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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


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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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SUBSCRIBE NOW ORIGINATE.REPORT/SUBSCRIBE June 2020 Originate Report 33


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

Facebook

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

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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

CONTENT L E T U S H E L P YO U !

CURRENTLY ACCEPTING ARTICLES

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June 2020 Originate Report 37


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