look and feel like the lender, a complete white-label product. ORIGINATION PARTNER (OP): Traditional Broker + lender relationship, lender shows on HUD. A full concierge service for Broker partners handling everything from A-Z is an entirely new model for private lending and Mortgage Brokers / Real Estate professionals. Working with a direct lender enables Mortgage Brokers to keep the lion’s share of the profit and have the potential to earn from the yield spread as well, all while monetizing on much more frequent lending transactions, instead of the normal 5-7 year customer lifecycle. There many private lenders chasing this strategy and it’s safe to be wary of who to work with. While choosing a partner, look for someone who understands the business and has a strong reputation for closing transactions. You’ll also need support with marketing materials. Having the right documents and product tear sheets (one-pagers) for conversations, trade shows, etc. is helpful in positioning the opportunity with your existing book of referral business from Realtors.
For more information call
877-450-9741
ROB JENNINGS robert@triumph.capital
GEORGE O. FLINT goflint@triumph.capital
CEO Geraci LLP ANTHONY GERACI Anthony@Originate.Report Vice President Geraci Media RUBY KEYS Ruby@Originate.Report Editorial Director MAX BERGER Max@Originate.Report Art Director LYNDA HIGHT L.Hight@Geracillp.com CONTRIBUTORS Edward Brown • Anthony F. Geraci James Bowie • Ruby Keys • Steve Pollack Brian Mingham • Justin Brogna Lou Forino • Graham Womack
FOUNDING UNDERWRITERS
MARK HANF President, Pacific Private Money ORIGINATE WEBSITE www.originate.report GERACI LAW FIRM www.geracilawfirm.com MEDIA WEBSITE www.geracimediagroup.com CONFERENCE WEBSITE www.geracicon.com
Letter Editor from the
“It’s tough to make predictions, especially about the future.” – Yogi Berra
Welcome to the July Edition of Originate Report! In a word, this issue is about change. Looking back several months, we could never have predicted the impact that this novel coronavirus could have had on both the economy and our daily lives. As people slowly return to work and adapt to the new protocols, it is difficult to imagine life will ever return to what we used to accept as normal and routine. But, we must persevere and continue to pivot in order to not only survive, but thrive, despite what is happening in the world around us. In this month’s cover story, we take a closer look at Steve Pollack’s resilience as he navigated several different careers before becoming one of the most respected CEO’s in our space. From an optometrist, to a professional poker player, to a real estate investor and co-founder of Anchor Loans, Steve honed his ability to read a room, welcome change, and adapt to new circumstances, a takeaway we can all use right now. These inherent abilities combined with a will to embrace change have allowed Steve to succeed. And, now, I must let you know that this will be my last edition as Editorial Director for Originate Report. I’ve enjoyed every interview, every discussion, and every connection I have made over the past two years. I am going to take a page from Steve’s book and go all in on my new path. My last words of advice come from a famous quote by Charles Darwin: “it’s not the strongest or most intelligent who will survive, but those who can best manage change.” Until our paths cross again,
Max
Max Berger
Max Berger Originate Report Editorial Director June 2020 www.originate.report Originate Report 5
PROFILE
Steve Pollack, President & CEO Anchor Loans
Doctor, Landlord, Poker Champ, Lender STEVE POLLACK’S ECLECTIC CLIMB TO THE TOP OF A 60 BILLION DOLLAR INDUSTRY By Graham Womack, Contributing Writer
L
his
lending company he now leads, Steve
career choices, Steve held on to the
optometry
Pollack always knew he wanted
entrepreneurial spirit and work
from UC Berkeley, building
to be in business for himself. His
ethic he acquired early in life.
a successful optometry practice,
first successful business was as a
investing in rental properties, playing
young boy mowing neighborhood
With an early love for board and card
professional poker for several years,
lawns in New York, and as he went
games and a head for numbers, that
or building the multi-billion dollar
on to travel a diverse landscape of
Steve would be drawn to professional
ong
before
doctorate
6
earning in
Steve sold his practice, expanded his
Berkeley and started an optometry
rental property portfolio, and found
practice in Stockton, California.
success playing poker professionally. In his seven years as a competitive
“I started my own business, my own
poker player, Steve says he never
practice, and ran it for 10 years,”
relied on luck. Although the smoke
Pollack said. “I built it up and started
and mirrors of high stakes poker
with no patients. Day one, I opened
might give the illusion that luck
the doors, no patients, and did what I
rules the table, the truth is that the
needed to do to build up my practice
player’s ability to analyze all the
to a busy, thriving practice.”
available data determines the win. Working with a partner, Pollack “It would not be possible to support
developed
yourself and make a living and
But after many years of success,
be
successful
for
seven
years
continuously if it was only luck,” Pollack
told
Originate
Report.
“Because luck eventually catches up
passionate
about—makes
perfect
sense. It’s the nearly twenty years he spent building an optometry career that seems a bit of an odd choice for
Anchor Loans. Pollack’s company was the first in the industry to fund over a billion dollars in loans in a single year and remains an industry leader with over $8 billion in loans to real estate investors looking to fix-and-flip properties.
“I am intrigued by complex systems
Here’s how Pollack found success,
and was a bit of a science geek from a
what his life’s like today, and how he
young age, so I was naturally drawn
plans to navigate the uncertain road
to the study of human physiology.
ahead for businesses wrought by the
I
global pandemic.
my
undergrad
in
year eight or nine that I didn’t want
to be my life’s work, so I ended up
this man of many interests.
completed
“We were both busy and I realized in
Though Pollack’s been out of the
and co-founder of Calabasas-based banking as the career he’s most
something was missing for Steve.
Pollack said. “It wasn’t what I hoped
data serves him well today as CEO choose
business.
to do this for the rest of my life,”
than 20 years, that ability to analyze
ultimately
active
with you, right?”
competitive poker game for more
poker—and
an
A side career had emerged during his time as an optometrist, with Pollack buying rental properties. In fact, he purchased two rental properties before ever owning a house for himself.
So,
when
Pollack
left
optometry, he went into real estate investing full-time and “basically did do.” Purchasing
distressed
properties,
Pollack would fix them up and often resell them. Sometimes, too, he’d hold onto the property, find a tenant for it, and refinance. This is what
optometry, and I built a successful
From Optometry to Real Estate
practice and spent ten years helping
Investing to Poker
eye patients. Over time, I realized
Pollack began as an undergraduate
I was not as passionate about the
student
career path I had chosen as I was
California, Los Angeles then earned
expecting,” Steve explains.
his doctorate in optometry at UC
the
my partner.”
what Anchor’s borrowers currently
psychobiology and my doctorate in
at
selling my practice after 10 years to
University
real estate investors refer to as a
of
“buy and hold strategy”. Business moved briskly for 2-½ Steve Pollack: Continues on pg. 8
June 2020 Originate Report 7
Steve Pollack: Continued from pg. 7
years before a 1990s recession made things much tougher. “I still had my rental properties, but buying, fixing, and selling was problematic,” Pollack said. “At that point in time, I didn’t have a problem
a few weekends every summer to the
tournaments.
Throughout,
he
Nevada side of Lake Tahoe, where he
pursued his craft strategically.
could legally play Hold ‘Em. “It’s a game of skill and it’s a game “I
would
always
be
successful
in which you not only have to assess
playing up there, and so I just kind
mathematical
probabilities
and
of stumbled into it,” Pollack said.
situations based upon cards,” Pollack said. “It’s a game of understanding
Pollack never made a conscious
people and their habits and reading
decision, he explained, to seek out
them and picking up tells, if you will.
my properties.”
poker as a full-time profession. But
You have to do all these things in
he was a good enough card player
the (space) of sometimes 15, 20, 30
The poker table beckoned.
and it was fun enough, at least in the
seconds.”
living per se, but I wasn’t making a living because I wasn’t selling any of
Competitive Poker
beginning, for Pollack to transition. Pollack
did
well
enough
as
a
As a child, Pollack had always been a
Professionally,
played
professional card player to forge
good player of games, from chess to
games like High Stakes Hold ‘Em,
a seven-year career. There were
gin rummy to poker. This continued
No-Limit Hold ‘Em, and Texas
drawbacks, though.
well into Pollack’s optometry career
Hold ‘Em, generally opting to
when he would travel from Stockton
play in cash games rather than
Steve Pollack, President & CEO Anchor Loans
8
Pollack
“The problem with playing poker
as a job is it’s a job in which you
with his winnings and two friends
motivations,
truthfulness,
have no vacation pay, no sick pay,
he’d met on the professional poker
habits,” Pollack said.
no health insurance, and many
circuit, Pollack began to invest in
days you show up at work with a
real estate trust deeds.
and
In 23 years, Pollack has thrived, transforming Anchor Loans into
pocket full of money and go home (from) work with no money in your
“I wasn’t the broker originating the
one of the top fix-and-flip lending
bucket,” Pollack said. “It’s not your
loans,” Pollack said. “I was just the
companies in the United States.
ordinary job.”
money behind the loans with some
Operating in 47 U.S. states and
of my friends, and so I became a
Washington D.C., the company works
trust deed investor.”
with applicants who might struggle
Then there were the health risks to consider. “At that time, there was smoking allowed in the casino,” Pollack said. “I went to work every day and had to sit around people smoking, which I don’t particularly care for.” So once again, Pollack began to formulate an exit strategy. Armed
to
obtain
traditional
mortgage
In time, Pollack and the two friends
financing, providing them with fast,
-- Dan Harrington, a 1995 world
reliable, and flexible loan options.
champion of poker, and Jeffrey
Pollack’s insistence on providing
Lipton -- realized they could provide
borrowers
a better lending service if they cut
customer experience” keeps people
out the brokers and worked directly
coming back, with over 85 percent
with real estate investors.
of Anchor Loans’ borrowers being
with
“an
exceptional
repeat customers. “My friends and I wondered why we were investing money with other
The firm has grown steadily despite
brokers when we could have more
national economic crises, navigating
control of the situation, originate
its way through the 2008 and
stronger loans, and make a business
2009
out of it.”
and ultimately emerging stronger.
So, in 1998, Pollack, Harrington, and Lipton pooled their money to form Anchor Loans.
Technically, poker and real estate lending are two different things. But a former competitive poker player like Pollack can easily see some of the parallels and where to apply his past success from the card tables. “The same skills and game theory apply to analyzing real estate risk. Whether you’re directly investing real
estate,
financial
debacles
Pollack said that in 2016, Anchor became the “first private money platform to originate over $1 billion worth of loans in a calendar year,
Lending like a Poker Player
in
global
or
indirectly
investing by lending and being one step away from the collateral, you still need to read the borrower’s
and we have met or surpassed that amount every year since,” which he
counts
among
his
proudest
professional achievements. But success is not just about making money for Pollack. “I enjoy mentoring the team at Anchor, helping them reach their potential and grow their careers,” Pollack said. “I also enjoy the intellectual the
exercise
business,
risk
of
running
assessment,
Steve Pollack: Continues on pg. 10
June 2020 Originate Report 9
Steve Pollack: Continued from pg. 9
structuring
loans,
and
helping
borrowers realize their goals and their aims-not just in their financing, but in their overall business.” He’s also emerged as a leader in the lending industry, becoming involved with
the
California
Mortgage
Association in the early 2000s. In
he has an awesome family and
rapidly-rising numbers of cases of
great relationships with his wife
the novel coronavirus, or COVID-19,
and daughter.
necessitated mass transitions to
He rejects the idea of work-life balance. “I don’t look at it as a work-life balance issue,” Pollack said. “I look at it as, make a choice as to what’s appropriate on any given day and
the years since, Pollack has served
make every moment count whether
more than a decade on CMA’s board
you’re at work or home.”
of directors and spent a term as the organization’s president.
Now, everything that Pollack has
working from home. “We
didn’t
have
remote
office
workers, but I always believed that there are only three things that keep remote workforce from being efficient: the bed, the refrigerator, and the TV,” Pollack said. “I still think that’s a problem for many people that are working remotely today, but they’ve gotten used to it.”
done has prepared him for the Life outside of work is good, too.
latest crisis facing his business
To help employees, Anchor Loans has
A longtime student of martial arts,
and America.
provided them with tips such as how to structure their days, make sure
Pollack picked up Tang Soo Do in his 50s and spent eight years
All in Against Coronavirus
they take breaks, including breaking
earning a black belt. Pollack also
Like many companies, Anchor Loans
for lunch, not just eating in front of
appreciates his home life, saying
had few remote employees when
the computer.
Steve Pollack, President & CEO Anchor Loans
10
Things have definitely changed for
“This is not 2008 and 2009 in which
Pollack’s
there were many people upside-
business,
he
conceded,
though good has also come of it. “I
actually
found
that
our
management and executive team’s conference calls are a little bit more efficient,” Pollack said. “Everybody shows up on time. They’re focused.” Moving forward, Pollack is guardedly
is fooling themselves.”
down on mortgages and unable to
To protect against risk, Pollack has
pay,” Pollack said. “There is a ton
taken a number of safeguarding steps,
of equity in properties across the
including restructuring underwriting
nation that will, I think, support
guidelines and lowering leverage
price
ratios, but otherwise continuing to
structure
for
the
price
valuation for the most part.” He added, “However, having said that, anybody who can tell you what’s going to happen in a given
optimistic, even with the economy
market with certainty six months
still unpredictable.
from now or nine months from now
lend. And he’ll keep doing what he’s learned to do well in life: welcome change, adapt, and make the best of the new normal. FOR MORE INFORMATION VISIT: www.anchorloans.com
LOOK WHO’S HIRING!
INDUSTRY JOB WATCH
Looking to fill a position? Advertise it here in Originate Report’s Industry Jobs to get it in front of thousands of qualified candidates. Contact us at (949) 629-3961. Fidelity Mortgage Lenders, Inc. has been funding real estate loans in Southern California since 1971. Founded as Fidelity Home Loan Co. Inc., we originally specialized in residential equity loans, and later expanded in to commercial lending. We make loans on both commercial and residential properties in the state of California, providing first trust deeds, refinances, and/or purchases. Now in our fifth decade, Fidelity Mortgage provides loans to borrowers which larger institutions are unable to fund. We grew by responding to the needs of a changing real estate marketplace while serving a growing community of property owners and investors. Our reputation for fairness and reliability brings us referrals from our borrowers and other professionals. As a result, we service a network of real estate brokers, attorneys, accountants and business managers who seek our professional help for their clients. All of our combined departments work together to completely service loans. From loan advisers to escrow officers to loan servicing, there is only one goal… our clients’ total satisfaction. The Role: We are seeking a candidate with knowledge of commercial lending to be part of our loan servicing team. Responsibilities: • Service Loans - Monthly payments processed and scanned - Monthly check to investors • Collections - Track and file late notices - Read fees and statements, and conduct appropriate follow-ups - Use judgement to escalate concerns to immediate Manager or to the Company’s Chief Operating Officer • Insurance - Read and understand Property Fire Insurance - Track insurance notifications - Monitor requisite insurance on properties - Communicate to investors and property owners • Customer Service with Investors and Borrowers - Answer general questions, and display problem-solving skills • Knowledge “The Mortgage Office*” loan servicing software system Qualifications: • ~3 years Real Estate Loan Service Specialist • Knowledge “The Mortgage Office*” loan servicing software system • Familiarity with foreclosures • People skills and rapport with borrowers, customers • Computer skills: proficient in Word, Outlook and excel. • Able to manage multiple projects, deliverables, milestones, and schedule
June 2020 Originate Report 11
WISDOM FROM THE CEO
Brian Mingham Founder & CEO of CFSI Loan Management
12
results-oriented
executive
with
proven experience in all aspects of start-ups and growth initiatives to create viable businesses. He has proven his ability to capitalize on market opportunities, driving revenue
and
profits,
combining
entrepreneurial vision with strong management,
leadership,
and
relationship-building skills. How did you go about building a customer base for your early ventures? I spent 15 years in the mortgage business in national sales roles, and all of my businesses have revolved around selling services into that space. Sell what you know! There is not a better piece of advice when building a business. What has been your favorite aspect of being an entrepreneur? It has been the hardest and most rewarding
experience
in
my
professional
experience.
Utilizing
all of the wisdom I was exposed to at a Fortune 500 company has been priceless. I believe that I would have made many more mistakes, failed to plan properly, and just shot from the
B
Brian Mingham, Founder & CEO CFSI Loan Management
hip – and all of those things can be costly when you are growing your business with your own money!
rian Mingham is Founder
risk mitigation firm by creating
&
Loan
key strategies and hiring the best
Management (CFSI). He is
team in the space. In his role, Mr.
responsible for the firm’s overall
Mingham has continued to focus
strategy,
on building CFSI’s year-over-year
CEO
of
reporting,
CFSI
and
general
management of CFSI.
revenue growth by leading key growth initiatives, identifying high-
Since founding the firm in 2012, Mr.
growth market segments.
Mingham has transformed CFSI to a leading nationwide construction
Mr. Mingham is a high-energy,
What has been one of your biggest challenges as a CEO during the pandemic crisis? CFSI has always had a Disaster Recovery Plan in place, as well as a Work From Home policy, since our office is in Colorado and we can sometimes experience severe Brian Mingham: Cont. on pg. 14
June 2020 Originate Report 13
What advice would you offer
What key activities would you
someone who is starting their
recommend entrepreneurs to
first business?
invest their time in?
Do what you know, stay away from
For me it is reading!
in the past, but this has been very
highly regulated spaces, and start
your business, your clients’ business,
different. Now, the issue of being
small. My CPA asked me “Why would
their clients’ business, and sell. All
stuck
kids,
you pay someone $2M for a business
businesses have the classic struggle
pets, and the media are driving
to make $200k a year?” then they
of Sales/Ops, and you cannot do both
said “Just start one!” That comment
for long – so pick what you are good
resonated with me, and so I decided
at and hire the best person you can to
to follow their advice. It has worked
do the rest. Build a team around key
out very well. Capital requirements
players in your organization, train
are real, payroll is real, taxes are real,
them up, treat them well, and they
and you cannot escape these things
will help you grow your business.
Brian Mingham: Cont. from pg. 13
storms and large amounts of snow. We have utilized these processes
at
home,
spouses,
additional stress and chaos into the workplace (which happens to be at the kitchen table), and it shows in work quality. More employees are telling us that they are “stressed out” because they cannot escape the situation. We took for granted our
in a business. Pay close attention to the math, do not run a loss, do not
work life, gym life, and home life,
hire friends, make sure to pay for
and it has been changed forever.
talent, and outsource what you can.
14
Understand
Brian Mingham Founder & CEO CFSI Loan Management www.thinkcfsi.com
PRESS RELEASE
ABS Appoints Jasen Portero as Chief Operations Officer LONG BEACH, Calif., May 5, 2020 - Applied Business Software, Inc., (“ABS”), leader in loan servicing and origination software in the private lending space, announced today that Jasen Portero, its current Vice President of Development for the last 12 years, has been appointed Chief Operations Officer. As a Full Stack Developer, Jasen oversees the Development Department, manages all online services, and spearheads all new projects. As VP of Development he has created a multitude of Front-End Service capabilities: iPad app, electronic signature, online loan application and borrower portal, text notifications, loan geo-mapping, API, and the first fully browser based version of The Loan Office® servicing software. As a Chief Operations Officer he will be extending the online services and will oversee development of both products, The Mortgage Office® and the Loan Office®. Prior to joining ABS, Jasen spent 18 years working for Universal Music Group, WellPoint, Warner Bros., and Evite where he took part in developing some of the technology people around the world have come to use and love. “I am honored and humbled to take on this new role and take ABS to a new level. Our software is a testament to hard work, excellence in coding, and continuous innovation. ABS as a trusted brand is experiencing incredible growth, and I am excited to be a part of it and take the company to the next phase.”, said Jasen Portero. “Since joining in 2008, Jasen has been instrumental in our growth. He is an excellent addition to our senior management team and will play a critical role in ABS’ future product development strategy. His proven track record and ability to build a winning team are a great combination for what lies ahead”, said Carlos Nodarse, ABS’ CEO. About Applied Business Software Applied Business Software is a market leader and global provider of software systems and solutions to the lending industry. ABS offers a complete suite of software products designed from the ground up to specifically address the needs of those who originate and service loans. All our products are consistently rated superior in design, system interface, expandability, and ease of use. ABS is based in Long Beach, California. For additional information about ABS’s products and services, visit www. themortgageoffice.com or call (800) 833-3343. Elizabeth Morales, Chief Marketing Officer www.themortgageoffice.com | (800) 833-3343 | elizabeth@absnetwork.com June 2020 Originate Report 15
FEATURED
Could the Corona Virus Provide the Next Boon for Private Mortgage Lending? By Edward Brown, Pacific Private Money
T
he Corona Virus had all but
in-place restrictions and lack of
might ensue should the perceived
shut
certainty in the market.
lockdown last for a few more months.
down
conventional
lending in late March 2020
The main reason is that a prolonged
and most of April 2020. Although it
This situation may provide a boon
economic decline can produce long-
now appears that many banks have
to the private lending industry as it
lasting effects that may take years
loosened up, they are far behind
has done at times over the past 30
to recover, especially in certain
in applications due to the shelter-
years; however, a cautionary tale
markets such as restaurants, retail,
16
“In addition to the simple laws of supply and demand where the supply of money available for real estate purchases decreased due to the number of S&Ls closing, other conventional lending institutions became skittish and backed off; even for the more conservative loans.”
and any place where people gather.
double-digit inflation. That caused
higher interest rates on savings
Different
a recession in 1980.”
without
economic
interruptions
have occurred over the past 30 years
the
insurance.
When
depositors switched, it depleted the
that, for the private lender, with
Stagflation
growth
banks’ source of funds. S&L banks
foresight, fared better than just
devastated S&Ls. Their enabling
asked Congress to remove the low-
before the downturn in the market.
legislation set caps on the interest
interest rate restrictions. The Carter
rates In
the
mid-1980s
the
slow
deposits
and
loans.
mid-
Depositors found higher returns in
1990s, the Savings and Loan crisis
other banks. At the same time, slow
shuttered many real estate lending
growth and the recession reduced
institutions. Almost one out of three
the number of families applying for
Savings and Loans failed from 1986
mortgages. The S&Ls were stuck
to 1995. It was the most significant
with a dwindling portfolio of low-
collapse since the Great Depression.
interest mortgages as their only
According
income source.
to
to
for
and
author
Kimberly
Amadeo, “In the 1970s, stagflation combined
low
economic
growth
The
situation
with high inflation. The Federal
1980s.
Reserve raised interest rates to end
became
Money
worsened market
popular.
They
in
the
accounts offered
administration allowed S&Ls to raise interest rates on savings deposits. It also increased the insurance level from $40,000 to $100,000 per depositor. By 1982, S&Ls were losing $4 billion a year. It was a significant reversal of the industry’s profit of $781 million in 1980. Between 1982 and 1985, S&L assets increased by 56%. Legislators in Corona Virus Next Boon: Cont. on pg. 18
June 2020 Originate Report 17
Corona Virus Next Boon: Cont. from pg. 17
California, Texas, and Florida passed laws allowing their S&Ls to invest in speculative real estate. Amongst scandalous activity such as putting pressure on the Federal Home
Loan
Banking
Board
to
overlook suspicious activity, the crisis
pushed
states
like
Texas
into a recession. When bad land investments were auctioned off, real estate prices collapsed.” In addition to the simple laws of supply
and
demand
where
estate purchases decreased due to the number of S&Ls closing, other lending
investments. Many investors wanted
and threatened to sue for specific
to ride the gravy train to invest
performance. By all accounts, the
at any valuation. Venture capital
buyer needed a loan of 20% LTV.
was easy to raise and fueled many
Unfortunately
companies that never had made a
[or
fortunately,
depending on which side of the table
profit and probably never would.
you are], the banks were acting like a deer in headlights and would not
In early 2000, the Fed raised
commit to a loan; thus, the buyer
interest
had to turn to hard money [as it
market volatility. At the same time,
was called in those days]. The terms
Japan entered a recession. In April
were 14% and 10 points for a three
2000, a judge ruled that Microsoft
year loan with a one year minimum
was guilty of monopolization and
guarantee of interest. Although the
violation of the Sherman Antitrust
buyer was not happy with the terms,
Act. This led to a 15% decline in the
rates,
leading
to
stock
the
supply of money available for real
conventional
refused to change the contract
institutions
became skittish and backed off; even
“In addition to the simple laws of supply and demand where the supply of money available for real estate purchases decreased due to the
for the more conservative loans.
number of S&Ls closing, other conventional
Enter the private real estate lender.
lending institutions became skittish and backed
For those who could think outside
off; even for the more conservative loans.”
the box and use some creative thinking, loans were made that, in one person’s opinion “was like shooting fish in a barrel.” An example
he knew he was going to make a
shares of Microsoft. On the same
of this was a loan I was privy to
fortune on the building and be able
day of the judge’s ruling, Bloomberg
that, to this day, I cannot believe a
to refinance once the economy got
News
conventional lender did not make;
back to somewhat normal.
article that stated, “It’s time, at last,
published
a
widely
read
to pay attention to the numbers.”
the property was in the financial district of San Francisco and was
Then,
we
Within two weeks of that article, the
considered a prime office building.
experienced the Dot Com bubble and
NASDAQ had dropped 25%. Many
The building was 80% occupied and
burst. During the 1990s, more people
investors sold stocks just before
had tremendous positive cash flow
were getting use to the World Wide
April 15th in order to pay for gains
from long term, stable tenants. The
Web. At the same time, a decline
they had realized from sales in 1999.
buyer was getting a severe discount
in
the
This compounded the decline of
because the son who was given
availability of capital. Add to that the
the NASDAQ. In addition, investor
authority by his father accidentally
Taxpayer Relief Act of 1997 which
confidence was further eroded by
accepted an almost insulting low-
lowered capital gains tax. These
several accounting scandals and the
ball offer. Although the father tried
combinations made more people
resulting bankruptcies that ensued.
to correct the mistake, the buyer
willing to make more speculative
This spiral downward turned Dot
18
in
interest
the
late
rates
1990s,
increased
private real estate lenders. Many
times; they pull back. They have less
private
curtailing
manpower via closed offices and less
Although the Dot Bomb era was
their guidelines regarding LTVs,
employees able to accomplish what
not real estate related, confidence
but they were making loans based
is takes to make loans. This, again,
in
shaken.
on the then new, lower values and
gives the private lender the ability to
September
making a good living. For example,
provide the oft needed financing for
11th attacks occurred and many
Mark Hanf, president of Pacific
borrowers. Interest rates have gone
borrowers were once again faced
Private Money, started his business
up for these borrowers even when
with
who
in 2008. Normally, one would have
the Fed has reduced interest rates.
pulled back on their lending, not
thought starting a lending business
Less capital in the markets to lend
matter the asset or the strength of
in 2008 was the wrong time, but
means the demand for capital will
the borrower.
Pacific Private Money flourished,
raise the price for that capital. As
as they made loans to borrowers in
long as the conventional lenders have
Again, enter the private real estate
need at conservative, newer, LTVs,
basically stepped aside from real estate
lender. During this period, real
and no client lost money during the
lending, the private lender should have
estate had not severely declined;
continued decline through 2012 due
the same opportunities that existed
maybe because the decline was more
to conservative underwriting.
during the S&L Crises, the Dot Bomb
Dom to Dot Bomb as it was known.
the
Soon
economy
thereafter,
was the
conventional
lenders
lenders
were
specific to the Internet rather than a global real estate credit crunch.
Up next, the Corona Virus; although
People still had jobs and made their
the pandemic has substantially hurt
mortgage payments for the most
the economy regarding sales/profits,
part. The supply of housing had
the underlying economic picture was
not kept up with demand, so prices
strong prior to the virus, and there
stayed relatively stable. However,
is compelling reason to think that it
whenever
perceived
can be strong again after restrictions
uncertainty, banks typically pull
are lifted, as the various restrictions
back and usually to an extreme
were created by governments rather
wherein even the most conservative
than economic forces and can be
of loans is not made. The private real
undone when governments decide
estate lender was given the ability to
to disseminate them; especially if a
lend very conservatively at the same
lockdown is only for a few months
time as commanding a higher rate of
rather than years. So far, real estate
interest than was normally attained
has not shown signs of collapsing.
in a more stable econom
Sellers are unwilling to unload their
there
is
properties at depressed prices. The next time the banks curtailed
long governments will intervene rather than let the virus run its course on its own. A long, protracted shutdown
would
severely
affect
every economic situation, but it always seems that the best time to invest/lend on real estate is during the darkest hour. The old adage of buy low, sell high seems to work better than buy high and hope it goes higher. Even if we do not know how long an economic decline lasts, conservative underwriting can help weather tumultuous times. As many investors claim, the time you make
Recession in 2008. This time, real
are still being completed even if
estate was specifically cited as a
they are hampered by
major contributor due to the credit
social distancing and
ABOUT THE AUTHOR:
bubble and subsequent mortgage
more people working
Edward Brown is in the Investor
meltdown. Real estate prices fell
remotely. However, the
Relations department at Pacific
precipitously,
real
banks are doing what
there
they always seem to
for
do during unsettling
estate
declined
were
ample
in
value,
opportunities
Transactions
the virus will be around and how
Buyers
although
exist.
Of course, nobody knows how long
lending occurred during the Great
and
still
Crisis, and the Great Recession.
money is when you buy, not when you sell.
Private Money in Novato, Calif. CONTACT: edward@pacificprivatemoney.com
June 2020 Originate Report 19
SPOTLIGHT SPOTLIGHT
INDUSTRY SPOTLIGHT Justin Brogna
Thrive Lending
20
working as everything from teller to President. Most of that experience was related to real estate lending. I’ve been fortunate to personally invest in real estate as well. My partners at Thrive offered me an opportunity to exit the banking world and join them. Private lending was a natural evolution for me to marry my lending and first-hand real estate experience. It’s been awesome and I haven’t looked back. Q: How have you seen Thrive Lending grow and expand in the last few years? A little over 5 years ago, Thrive was a fractionalized hard money lender originating roughly $17MM a year. Today, we manage two funds and generate close to $90MM in originations a year. Our average loan size has grown to over $4MM. We are lending to sophisticated borrowers Justin Brogna, Chief Operating Officer Thrive Lending
J
with more quantifiable data to make credit decisions and have been able to extend our lending presence to several
ustin Brogna serves as the Chief
excited about applying that expertise
Operating Officer for Thrive
to Thrive Lending. Justin has a strong
Lending. He is responsible for
business development background
overseeing the Thrive Lending Fund,
Q: How has your company vision
and believes that excellent customer
which includes sourcing and funding
evolved from Day 1 to Today?
service
I don’t think our vision has necessarily
of the loans.
successful business.
is
tantamount
to
any
Prior to Thrive, Justin worked for
major metros across the country.
evolved, but I do think the execution of it has. We have always been
nearly 20 years at various large banks
Justin has two kids and they enjoy
dedicated to congruence. We believe
in Austin. In many of his previous
boating, bike riding, and spending
it’s important for all stakeholders
banking
quality time as a family.
to succeed. As the company has
positions,
Justin
was
grown and flourished, we have
responsible for creating, growing, and maintaining multi-million dollar
Q: How did you first get involved
loan portfolios. He understands how
in real estate, and private lending
to navigate the intricacies of the
specifically?
lending business, in particular, and is
I spent most of my career in banking,
been able to help more borrowers and investors fulfill their goals all while achieving our own. Justin Brogna: Continues on pg. 22
June 2020 Originate Report 21
Q: What is your favorite quote?
this market disruption to their
Rules are for those who do not
advantage?
Q: What does success look like
understand what the rule makers
We are taking this time to form a
for you?
want. -Somebody
New Market Fund. The fund will
Justin Brogna: Continued from pg. 21
allow us more flexibility to adapt to
Security and abundance. Q: How is Thrive Lending
current market conditions today and
Q: What advice would you give
responding and adapting to the
also as they change in the future.
your younger self?
COVID-19 crisis?
The idea is to manage risk while
Always stay true to yourself.
We are taking a very proactive
maintaining
approach to portfolio management
presence of active lending.
Q: What mistakes have you seen
and
others make in this industry? How
of
does Thrive Lending avoid making
borrowers
has
significantly.
We
those same mistakes? At times it seems the industry can have a ‘follow the herd’ mentality. This creates artificial competition and drives LTVs higher than they should be and drives down pricing. We
have
avoided
the
follower
mentality by finding a niche in the marketplace, offering unique loan structures
and
solutions,
while
simultaneously being able to avoid taking undue risk.
22
our
risk
mitigation.
communication
underwriting
Our
strong
market
level
current
Q: If you were stranded on a desert
increased
island with access to one book, one
with are
a
updating
policies
and
song, and one movie, what would they be?
procedures as well making sure
Book: Where the Sidewalk Ends –
our loan structures match current
Shel Silverstein
market conditions. We are shifting
Song: Three Little Birds – Bob Marley
our expectations on loan production
Movie: Gladiator
and focusing on opportunities where we have an abundance of experience and local resources. Q: How is Thrive leveraging
Justin Brogna Chief Operating Officer Thrive Lending www.thrive-lending.com
Private Money Loan Servicing Software Powerful, Flexible and Easy to Use! Multi-Lender Loans
Online Investor Access
Mortgage Pools
RESPA Compliant Escrow Analysis
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Rehab, Commercial, Construction, HELOC, ARM
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Online and Over The Phone Payments
The ® Your Ultimate Lending Platform
(800) 833-3343
www.TheMortgageOffice.com
Applied Business Software, Inc. 2847 Gundry Avenue, Long Beach, CA 90755 sales@absnetwork.com
June 2020 Originate Report 23
FEATURE
What Real Estate Investors Should Know About Economic Cycles and Coronavirus By Lou Forino, Gauntlet Funding
R even
eal estate and economic cycles
up and down, the market (i.e. the
values and activity level reach an
are inherently dynamic and
“pendulum”) will inevitably trend
unsustainable
thus largely unpredictable,
back towards the threshold line.
a subsequent downswing as the
for
the
most
pendulum
experienced
point—resulting
plummets
below
in the
industry insiders – despite what some
The
of
threshold line and into the negative.
would have you believe.
the pendulum’s swing from the
This downward trend continues until
threshold line is relative to the
the momentum generated by the quick
It can be helpful to think of the market
momentum with which it moved
rise is countered by corrective actions.
as a giant pendulum, constantly
away from that line. In other words,
fluctuating above and below a set
the greater the pendulum increases
Understanding our Position in the
threshold that shows normalized
above the threshold, the greater it will
Cycle Leads to Better Investing
long-term economic growth. These
decrease. The subsequent outcome
Developing an idea of the pendulum’s
fluctuations are prompted by the
can range from a modest correction
current location in its cycle can
collective decisions of market players
to a catastrophic plummet like the one
provide insight as to whether your
that dictate supply and demand, and
experienced in the 2008 market crisis.
investment
speed
and
amplitude
strategy
should
be
aggressive or reserved.
any number of other variables. Overall, the market cycle can be The aforementioned threshold line
explained in uncomplicated terms.
Still, it is risky to attempt to ‘time’
is always pulling the pendulum back
As the pendulum travels upward,
the real estate marketplace. Be wary
towards
prices
The
of making snap investment decisions
equilibrium—a
principle
are
pushed
higher.
often referred to by economists as
elevated
inevitably
because you predict a quick rise or
mean reversion. It indicates that,
relent to higher risk, prompting the
fall of the pendulum — that kind
despite
pendulum to reach its apex. Asset
of reactionary approach is all too
24
temporary
vacillations
price
points
common, and can lead to immense
predict a timeline for the pendulum’s
sector. Factor in days on the market
excess and devastating corrections.
next upward swing. Real estate
and negative fluctuations in sales
buyers and sellers have been reigned
price compared to the listed price.
The way forward is to rely on
in, and demand for loans is down.
Remember to keep close tabs on the
approximations of where we are
The capital markets have slowed to a
mean reversion. That established
in
cycle—including
crawl. Fear and uncertainty have led
base line has a magnetic effect on the
the momentum of the upward or
many investors to play it safe for the
swinging pendulum of the economy—
downward trend—and premise your
time being, and private lenders are
sooner or later the variations will
investment
raising interest rates and lowering
reach equilibrium. That’s the very
LTVs in response.
reason why investing in real estate
the
present
strategies
based
on
that. Lucrative opportunities can be
pays dividends when the correct
leveraged even in the most negative But it’s not all doom and gloom; the
market conditions.
consequences of these developments Practically,
the
best
method
to
weather the economic trends is to be an aggressive buyer when the pendulum seems to be nearing its bottom, then take a more reserved approach
when
approaches
its
the peak.
pendulum It
sounds
simple; however, those low and high apexes are challenging to predict regardless of the experience level of
have
been
offset
somewhat
as
conventional lending has slowed down. There is some evidence based on studies of past pandemics that the economic effects of COVID-19 will be relatively short-lived, particularly in regards to the mortgage industry. Technology has lessened some of the economic impact of the virus as well; the remote work phenomenon
the investor.
has empowered more businesses
Where Does Coronavirus Fit
internet gives potential borrowers
to
Now it’s time to address the elephant in the room: what impact has the coronavirus pandemic had on the market cycle? Before the crisis took the world by storm, the private lending industry was anticipating a competitive market with high demand and low inventory and mortgage rates going into the spring Now,
the
situation
has
completely changed. With
nationwide
shelter-in-place
policies continuing to wreak havoc on the
many service
industries and
functional,
and
the
the freedom to engage with the
Into This?
season.
remain
(especially
entertainment
industries) with no clear, definitive end in sight, it is uniquely difficult to
real estate markets without ever stepping outside.
Continue monitoring the current trend
identifiable
market
dissuaded from making moves in the event of an economic downturn, even the one we’re experiencing right now—investment opportunities are there at any point in the cycle for the confident investor. Gauntlet Funding is Open and Still Lending We are here for you to advise you and service you. Please let us know how we can help. We continue to put the health and safety of our clients as our highest priority, especially during this time. Our team is taking all precautionary measures and limiting all client contact by moving to contact-less
Putting Confidence in the Threshold downward
strategy is implemented. Don’t be
via
easily-
indicators—
particularly those in your local
meetings and calls. Please contact us today for any hard money lending questions you may have or fill our online form today. We’ll be more than happy to serve you.
ABOUT THE AUTHOR: Mr. Forino co-founded Gauntlet in 2013, and is responsible for strategic direction of the company. Under Mr. Forino’s direction Gauntlet is has lend over $250 million dollars in private loans amongst its product lines. Founded on the principals of building wealth through real estate Mr. Forino has dedicated himself to help his borrowers, investors and employees achieve or enhance this dream. Since 2010 Mr. Forino has been involved in over 100 real estate transaction, as a real estate investor/developer. Previously Mr. Forino founded and later sold Infinity Consulting Group (ICG), an IT staffing and consulting company with 145 FTE employees and over $20 MM in runrate revenue. Mr. Forino managed multimillion dollar projects for global Fortune 100 companies such as Pfizer and UBS. While at ICG, he completed six acquisitions of competitor’s businesses. CONTACT: louforino@gauntletfunding.com
June 2020 Originate Report 25
FEATURE
SELLING FIX-AND-FLIPS IN THE CORONAVIRUS ERA By James Bowie, Alta Capital Group
D
ue to the constantly evolving
seller premiums, with parents of
started midway through March will
status
COVID-19
adolescents aiming to get settled into
subsequently lead to a corresponding
pandemic—including social
their new homes well in advance of
reduction in property sales. Recent
on
the beginning of the school year in
surveys
commercial activity—the real estate
August and September. This year,
Department of Commerce indicating
investment industry is contemplating
however, amidst the widespread
that
how to resolve potential issues
market instability and general sense
spike in February 2020, mortgage
involved
fix-and-
of uncertainty, this buyer behavior
applications on a national basis
flip projects in a market severely
data may not be as reliable for the
decreased by 29.4% in the week
impacted by the coronavirus.
majority of the real estate markets
ending March 20 foreshadows the
nationwide.
potentially devastating after-effects
distancing
and
with
of
the
restrictions
selling
The window of time between March
conducted
after
reaching
by an
the
U.S.
11-year
of COVID-19 on the housing sector.
and July is typically the ideal time
Collectively,
of year to sell a property. June
agreement that the sharp decline in
While a nationwide transactional
historically
economic production that initially
decline is anticipated in the real
26
yields
the
highest
economists
are
in
rehab project before the actual
base is searching for and that their
on-site work actually begins. That
rehabs are priced competitively for
means conducting a close analysis
the local market. Now, more than
of
or
ever, attention to detail and high-
“comps”, is more important than
quality construction is vital for
ever. Studying the sales history of
successfully selling a property.
comparable
properties,
properties sold within the last three months in a given local market
A key advantage investors must
will give investors a more accurate
offer to potential homebuyers who
method of forecasting the chances
are
of success
measures is a chance to visually
for
their
individual
property portfolio.
observing
social
distancing
experience the property. Working with a trusted real estate agent to
This
estate market, on a locale-by-locale comparison, the overall performance of
different
regional
sectors
is
exhibiting a wide degree of variance thus far—indicating that the eventual sale of fix-and-flip projects will be heavily dependent on the unique manner in which the coronavirus impacts the respective local market. To illustrate, new housing starts may be on the decline in a particular market, while existing homes are selling like hotcakes. More recently constructed homes that carry higher selling prices may linger on the market, whereas a priced-to-sell renovated house may sell right away. What does this mean for real estate investors? Put simply, more legwork will be required to successfully predict the viability of a given
independent
is
ensure that properties for sale are
becoming vital, as the real estate
listed on the full range of free real
market is in a state of constant flux
estate platforms will increase the
that does not always follow a logical
visibility of the fix-and-flip project.
pattern. For example, one regional
Additionally, investors should make
real estate market many thought
sure that their completed projects
would experience issues was Seattle,
are virtually featured in such a
Washington—an area in which one
way that accentuates the property’s
of the first widespread outbreak of
distinctive
COVID-19 cases in the United States
the areas that have been recently
was well documented. However,
upgraded.
Seattle
currently
emphasis on the aesthetic aspect of
being sold for 0.6% above the listing
for-sale properties, investors may
price due to the considerably low
consider partnering with a virtual
inventory of the metropolitan Seattle
staging specialist to offer prospective
rea estate market for home buyers to
buyers an interactive online tour
select from.
experience featuring high definition
properties
research
are
qualities, With
the
including increased
images that can be obtained for One of the most essential steps for
reasonable prices. The return on
real estate investors focusing on fix-
investment could be well worth it—
and-flip properties to take is to ensure
as the longer properties linger on the
their projects feature the specific
market, the slimmer investor’s profit
amenities that their target customer
margins become.
About the Author: As President of Alta Capital Group, James Bowie oversees operations and business development for the company. Anticipating an emerging opportunity in distressed real estate investment, James founded Alta in 2009 to capitalize on the shifting market conditions. Prior to founding Alta, James spent seven years as a commercial real estate broker with Lee & Associates, The Staubach Company and Grubb & Ellis. Throughout his time in commercial brokerage, he specialized in the acquisition, disposition and leasing of investment property. Contact: james@altacg.com
June 2020 Originate Report 27
FEATURE
[COVID-19] Force Majeure Contract Clauses By Anthony F. Geraci, Esq., Geraci LLP
F
orce
majeure
found
in
clauses
most
are
which proceeding with the contract
contracts,
would not make sense for the
of the contract impossible or
contracting party.
impractical.
usually in the boilerplate.
3. It
renders
the
performance
Most people don’t even read it, much less think about it...until you need to.
Force Majeure Contracts,
Further, the force majeure clause
in General
can be as broad or as constrictive
What happens when the world
Typically,
changes overnight, and the amazing
are activated when the following
deal you’re looking to close becomes
elements are present:
force
majeure
clauses
a nightmare?
depending on the parties negotiating the contract. How California, New York,
1. The contemplated force majeure
Illinois, Texas, and Florida look at
Force majeure clauses have their
could not have been reasonably
Force Majeure clauses
history dating back to French civil
foreseen
Combined, New York, California,
law.
parties,
Historically,
force
majeure
by
the
contracting
Texas, and Florida are the hotbeds
traditionally
2. It was completely beyond the
of legal activity, largely due to their
included to cancel contracts because
party’s control, they did not aid
populous states. Thus, these states,
of acts of God, wars and strikes, or
in it, and there was nothing they
along with Illinois (Chicago), steer
other major catastrophes, events in
could do to prevent it; and
the large body of legal opinions other
clauses
28
have
been
states will look to and potentially
contain a pandemic clause in its
Texas
rely upon.
force majeure list, coronavirus could
On the flip side, Texas does not
be covered as an act of governmental
require that the force majeure event
New York
authority in some areas, depending
be unforeseeable (See, e.g., Perlman
New York first looks at whether a
on whether the government has
v. Pioneer Ltd., 918 F.2d 1244, 1248
clause lists the specific event claimed
instituted lockdowns to prevent the
(5th Cir. 1990) – “Because the clause
to
spread of the coronavirus.
labeled ‘force majeure’ in the lease
“pandemics”
However, even if you do have the
majeure event be unforeseeable or
as force majeure events. Since the
force majeure clause with the above
World Health Organization has
in your contract, there is additional
listed coronavirus as an pandemic,
analysis needed. In New York, for
the claiming party would have a
instance, the force majeure event
strong argument to get out of the
must be unforeseen, and the party
contract (see, e.g., Philbro Energy,
seeking to invoke the force majeure
Inc. v. Empresa De Poilimeros De
clause must attempt to perform its
Sines Sarl, 720 F. Supp. 312 (S.D.N.Y.
contractual duties despite the event
1989). Even if a contract does not
(See id. At 318).
be
preventing
performance.
Some force majeure clauses do list
“epidemics”
or
does not mandate that the force beyond the control Perlman before performance is excused, the district court erred when it supplied those terms as a rule of law.”). Florida Florida
is
stricter
requirements,
requiring
with a
its party
COVID-19: Continues on pg. 30
June 2020 Originate Report 29
COVID-19: Continued from pg. 29
seeking to invoke the force majeure clause in the contract to show that the force majeure event was (1) unforeseeable and (2) outside the party’s control (See Florida Power Corp. v. City of Tallahassee, 18 So.2d 671, 675 (Fla. 1944)). California In California, force majeure is not necessarily limited to the equivalent of an act of God, but the test is whether,
their contracts likely have a strong
of Contracts defined impossibility
argument
coronavirus
as “not only strict impossibility but
outbreak is an unforeseen event,
impracticability because of extreme
unless
or unreasonable difficulty, expense,
that
the
the
parties
entered
into
the contract after the outbreak of coronavirus.
Whether
businesses
have also attempted to perform their contractual duties despite the coronavirus outbreak, and whether that
is
even
required
under
a
particular contract, are questions that must be assessed on a case-bycase basis.
injury or loss involved.” (Second Restatement of Contracts § 254) The United States federally declared an emergency related to Coronavirus, and several states are operating under lockdown / some limitation of the ability to do business. As a result, even if your contract does not contain a force majeure clause,
under the particular circumstances,
What if there isn’t a force majeure
there was such an interference
clause in the contract?
there is a possibility that you are
without the party’s intervention as
If you do not have a force majeure
able to have your contract voided
could not have been prevented by
clause in your contract, there are still
as a result. Keep in mind, however,
the exercise of prudence, diligence,
other options that could potentially
that a strict economic remedy is
and care (See Mathes v. City of Long
excuse your performance, including
tough to overcome, and more needs
Beach, 121 Cal. App. 2d 473, 477 (2nd
the defenses of impossibility and
to be included in an impossibility or
Dist. 1953)). Most importantly to
impracticability.
our analysis of real estate contracts,
Commercial Code (“UCC”), a model
frustration of purpose argument.
California courts have held that just
law that most states adopt, states that
because the expense to perform on
a seller is excused from performing
the contract is higher does not excuse
under the obligations of the contract
the performance, unless there exists
when the “performance as agreed
extreme and unreasonable difficulty,
has been made impracticable by
expense, injury, or loss involved (See
the occurrence of a contingency
Butler v. Nepple, 54 Cal. 2d 589, 598
the non-occurrence of which was
(Cal. 1960) – affirming the judgment against Nepple for an increased lease due to a perceived higher expense
The
Uniform
a basic assumption on which the contract was made or by compliance in good faith with any applicable
Conclusion Force Majeure clauses should be included in every contract. However, if yours doesn’t have one, you’re going to need to review your contract and speak with a competent attorney to discuss the merits of your case. You may have a strong argument depending on the contract.
for drilling operations).
. . . governmental regulation or other whether or not it later proves
If you have questions about force
As seen by the cases above, there
to be invalid.” UCC § 2-615(a).
majeure clauses, reach out to Geraci
Further, the Second Restatement
Law Firm at (949) 379-2600.
are a few nuances to the basic force majeure law incorporated by states. New York is looser, Florida and California stricter, and Texas and Illinois somewhere in between. As is usually the case, the question comes down to what is included in the contract. Businesses seeking to invoke the force majeure clause of
30
ABOUT THE AUTHOR: Named a Super Lawyers® Rising Stars SM in the legal field, which is given to just 2.5% of attorneys nationwide, Anthony Geraci is the managing shareholder of Geraci in charge of firm strategy and development of Geraci’s team and culture. He is skilled in mortgage lending and securities law and has authored numerous articles on real estate finance and security subjects. Mr. Geraci is a leader in creating national mortgage pools and mortgage funds as well as sophisticated net branching arrangements among several mortgage companies. CONTACT: a.geraci@geracillp.com
June 2020 Originate Report 31
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Industry Spotlight: Adam Child
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FEATURED
6 Digital Marketing Strategies to Guide You Through COVID-19 By Ruby Keys, Geraci LLP
T
he COVID-19 outbreak has
encouraging businesses to update
creating
affected countless countries,
their listings. This is essential for
customers
communities, and businesses
local businesses, especially when
COVID-19 response. As a small- to
to a degree that we’ve never seen
“nearby” or “near me” searches
medium-sized business, you can
before. In these unprecedented times,
are among the most common. To
use a blog to do the same. Create a
one of the worst things you can do
mark your business as temporarily
space where customers can go for
is to drop your digital marketing
closed, you must contact Google My
information about your business
strategy out of panic. There are
Business Support.
and
platforms informed
your
to
keep
on
their
industry.
Position
yourself as a thought leader and
options you can explore that will keep your business moving forward
Update your listing with your new
give your customers informative,
and continue generating revenue.
business hours or closure plan,
useful content.
and add a Google post to explain Update Your Google My Business
how your business is responding to
Update Frequently Asked
Listing
COVID-19. Do not set your listing as
Questions
Update your Google My Business
permanently closed!
In these uncertain times, people need answers more than ever. Make sure
listing, whether your business has closed or remains open. Google
Participate in Customer Service
your website fully addresses your
Maps will display if a business is
and Reputation Management
customers’ most common questions
temporarily closed, and Google is
Companies
34
like
are
and concerns.
Engage on Social Media People spend more time on social media than ever, so make sure to use those channels to keep customers up-to-date. Be active and online as often as possible and create a variety of posts to keep customers engaged. Some
social
platforms
have
implemented helpful tools during this time. For example, Instagram launched a “Stay Home” sticker for Instagram Stories to encourage social
distancing.
Profiles
that
use the sticker in their stories are grouped into a special “Stay Home” story on the Instagram main page. Tools like this can help ensure that If
you
offer
questions,
answers
you’ll
to
these
increase
your
build a long-term plan.
customers see your content. This
is
an
uncertain
time
for
chances of tracking higher on search
Run Google Ads Campaigns
engine results pages. This can boost
Letting customers know that you
your web traffic, click-through rates,
are open during this time is a top
and ultimately, sales.
marketing efforts could be far-
priority. If you are concerned that
reaching, and could have negative
your customers are not getting the
consequences
Pivot your Budget Buyer behavior will shift over the next few weeks and months, and you will need to adjust your strategy accordingly. adjusting
This
the
may
amount
require that
you
spend on pay-per-click campaigns or
changing
the
keywords
you
are targeting.
message, you can create a campaign using Google Ads or Facebook Ads that informs customers and reaches prospects that are ready to make a purchase. As we see lower demand for certain products and services, now is the time to use online advertising to
Businesses
that
use
mostly
traditional marketing methods, like print advertising and events, should pivot to online marketing equivalents at this time. Budget wisely, and focus on actions that have a measurable, short-term impact on your business. If your budget allows, invest in a marketing agency that can help you
push discounts.
everyone,
but
remember:
the
long-term effects of halting your
for
your
business
that even outlast the pandemic. Remember to stay active online, answer your customer’s questions, and inform them about the steps you are taking to protect them, your employees, and your company. If you have any questions about how to keep your company’s marketing efforts fresh during this pandemic, reach out to Geraci Media at (949) 379-2600.
ABOUT THE AUTHOR: Ruby Keys is the Vice President of Geraci Media. She joined Geraci LLP in 2015 as the Marketing Coordinator for Geraci Law Firm. As she enters her 5th year with Geraci, she is now the Vice President of Geraci Media, a full service marketing agency, which caters to the Non-Conventional Lending space. Geraci Media was founded in 2016 and began as an event line. Ruby has helped grow and manage Geraci Media to where they now host 2-3 in-person and virtual conferences a year, produce a monthly magazine for Loan Originators, and offer marketing services for lenders nationwide. CONTACT: r.keys@geracillp.com
June 2020 Originate Report 35
H I G H L I G H T S
LENDER C 2 0 2 0
NNECT
C O N F E R E N C E
2,246 CHAT MESSAGES
250 ATTENDEES
500 VIRTUAL MEETINGS
100+ PEOPLE ATTENDED EACH OF OUR VIRTUAL SESSIONS
46% OF OUR ATTENDEES WERE ENTIRELY NEW! THANK YOU FOR MAKING LENDER CONNECT 2020 A COMPLETE SUCCESS! STAY TUNED FOR UPCOMING EVENTS 36
THE IMPORTANCE OF
results. This global reach creates networking opportunities for building relationships and partnerships. Your audi ence has invested time in registering and listening to the information you plan to share. They’re expecting valuable takeaways from the webinar, even some thing they can put into place at their own company. This positions you and your brand as an industry lead er, or expert. Webinars can give your audience the chance to ask questions and provide feedback. This how well it performed. These metrics include the is valuable because you can address concerns, reser number of attendees, number of those registered, vations, or any lingering questions they may have and total views. The webinar can and should be recorded about your training or product in real-time. You can Webinars have grown in popularity in recent years for you, the audience, and affiliates to share with customize your presentation to your audience based on and have become an important marketing tool. others, growing the results even more. Each time a their questions and feedback to keep them engaged. These live web-based seminars can connect you with person completes your webinar’s registration form Ask them to take an action, such as completing a task leads from all over the world. They encourage interacti they should be considered a new potential lead, or answering a question. This will increase audience by allowing the audience to ask questions orJust how whether it be for a sale or a potential partnership. participation and interest. Include guest speakers, beneficial can a webinar be to your business? Here Webinars adds a personal interaction that videos and such as industry leaders or affiliates, to speak during are 7 reasons why webinars are a fantastic marketing commercials don’t. Webinars put a face and name your webinar. These individuals should be familiar strategy. Webinars are a cost-effective way to extend with your product making you approachable, human, with your industry and value of your product. They your reach globally. Rather than pay for flights and and someone they can trust. Educating them on how will be able to educate the audience on the benefits hotels to meet with individual leads, you can engage your product can benefit their company is the first or impact, validating information you have or will with a larger group over their computer screens. step in opening the door to future discussions and be sharing. By inviting a guest speaker, you can also People from all over the world can attend, providing partnerships. It is essential to show both new and increase the webinar’s attendance by including your your brand or product with the potential to see huge established leads how your product or service can guest’s audience and following. This can grow the results. This global reach creates networking opporimprove or enhance their workplace. Depending on number of leads you may gain substantially. Results tunities for building relationships and partnerships. the prospect, the sales process can be slow. Businesscan be seen quickly from webinars. After hosting a our audience has invested time in registering and lises want to convert a lead into a cusWhile it’s cerwebinar you’ll have metrics to measure how well it tening to the information you plan to share. They’re tainly important to provide useful information and performed. These metrics include the number of at expecting valuable takeaways from the webinar, tips to your audience, it’s equally important to share tendees, number of those registered, and total views. even something they can put into place at their own how your brand or business can help them achieve The webinar can and should be recorded for you, the company. This positions you and your brand as an this. How can your product be a solution to their audience, and affiliates to share with others, grow industry leader, or expert. problems? Your webinar should show the audience ing the results even more. Each time a person com the value of your brand. Garnering interest in the pletes your webinar’s registration form they should Webinars can give your audience the chance to ask product and its potential impact is the first step in be considered a new potential lead, whether it be for questions and provide feedback. This is valuable becompleting a sale. a sale or a potential partnership. Webinars adds a cause you can address concerns, reservations, or any personal interaction that videos and commercials lingering questions they may have about your trainThere are numerous benefits to hosting a webinar. don’t. Webinars put a face and name with your prod ing or product in real-time. Though this article only touches on a handful of uct making you approachable, human, and someone them, it should be clear that webinars are an effecthey can trust. Educating them on how your product You can customize your presentation to your auditive tool for engagement and growth. As you take can benefit their company is the first step in opening ence based on their questions and feedback to keep these benefits into account, you should begin to the door to future discussions and partnerships. It them engaged. Ask them to take an action, such as think how you can use a webinar for lead generation is essential to show both new and established leads completing a task or answering a question. This will and to increase traffic, which will yield great results how your product or service can improve or enhance increase audience participation and interest. for your business. Webinars have grown in populartheir workplace.Depending on the prospect, the ity in recent years and have become an important sales formation and tips to your audience, it’s equalInclude guest speakers, such as industry leaders or marketing tool. These live web-based seminars can ly important to share how your brand or business affiliates, to speak during your webinar. These inconnect you with leads from all over the world. They can help them achieve this. How can your product be dividuals should be familiar with your industry and encourage interaction by allowing the audience to a solution to their problems? Your webinar should value of your product. They will be able to educate ask questions or provide feedback in real-time. show the audience the value of your brand. Garnerthe audience on the benefits or impact, validating inJust how beneficial can a webinar be to your busiing interest in the product and its potential impact is formation you have or will be sharing. ness? Here are 7 reasons why webinars are a fantasthe first step in completing a sale.There are numertic marketing strategy. ous benefits to hosting a webinar. Though this article By inviting a guest speaker, you can also increase the only touches on a handful of them, •it Upcoming should be clear Business Development • Fintech/Newest Loan Programs • Automation in Today’s Evolving Society webinar’s attendance by including your guest’s auWebinars are a cost-effective way to extend your that webinars are an effective tool for engagement dience and & following. This can grow the number of reach globally. Rather than pay for ights and hotels Trends Changes • Marketing & Outreach • Essential Tools & flTechnologies •and New Legal Issues and Regulations growth. As you take these benefi ts into account, leads you may gain substantially. to meet with individual leads, you can engage with a you should begin to think how you can use a webilarger group over their computer screens. nar for lead generation and to increase traffic, which 5. Results: will yield great results for your business. WebiResults can be seen quickly from webinars. After People from all over the world can attend, providnars have grown in popularity in recent years and hosting a webinar you’ll have metrics to measure ing your brand or product with the potential to see huge have become an important marketing tool. These
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June 2020 Originate Report 37
Redwood Mortgage Corp. www.redwoodmortgage.com RMC@redwoodmartgage.com (800) 659-6593 San Mateo, CA 94402
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