Issue 036 Official
Whatâ€™s @ Your
it "Hard Based 18 IsMoney" 12 Collateral or is Lending A 'new' type of lending.
it "Hard to get Money"?
for 28 Help Distressed Commercial RE Owners Diffusing the ticking time bomb,
up 58 Bringing the Rear: Special Banksters' Edition
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Is it "Hard Money" or is it "Hard to Get Money"?
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Collateral Based Lending
tom krug Managing Director Luxury Asset Lending A 'new' type of lending.
Commercial Real Estate: Secrets to Success Karim Jaude author, The Smart Real Estate Investors Guide: Your Road Map to Wealth In Any Economy The new real estate game.
Help for Distressed Commercial RE Owners andy bogdanoff chairman remington financial group
Cost Segregation: The IRS-Approved Approach to Closing More Deals William McLee Managing Director Luxury Asset Lending
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TNR Is Going To a Paid Subscription Have you heard yet? If not, you may read my full announcement on our Blog at http://thenichereport.com/blog. The Niche Report has built solid, key relationships with industry players over the years. These relationships will allow us to offer you, our *current subscribers, huge value-added bonuses that will far exceed the nominal cost to subscribe to TNR. For example, the first 5,000 premium subscribers (*only available for current subscribers) who re-subscribe at the nominal ANNUAL subscription rate of $19.99 (Reg. $47.95) will receive: • TNR thru December of 2011 so you won’t miss your favorite columns by Mandelman, Frank & Brian, Dennis Yu, Karen Deis and many others. • A Facebook Business Page One per subscriber, by Blitzlocal.com!! Already have one? Then advertise it with a Facebook ad. • $50 in Facebook ads!! Kick-start your Facebook Business Page and find those industry partners & clients to fan your new business page (Facebook has limited us to ONLY 5,000 codes). Yes, we are actually PAYING YOU to subscribe to TNR. • Access to the “Super Star” audio interviews by Carl White of The Mortgage Marketing Animals at Now That U Know What U Know, a $47.00 PER MONTH value for the entire duration of your subscription. Now, I am no financial wizard, but the value-added bonuses along with an annual subscription to the ONLY mortgage industry trade magazine worth reading, is just silly insane. We created this package for our *current subscribers so there would be NO doubt in your mind about re-subscribing as a premium subscriber. In total, it is quite clear that a $19.99 annual (Reg. $47.95) subscription fee (breaks down to $1.67 per issue) may be the best investment you could ever make in yourself. Please skip Starbucks for one week and invest in your business. You have no excuses now to not jump into this little thing called Facebook and tap into your local community for leads and referrals. In fact, you can follow Dennis Yu, who authors our Online Lead Generation column each month, and read about how to utilize your new Facebook Business Page. Our Motto going forward after July 2010, “Stop by TheNicheReport.com where the News is free, but stay for the articles.” Once we convert to a paid subscription in July of this year, we will limit the online digital copy to the first eleven pages to be viewed on our site. This will give people who are not subscribed to TNR a synopsis of what our magazine is about. We will no longer post all our magazine articles (and the full digital magazine) online. However, you will still be able to read relevant, timely news stories from around the web, our TNR Blog posts, press releases, and up to the minute Loan Scenarios for free. This special discount will be offered to more than 20,000 current subscribers. Your odds of getting everything mentioned above with your premium subscription are 1 in 4. Email us at firstname.lastname@example.org with any questions, or send us an email to subscriptions@nichereportonline. com to receive our email reminder on the day we open our subscription window. You will have to re-subscribe after July 19th for this offer once our new paid subscription window goes live. Current subscribers will continue to receive TNR thru 2010 at no charge. Thank you and keep up the fight,
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Letters to the editor
Letters to the editor Bringing up the Rear: Jon Leibowitz, May 2010 Issue, pg 54
to keep busy. They were sought out by the professionals in the industry.
Another good article about loan modifications. I want to point out that the proposed FTC rule you are discussing in your article is already a law (SB 94) in the People's Republic of California.
Let's call HVCC for what it is... regulation based on the lowest common dominator. Instead of enacting this regulation, they should have gone after the ones committing the fraud. The lenders have more than enough tools to review and weed out bad appraisals. HVCC is bad for the clients ,originators, lenders, appraisers and should be repealed. We need to start holding people responsible for their actions and not punish the entire group. I truly believe that the vast majority of people in the mortgage industry are honest and ethical. Especially now. Were there some bad apples? You bet. There still are! But they are the minority and we shouldn't be punishing everyone to get to them and the latest study by MARI demonstrates that HVCC is not the answer.
Gov. Schwarzenegger signed it last October and CA Attorney General Brown is happy and eager to enforce it. We got a lot of calls from desperate homeowners asking for loan modification assistance. All we can offer them is HUD's toll-free number and refer them back to their lenders, basically throwing them to the wolves. This law is preventing people from getting real assistance - it is beyond stupid, it's criminal.
Robert W. Dudek, Statewide Home Loan Corp
Letter to the Editor on The New HVCC Rules by Benji Brossette, May 2010 Issue, pg 10 I couldn't disagree more with the letter by Benji Brossette stating in a nutshell that "all it does (HVCC) is take away the privilege of some crooks from selecting their own appraiser." The Mortgage Asset Research Institute (MARI) just released a study stating that in 2009, the incidence of fraud involving property valuations increased by 50 percent. Management companies pick appraisers like they are lottery numbers, the appraiser is rushed to complete the job and they are going to earn about half as much. And the amount of fraud went up....Really? Welcome to HVCC Mr. Brossette. What disappoints me the most is the common attitude that originators, brokers and lenders are crooks and all appraisers are willing to be blackmailed and bullied into doing what they are told. The vast majority of professional and ethical appraisers didn't need to bow to pressure
I hope you get your name on a lot of the Lottery Balls when you are out of training Mr. Brossette. Unfortunately, you will never have a chance to prove yourself to me or earn my business.
Brian Ott, Founder, Mortgage Resource LLC
Brokers Don’t Jump Ship! (Posted on thenichereport.com/ blog/) PRMG CEO Paul Rozo, Responds I am very pleased to learn that many of you share the same sentiment that “brokers” should remain as brokers and keep their independence and identity; that net-branching is not the only choice. That being said, we certainly enjoyed reading many of your responses and testaments to the fact that you believe as we do, that wholesale business remains a strong viable origination channel for years to come. PRMG’s core mission going forward is to continue to provide education, training
and support to our brokers with SAFE ACT / NMLS, and HELP certification classes in an effort to keep them up to date with new requirements and regulatory changes in our industry. Furthermore, we are putting in place a grass-roots effort to reach out to mortgage brokers to help them fully understand the nature and magnitude of the many legislative bills that potentially threaten our wholesale business. Be assured that you will receive a phone call from one of our PRMG wholesale managers to help you navigate these troubled waters and answer any questions you may have while providing you with guidance as it relates to your business, including the necessary course of action in how to stop such threatening bills from passing in our legislation. Moreover, for those brokers who are literally finding themselves on the verge of “jumping ship”, even after speaking with one of our Sr. Managers, please contact me directly before deciding such course of action, as I would like to provide you with some insight in making such a decision.
Paul Rozo, CEO and President Paramount Residential Mortgage Group, Inc. Letters to the Editor may be e-mailed to email@example.com or faxed to 703-991-2362. Include your full name, email address, and daytime phone number. We are unable to publish all letters and may edit letters for length and clarity. Visit us online at www.TheNicheReport. com to subscribe to our magazine and/or eNewsletter. Or call toll-free at 866-964-2695 for more information.
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Collateral Based Lending A "New" Type of Lending? by tom krug
ooking for the next big thing? You're not alone. With the end of the Home-Buyer Tax Credit, Loan Officers need to adapt and recognize the need to rebuild their pipelines. How? If you are receiving requests for cash-out loans or believe your clients have a need for cash, consider Collateral Based Lending. Forget about looking on your traditional lender rate sheets or calling up your Hard Money contacts- you won't find it there, but when it comes to needing a quick solution to your clients needs, Collateral Lending can help fund those loans, and help you earn great commissions too. The 4th quarter of 2009 recorded the second lowest amount of cash-out mortgages in 25 years. Did borrowers just not have a need for bill consolidation? No need for extra cash? Hardly. Bob Hope's one liner could sum up how most borrowers feel today, "A bank is a place that will lend you money if you prove that you donâ€™t need it." The great recession continues to put pressure on secondary markets limiting lending products. Freddie Mac attributes the fall in cash-out loans due to declining home values and tighter underwriting guidelines. Tired of hearing the same old story? Time for new news isn't it? Before Subprime and Hard Money, Collateral Based Lending was the norm for many that needed fast access to cash. Today, this lending product is new once again and is making a comeback. Good news is here for mortgage companies that are searching for a cash-out option for their clients. 12
A Simple Concept A few years back, friends looked perplexed as I described how banks really made loans and the impact of the securitization market. Today it seems like everyone is an expert - thanks to CNBC and the like. But still, trying to describe how mortgages are bundled up, securitized, and then sold off to investors around the world can still leave some scratching their head. With Collateral Lending, it is a pretty simple concept that everyone can understand. As the name implies, Collateral Based Lending, are loans that are based solely on your clients collateral - the assets that they own. When qualifying for these loans, credit and income are typically ignored and unlike Hard Money, other assets can be used as collateral in lieu of real estate. A Collateral Based Loan is different from a Hard Money loan, not just because you can qualify using alternative forms of collateral, but also because loan amounts can be as small as $10,000 and as high as $2,000,000. How many loans have you worked on where clients needed access to, say, $20,000 or $50,000 only to be turned down by traditional lenders as well as hard money lenders? No home found for your loan? Collateral Lending can give you another option before you pass on that loan - and when you eliminate most of the paperwork and time spent on traditional mortgages, this loan can be fast and profitable. Maintaining a Competitive Advantage Let's face it, it is difficult to differentiate yourself when
you are basically offering the same product as the next loan officer. With just a handful of loan products and few investors, the only way to differentiate yourself is by rate, or, by giving away your commission, right? Consider your competitive options: #1 - offer the lowest rate & fees or #2 - start with higher rate and fees, then work down to the lowest rate & fees. Consumers that can qualify for today's loans are ones that can shop for the best rate and fee - and get it. Bottom line, it can be tough to make a living in this environment! Expand you loan products and begin offering a loan that many Brokers and Lenders simply do not offer. The Secondary Market may not be offering these loans, but by partnering with a Collateral Lender, you can separate yourself from the pack and compete where there just is not much competition. Imagine having a unique loan product that the big bankers or brokers will never have, where competing on rate never is an issue, where loans can close in just a few days...this would surely give you a competitive advantage and an approach to capture more loans. Competing solely on rate is an unfulfilling experience that can kill your commission. To truly differentiate yourself from the next Loan Officer, by fulfilling the role of trusted advisor, you need every loan option available to present to your clients. Adding this loan product can be a breath of fresh air and a new outlook on the lending profession for you.
The Loan Process - What To Expect When pre-qualifying a borrower, it does not take long to discern whether or not you can place him or her with a traditional lender (or Hard Money). Whether by credit score or LTV, you can quickly determine how to proceed with that loan within the first 20 minutes. For those clients where it is obvious that they fail to meet guidelines along with
fall-out loans, a few more questions - details, are needed on your 1003. The "ASSETS AND LIABILITIES" section of the 1003 needs to be covered completely to discover assets that the client has. Consider this: Over the last five or six years, we have all accumulated "stuff;" whether that be a sports car, jewelry, fine watches or collectibles. And, for your high-end clientele; boats, exotic cars, planes, art, or precious stones and more. These are examples of assets you need to uncover that your clients have, but ones they are not readily disclosing to you. When traditional loan options have been exhausted, whether in the first 30 days - or 30 minutes, the question should arise as to whether or not your client is willing and able to use one or more of their personal assets as collateral for a cash-out loan. This final simple question will open up the doors to you for a stream of new loans and future commissions. Once the client has agreed to using alternative collateral for a loan, and you have a fair indication of value, the next step is to partner with a Collateral Lender. Tip: While all loans require confidentiality, you will find that this client will need more privacy and discreet lending. Collateral Lending is not unlike how Subprime Lending was 10 to 15 years ago. At first, Subprime Lending was shunned by many Brokers and carried a stigma for borrowers. Shortly thereafter, we were all watching Argent commercials during the Super Bowl. Subprime today does have a stigma from its wild lending days, but that is for another article. The point here is that Collateral Lending is new and not yet mainstream. No doubt, Collateral Lending is quite different from loans you have been originating, and they are not for every client. But for borrowers that need at least $10,000, these loans can meet their needs and close very quickly. If some - continued on page 47
Commercial Real Estate: Secrets to Success in the New Real Estate Game by Karim Jaude
veryone is affected by real estate, whether to make a living, to invest, to live in, to work, to play or just as social conversation. The real estate market as we knew it before 2008 has changed forever. Credit is difficult to obtain and is more expensive. Lenders have changed their rules, are underwriting more strictly and conservatively, and want to see proof of funds and prequalification before they even look at the purchase offers. Appraisers are undercutting the values and tenants are becoming more educated. These tenants demand better services and more value for their money. However, these changes create windows of opportunities that I have not seen in my 45 years in this business. These opportunities can be extremely lucrative for savvy investors who understand the game, play by the rules, have the capital, the ability and the know-how to acquire and manage distressed properties. Over the next 18 months, more than a trillion dollars of commercial real estate will be due for refinancing. Because of tighter credit, stricter underwriting, and a drop in property values of 30 to 70 percent, most of these properties will not be eligible for refinancing unless the property owners are willing and able to put more money down, and this creates additional opportunities for group investing. 14
Story A few months ago, I bought an apartment building in Long Beach, CA that was fully leased, well-maintained, upto-date on the mortgage and producing a healthy cash flow. Five years ago the seller refinanced it with a five-year fixed loan with a balloon payment due in June of 2009. Because of the tighter credit, the change in underwriting, and the drop in value, the lender wanted $200,000 more to refinance the loan. The seller had three options: • Put the $200,000 down, which he didn’t have. • Give the property back to the lender. • Sell the property at a discount, which he did. I was able to pick up a very good investment at a nice discount. Real estate is local. There is no such thing as a general real estate market. Like any real estate investment, location is important but so are timing, trends, price and management. You should look at markets where homes are affordable, the underlying economy is strong, jobs are being created and/ or is a popular destination for retirement, so appreciation is likely to happen sooner rather than later. You should also look at the competition: new construction coming to the market and the number of vacant units or square feet in the market, because they will affect the performance of your investment. Commercial Properties The National Association of Realtors reported last week that commercial real estate activity is suffering
through the current economy with continued declines in rent and prices. They also added that the pace of decline moderated. Opportunities are still spotty. Look for sellers who have to sell: their loan is due and they can not find the right financing, they are going through a divorce, loss of job or business, transfer or moving out of town, sickness or death, etc. Find someone who has to sell and you will be able to find great opportunities.
Story Five years ago I bought an apartment building in Plano, TX with an 18 percent down payment. The lender gave me additional funds to improve the building with up to 93 percent of the purchase price due in three years. Although I had to pay a slightly higher interest rate to acquire the building, I would not have been able to purchase the building if I had to make a higher down payment. Real Estate Cycles Real estate is a cyclical business. Sometimes the cycle is shallow and short, sometimes its deep like a U, V, or W. No matter how much it goes down, it almost always comes back up higher than the previous peak.
After each cycle, the top of the next cycle will be even higher than the previous one.
Story In 1979, I bought a three bedroom house in Mar Vista for $30,000. I told my friends and partners that this house would be worth over $100,000 very soon â€“ many did not believe me. Although we are at the bottom of the third cycle since we bought that TOP CYCLE house, you would be lucky today to buy such a house for 15 times more than I DOWN CYCLE paid in 1979. UP CYCLE 1. Up Cycle. In an up cycle, the demand
for properties is greater than the supply. A great strategy in an up cycle is fixing and flipping. 2. Top Cycle. At the top or peak, supply is close or equal to the demand. A peak cycle can be a perfect time to find motivated or desperate sellers and to get a great deal. 3. Down Cycle. During a down cycle, supply far outstrips demand. Prices can fall quickly. Buy at a big discount.
Story At the beginning of the year I helped one of my investors buy a 22-unit apartment building under construction in Glendale, CA. Unfortunately, the developer ran out of money when the building was only 90 percent completed. The bank refused to extend him extra credit and started the foreclosure process. I bought the note from the bank and made a deal with the developer. Although the capital invested by the developer was $700,000, he accepted just $30,000 to walk away and get rid of a headache as well to save his credit. 4. Bottom Cycle. At the bottom of the cycle, supply is very close to demand. Usually in this situation, prices have fallen as far as they are going to and will start to rise within a few years. It is very important to perform thorough market research to find out the market direction before you invest. Is it stabilizing, going up or going down? Where are we in the cycle? As I preach in my lectures and at The Smart Real Estate Investorsâ€™ Seminars, I make most of my money in real estate when buying. If you buy right and do not have to sell, you will always make money in real estate. For 45 years Karim Jaude has developed, invested in, financed, brokered, and managed properties in eight countries. Jaude has founded and operated 19 successful companies and made his first million at age 26 by buying and fixing distressed properties and businesses. Karim is the author of The Smart Real Estate Investors Guide: Your Road Map to Wealth In Any Economy and hosts monthly real estate seminars in various locales. He mentors, writes, teaches, and speaks about real estate frequently and has been published in 115 business and real estate journals nationwide. Contact Karim at 310.471.0650, firstname.lastname@example.org, www.dynamicscapital.com.
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“Dropping our AMC and going to Mercury Network was the best business decision I made in 2009. The AMC filled my days with arguments between the bank, borrowers and Realtors. With Mercury Network, we get appraisers located near the subject property who know the area and their pricing is lower than the AMC. Instead of arguments over values, I can work on things that make the bank money.” Terry K. Fraser , Mackinac Savings Bank, FSB “We get to use and support appraisers we know and trust, while keeping us in compliance with the regulations — all without burdening appraisers with high AMC fees.“ Bob Wampler, First Republic Mortgage “Mercury’s double blind feature assures management that production staff cannot hand choose or discuss value with the appraiser, keeping us compliant with HVCC and FHA appraisal guidelines. It’s also streamlined my ability to review.“ Sheila Hutchison, George Mason Mortgage, LLC “We chose Mercury Network because we can customize our fee panel and we’ve got hassle-free, total control over it. You can’t get that with AMCs. We also love how easy the order process is and we’re kept up to date on each step of the process. Those status updates save us a lot of time.” Jaki Brown, First Community Bank
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Is it “Hard Money” or is it “Hard To Get Money”? by joseph andahazy
ou hear the expression all the time. “My client needs a Hard Money Loan.” Usually that means somebody was turned down for traditional financing or the borrower just knows he will never qualify for a bank loan because of either negative credit, questionable income, or maybe the property itself does not meet the qualifying criteria. Another reason could be he has an opportunity to acquire a property, but needs to close on it within a very short period of time or risk losing it. The only apparent solution is to find a bridge loan from a private investor or the more common terminology: Hard Money. Who are these Hard Money Lenders? They are well educated, business-savvy entrepreneurs receiving handsome returns on their loans. Most are comprised of mortgage consultants, brokers, realtors, CPAs, attorneys or just plain old business “fat cats” with deep pockets. Most are very experienced in real estate matters, posing as private portfolio lenders operating their little enterprise out of their Self-Directed IRAs. Some lenders are established store-front companies backed by a large investor pool or hedge funds marketing through online web sites, financial industry media and social business networking groups.
Larger firms market with a more corporate approach with names like … ABC Financial Solutions Inc., or XYZ Capital Funding, Inc. Their web sites can have a more corporate look and feel with photos of towering office buildings or people in business attire clutching brief cases and shaking hands in a boardroom environment. All designed to make you feel you have arrived and met the “professionals” who will fund your deal and FAST! Some even promote closing in 7-10 days. Now, I have not yet seen large street signs outside of office buildings that read… “HARD MONEY LOANS.” Although in today’s environment, I think it could only be a matter of time. Hard Money Lending Philosophy - Being somewhat discrete about their business is common because the Hard Money Lender loves the personal control they have over every deal, and prefer having not to answer to anyone except their own conscience or the small investor pool who have trusted them with their participation agreements and contributions. The art of the deal, as they see it, fuels their intellectual prowess to fund, or not fund the request. You are purely at their mercy and they know it. For a Hard Money Lender, the “gut feel” is the compass they follow. This is why nothing is decided upon until they speak to the borrowers via conference call to gain a sense of with whom they are dealing. I If possible, meet them in person at the location of the subject property. I have found this meeting is the most important step in attaining a positive response, even more important than verifying requirements such as Tax Returns, Asset Statements, Public Records etc. All are in the interest of validating the basis of the borrower’s credibility. The Hard Money Lender’s rules of engagement will alter as they see fit for each scenario. Unlike automated underwriting engines which produce results within minutes, hard money underwriting places more emphasis on the personal experience of the borrower and the physical attributes of the subject property. Standard verifications of personal assets and credit ratings are requested. I have found the deal itself will be decided on the merits of the potential value of the finished property and the borrower’s ability to sell his experience to the lender. The lender has no desire to take over the property should the loan default. However, part of the lender’s decision process will include a full assessment of how to quickly it could “unload it” and the cost to do so in the event of a foreclosure. Because the housing bust is still with us after two years, some very experienced investors have designed
comprehensive business plans seeking Hard Money Lenders to be their “floating funds” resource while they hunt for and bid on multiple foreclosed homes from bank REO listings. Banks are eager to quickly unload their REO properties because that only improves their Balance Sheets. To the real estate investor - having the ability to close fast, rehab fast and sell fast, is key. To the Hard Money Lender, partnering with an experienced investor who has mastered the “buyfix-sell quickly” model will certainly want to continue the relationship because of the minimized risk and the positive return expectations. Even with interest rates in the mid-teens, and the combining lender / broker fees ranging from 3-8 points, most investors will chalk that up to the cost of doing business. Having that financial “system” in place allowing them to move quickly in managing multiple purchase contract bids, maintaining a regular rehab crew busy on their projects, and marketing the finished home for sale, is what they prefer. If a real estate investor can return quality work within a few short months and sell the property with a nice profit, then everyone wins. The system can be very effective. The phrase “skin in the game” is widely used in this industry to learn how much cash/equity the borrowers will have in the deal. The more they do, the more likely the lender will help accommodate the remaining amount. Loanto-Value financing percentages hover around 50-65 percent in this market for cash-flowing properties. That is about as far as a Hard Money Lender will want to feel comfortable. What Properties Qualify for Hard Money? Mostly investment properties only; both residential and commercial that traditional banks and mortgage companies, for whatever reason, will not finance. The property can be any type. Keep in mind, you will have more success in gaining the interest of a Hard Money Lender if the property is a “cash-flowing” entity such as an operating restaurant, golf course, auto repair shop or apartment building verse raw land in a remote location. There may be lenders for raw land, but usually they will want to cross-collateralize the loan against some other asset belonging to the borrower and/or principals of the company. Not all Hard Money Lenders operate the same way, so you will need to know what they will and will not fund. Over the past several years I have created a matrix of lenders and the types of loans they offer, the qualifying property types and which states they will lend. I have also discovered,
as a general rule, the smaller Hard Money Lenders prefer to lend on properties in their own neck of the woods and not cross several county or state lines. Being in close proximity to a deal they have funded only adds to their comfort zone and control. Only the larger firms with deep pockets appear to promote their ability to fund nationwide and some even internationally. Most Hard Money Lenders will not lend on primary residences because of the regulatory and licensing laws governing high rates and fees, so they tend to stay in the “investor properties only” world and preferably commercial properties. Typically, the notes will be drawn up as commercial business loans lending in the name of an entity. However, someone will have to personally guarantee it, unless the Hard Money Lender funds the loan as “Non-Recourse,” which is easier for the lender to take over the property in a default situation. Again, it all depends on how they feel about the deal and who they’re lending to. Hard Money Application Requirements – Mostly a Hard Money lender will follow the rules of the commercial
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loan industry. The first submittal is the Executive Summary. This document should be no more than two pages to include a brief introduction of the subject property, bios on the borrowing team, the purpose of the loan, the amount being requested with specific detail on the Use of Funds. There should be a few photos of the subject property with some detail from the tax record with map locations and designations. Also the length of time or the term period for the loan should be identified. Most important is the Exit Strategy. This is a detailed plan on how the lender will be repaid. If this document is designed correctly and provides all the important strategic information to get your message across, then you should be able to strike the interest of the Lender to move to a conference call with all the parties associated with the deal. An example would be the Broker – Lender and the key principals borrowing the money. Usually the conference call is the “make” or “break” point of the process. If it does not go well, than it does not mean your deal is not fundable. Not enough interest was created with this lender. This is a normal part of the process. However, if you are talking to your fourth or fifth lender and you are hearing the same issues, then you will need to reassess your deal. Now, if your call generates a favorable response, the lender will (should) generate a “Letter of Intent” to lend [LOI]. I say “should” because all lenders do not act the same or have the same requirements. In any event, The LOI will spell out the terms of the loan i.e. interest rate, fees, term period, due diligence fee, escrows, monthly payments and any conditions. Your signature on that letter will signify your intent to accept the loan under the terms specified. The LOI may stipulate a required upfront “due diligence” fee which the lender uses to perform their background checks, verifications, title searches, site surveys, appraisals and related legal checks regarding the borrower, the subject property and for the production of final loan commitment letter (LOC). Depending on the size of the loan and the location of the property, this fee can be rather stiff and possibly reach four digit figures. Again each lender operates their own game plan so be aware. The fee may or may not be refundable in part for any unused amount if the loan is denied. But it is always shown as a credit towards the borrower’s total settlement cost at closing. It is important to understand the process after the LOI is accepted and signed. I suggest obtaining
the due diligence process in writing before handing over any fee. Not having a thorough listing of expectations regarding the fee, a time table for the due diligence performance and expected date of loan decision, could drag out the process for months. Where to find Hard Money Lenders – The first time I discovered a Hard Money Lender was years ago as I was processing a payoff scenario for a client being refinanced. The first trust lender being paid off was an individual, not some bank or mortgage company. As I spoke to the individual collecting his payoff information, he began selling me on his ability to provide funding when borrowers or properties do not qualify. From then on I discovered business networking groups and real estate investment groups in my area where I met several more. I started collecting names and making phone calls learning all I could about their capabilities. Of course today all you really need to do is an online search for: HARD MONEY LENDERS and click away to your heart’s desire. But know this: there are brokers posing as lenders, so ask first if they are truly the “lender” or source of the capital. Sometimes you have to co-broker a deal and that’s OK if that’s what it takes to close your deal. I have worked with brokers several times and as long as there is a formal agreement, you are fine. Also, there are “scammers” out there posing as lenders. (Most are offshore). Their only goal is to convince you to accept an LOI so they can collect upfront due diligence fees. After they have your money, they slowly torture you by not returning phone calls or emails until you are so exhausted, you just give up and move on. So if it’s your first time working with this lender, ask for references. One good way to check them out is to have them send a few copies of previous settlement statements and their attorney contact information. If they balk at your request to verify their
credibility, then hang up the phone. So as they say in Boy Scouts, “Be Prepared” before you contact a Hard Money Lender. Educate yourself first. It is the deal that is presented and packaged properly that has any chance of rendering a positive response. The success of attaining a hard money loan will depend on your ability to sell yourself and the property to the person who is actually writing the check [in most cases]. Not being prepared, you could strike out fast within minutes into your conference call. Do your homework first and you will improve your chances of sliding into home plate with the cash you need to get your deal done. Joseph Andahazy is the managing principal of Fair Market Funding LLC, in Alexandria Virginia; an independent real estate finance consulting company specializing in loan structuring, document preparation, presentation and sourcing capital for debt and/or equity participation funding. Email: info@fairmarketfunding. com. Office: 703-879-1828. Copywrite©2010 Fair Market Funding LLC.
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Help for Distressed Commercial RE Owners Diffusing the Ticking Time Bomb by andrew bogdanoff
ith property values down 40% in two years, delinquency rates increasing, and U.S. banks in a liquidity crisis that has driven the cost of funds to unprecedented levels, commercial real estate owners and developers are finding themselves between a rock and a hard place. With Goldman Sachs reporting that $1.2 trillion in commercial real estate debt is due to mature by 2013, it’s a ticking time bomb. The Mortgage Bankers Association has reported that two-thirds of commercial securitized loans and onehalf of whole loans won’t qualify for rollovers or bank refinancing when they mature. Even if they did, the supply of commercial real estate financing just isn’t there. In fact, commercial-mortgage-backed security loans, or CMBS, which account for 20% of all commercial loans, have already dried up. Further aggravating bank liquidity is the fact that most commercial banks will not be in a position to extend credit to new borrowers for as long as the banks continue struggling with their deteriorating commercial loan portfolios. At risk are literally hundreds of billions of dollars in distressed debt that banks can’t or won’t accommodate. Almost all of the media attention has been on the
distressed banks, how under-reserved banks are hurting, and how government has been rushing to aid them with many billions of dollars in bailout money that the U.S. Mint can’t print fast enough. There is no question that banks are hurting. But what about the thousands of distressed commercial real estate owners and developers who could be wiped out? They seem to be the forgotten casualty in this crisis, and too few in leadership seem to be asking the question, “Do they have options?” They do, but their options are limited. The hard truth about the liquidity crisis is that if owners can’t recapitalize their property, they may have to sell at a fraction of prior value - if they can find a buyer. Failing that they may have to declare bankruptcy, or as some already have done out of desperation, just give the keys to the bank and walk away. There is, however, another option that is better than the aforementioned alternatives. It’s an option that will help mitigate some of the terrible financial pain that owners and developers will feel across the country when the liquidity crisis hits them with more full force sometime between now and 2013. At Remington Financial Group we call that option “distressed owner recapitalization”. As a result we have created the Distressed Owner Recapitalization (DOR) Program that is focused squarely working with the broker community to help troubled owners and developers with
mortgages that they canâ€™t rollover or refinance. The program, in effect, sidesteps the deep and ongoing liquidity crisis by tying together the specialized capital advisory services at Remington with access to active, well-funded investors that are ready, willing and able to recapitalize troubled commercial real estate assets across the capital stack. Here is how the program from Remington works. 1. For experienced owners of existing incomeproducing properties looking to refinance, Remington offers access to investors willing to purchase the note from the bank at a discount. The owner continues to make the original payments to the new investor and participates in the upside when property values increase. In those instances where the bank wonâ€™t discount the note for the income-producing property, the Capital Markets Group at Remington has access to investors willing to recapitalize the property by providing the equity and/or mezzanine financing required to secure new senior debt of 50-65% LTV, with the owner participating in the upside once the market improves. 2. For experienced developers of partially completed projects that need capital to finish and then operate the property, Remington has access to investors that will purchase the note from the bank at a discount, allowing the developer to complete the project and operate the property. The developer continues to make the original payments to the new investor and participates in the upside when property values increase. In those instances where the bank wonâ€™t discount the note for partially completed projects, the Capital Markets Group at Remington has access to investors willing to recapitalize the project through completion, providing the equity, mezzanine financing, and/or senior debt needed to pay off the existing construction loan, with the developer
again participating in the upside once the market improves. The Distressed Owner Recapitalization Program from Remington offers troubled commercial owners and developers a solution to what otherwise is a disaster waiting to happen. While not the originally expected return when owners started their projects, the program offers a level of win-win opportunity in response to the impending and inescapable tragedy facing many distressed owners and developers. In the DOR Program the investor wins when there is intrinsic value in the real estate being recapitalized. Distressed owners win, too, although not as much as they planned when they made their initial purchase. The arrangement is a better alternative than if their mortgages were allowed to mature without being rolled over or refinanced. Some may find this option hard to accept. After all, owners and developers receive less of a return than they would have expected just two short years ago. However the program gives them a chance to buy time and stay in the game until the market stabilizes and turns positive, which could be several years. The DOR Program from Remington diffuses the ticking economic time bomb and offers a viable alternative for troubled owners and developers looking to ease their financial pain and to participate in the recovery.
Andrew Bogdanoff is chairman of Remington Financial Group which he founded in 1993. Remington has become a leading capital services firm through his leadership, expertise in commercial real estate financing, industry-leading fraud policy and more than 35 years of experience creating access to commercial capital.
Cost Segregation: The IRS-Approved Approach to Closing More Deals by william j. Mclee
ommercial brokers and their clients face a very tough and uncertain economy. Due to the credit crunch, banks have enforced stricter lending requirements such as increased down payments and higher debt coverage ratios. Cost segregation can help overcome these stricter requirements and help you close more deals by improving the financial performance of commercial property through improved cash flow, reduced taxes and increased return on investment.
What Is Cost Segregation Cost segregation is an IRS approved engineering-based approach to identifying assets within a building that can be reclassified into a much shorter depreciation class. Between 15 and 40 percent of the total cost of a property (excluding land) can typically be reclassified. Cost segregation effectively shortens the depreciation schedule, giving the commercial property owner a tax benefit today instead of waiting 39 years for the same deduction (or 27.5 for residential rental property). The best time for a study is when a property is constructed or acquired, but it is also possible to obtain these benefits for properties that have been owned for up to
15 years. A retroactive study can be performed without the problems associated with amending prior year tax returns or IRS approval. Immediate tax savings of $100,000 or more are common. The windfall of cash can be huge and will make a dramatic difference to your client in these tough economic times.
Cost segregation positively affects: Return on Investment â€“ when the additional cash flow identified is added to the net cash flow of a property, the result is a greater level of return. This also translates into a higher cap rate. Debt Service Coverage â€“ higher cash flows allow for greater ease in servicing debt. In a lenderâ€™s evaluation, it is beneficial to point out this cash flow increase as they are stringently evaluating the pros and cons of a deal.
Cost Segregation Example The following table illustrates the financial benefits of performing a cost segregation study for a sample $5,000,000 office building (including land of $1,000,000) and reclassifying 17 percent of the building basis to a shorter life.
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Next, consider the acquisition of the same office and the following cash flow scenario. Assume net operating income of $420,000, a down payment of $1,500,000 [30 percent] and a 30-year mortgage at 5.75 percent.
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use the Internet to search for homes.* The Return on Investment for this acquisition jumps from 8.53 percent to 11.47 percent due to additional depreciation of $110,165 (assuming a full year of depreciation). The bottom line is that the above key indicators typically improve by 25 percent to 35 percent.
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Opportunities Cost segregation studies are appropriate for any of your clients that purchased, constructed or renovated property in the past 15 years with a cost basis (land excluded) of at least $1 million. IRS Guidance The IRS has taken several steps to accommodate cost segregation studies. The IRS published a specific set of requirements as to who is qualified to perform a study in their 115-page Cost Segregation Audit Techniques Guide. It is important to note that as long as the study is properly conducted and documented, it does not raise the risk of an audit. The IRS also recently extended regulations to allow net operating losses (NOL) to be carried back up to five years. This means that if you paid taxes in the last five years and are now operating at a tax loss, you can claim a refund on your previous years’ taxes. Cost segregation studies can create or increase NOLs which generate immediate tax refunds. Now Is The Time To Integrate Cost Segregation Into Your - continued on page 47
Frank & Brian Speak
Impossible Perfect Games by frank garay & brian stevens
oes it come as a surprise to anyone that all our legislative and policy changes, which are done under the heading of "consumer protection”, have amounted to higher fees to the consumer and larger profits for our Nations largest banks? Does anyone see the absurd irony created through policy shifts with disclosures and transactional protocol that have pushed out most real estate transactions beyond 60 days!? Is it only Frank and I who think drawn out transactions that cost more money is not an improvement to our fragile real estate market and economy can tolerate? With that said, here comes Finance Reform. Please pardon my lack of excitement, this thing kind of scares me. Consider this, our nations 4 largest banks just came off a quarter where they all pitched "perfect games." In other words there was not a single day in the entire quarter where our banks had a losing day. Now according to the professional prognosticators that I've read, these results are a veritable impossibility. It's true though, in the middle of the largest housing downturn, at a time when foreclosure filings JUST hit their highest number since we've kept records, our banks made out like bandits. How is that possible? Because I don't have all the answers and because I'm limited to the length of this article I can only tell you
what I know and how it pertains to the mortgage lenders. So as I write this, Congress is considering limiting the Mortgage Brokers YSP or Yield Spread Premium. It’s the belief of congress that a loan officers ability to earn income by charging the consumer a higher interest rate will ultimately and exclusively lead to lender compensation abuse. Truth be told, those funds could also have been used to pay down the consumers fixed fees and give them more flexibility in the transaction. Here's my point though, so stick with me - Through RESPA's new and improved Good Faith Estimate, YSP is already the sole ownership of the consumer. So a congressional ban of YSP will only take that money out of the consumer’s pocket. It does not get rid of any overage it only takes it out of the hands of the consumer. In this little scenario, the money will simply STAY with the banks and therefore help the banks bottom line. Remember those impossible perfect games. You see, Congress' attack on the mortgage broker’s compensation has a residual effect in the real estate banking industry. It has invigorated our largest banks to take away the SRP from the Banking Loan Officer. Now just like congress with YSP, our nation’s banks are taking away SRP, in an attempt to limit unchecked lender abuse through higher compensation by charging higher interest
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Frank & Brian Speak
rates. Once again, what they fail to tell you is that this compensation still exists, it’s just not getting filtered down to the loan officer or consumer. The banks are simply damming the flow of money higher up stream. Higher to a place that benefits the banks bottom line. Listen, both YSP and SRP have the ability to be abused and need to be put in check, but we have to have an honest conversation that has honest intended results. I'm all for helping out the consumer but let’s have our actions reflect our words. Frankly I'm sick of hearing about greedy lenders that screwed our housing market. Lenders sold a product that was given to them by banks and Wall Street. Lenders didn’t falsely bundle these loans with AAA ratings and sell them for huge profits. Oh, and your friendly neighborhood lender doesn’t have the lobbying power to impose their will on policy changes. It’s not a surprise that existing and future legislative and policy change have benefited the big banks; it’s just surprising how very few people have noticed the road we've taken to get here. What do we know, hell maybe they need fat bottom lines. I mean let’s face it - someone’s going to eventually have to pay for their worthless portfolio of second mortgages. Those billions are going to eventually come home to roost, right!? And it’s not going to look good! Have you heard the term "too big to bail?"
Thinkbigworksmall.com (TBWS) was founded in 2007 by a group of highly successful real estate and mortgage industry entrepreneurs. Born in the most battered market in the real estate and mortgage industrys history, Thinkbigworksmall.com was conceived after decades of observing how the most successful professionals always seem to work smarter not harder. Frank & Brian can be reached at email@example.com
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2010-2011, Choosing Technology Partners Tech M&A & Why Mortgage Technologies Fail by Rick roque
fter having been involved with several mature and stage one (startup) companies and having sold my own technology start up in Spring of 2004, the mortgage technology market is a difficult path for many mortgage technology leaders – and even more difficult path for investors. I love success stories. Like any a-typical entrepreneur, vision, service and a passion to make a lot of money fuels me. I am always out there looking for the next “great idea” and better yet, the next significant innovation to take the industry forward. When we look at companies who have succeeded we easily see how easy the process can be. A good idea is brought to market with some investment capital; the product or service gains market adoption; revenue comes which is followed by a second round of capital & growth, and eventually the company gets acquired. This seems like an easy process – right? We all know companies who have followed this path. What is less transparent are the challenges that are encountered behind the scenes. The calculated risks, guess work, market circumstances and other factors that, to the less intuitive, are behind the scenes and therefore less visible. For the mortgage operation, this makes dancing with technology companies difficult. The small companies will talk about new market opportunities and the vision behind their product(s); the larger ones will talk about market share and their legacy platforms. In ei32
ther case, these companies could be on the verge of going out of business, being acquired or truly poised for growth. How can you tell the difference? How can you choose the right technology partner? With increased pressures on the mortgage industry related to compliance on the front end and consumer centric services (loan modification, HAMP, predictive analytics etc) on the backend, increasingly it is expected that your technology vendor will drive your success. No longer can your technology vendor sit on the sidelines of compliance and not lead the way. Too often technology vendors do not understand the market or do not have the compliance staffing to translate key compliance trends into core product requirements. If your technology vendor wants to visit you at your offices to learn how a mortgage process works and operates, that’s a clear indication there is a problem. This is a serious problem. “Fannie Mae’s Loan Quality Initiative (LQI), Freddie Mac’s Loan Quality standards regarding appraisals, and upcoming legislation regarding consumer protection are forcing the lending community’s hand to change”, says Joshua Weinberg, national industry Compliance expert, speaker and consultant. The mortgage industry is a complicated business and it is only getting more complex; the undercapitalized, under resourced or worse, a technology vendor that is slow to assume this compliance leadership role for you can be catastrophic to your business. With few exceptions, technology vendors have failed the industry by not providing cost effective and yet, more compliance driven and intuitive solutions that have the loan
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techspot origination workflow in mind. The solutions are either too flexible and don’t do enough in compliance (ex. Calyx Point) or they are too much of a “tool kit” and it requires a significant investment to customize and implement (ex. Dorado, Gallagher Solutions etc). Dorado and Gallagher, for instance are complex, rules based, true workflow driven enterprise “tool kits” for the mortgage corporation, but their historic costs to implementation is forcing business models and product changes to be more “out of the box” and require less customization. I give them credit for making adjustments. These decisions will be a key ingredient for success. I will touch upon this in the section Why Mortgage Technology firms (especially start ups) Fail however the reason for failure also reflects the recipe for success. But the failure to respond to the market and make these adjustments is at the nucleus of failure.
Tech Trends: Companies on the move The busy pace of M&A (Mergers & Acquisitions) activity that began in 2009 is expected to continue in 2010 and accelerate in 2011. In a consolidating market, the quickest and most efficient way to gain market share is by acquisition. In 2001, Ellie Mae was able to capitalize on nearly 20 years of Contour’s technology and market adoption in a single transaction. In addition, the acquisition of Genesis, provided Ellie Mae with state of the art 3rd party data exchange technologies that later evolved into the ePass / Ellie Mae Network; both very smart acquisitions that provided them with immediate market traction and legacy platforms to leverage. Fueling the M&A activity is this movement to integrate essential workflow processes that were once “add-ons” to the origination process but are now considered too important to the fraud prevention, compliance and risk mitigation efforts of the banking operation. Shifting this paradigm further, more stringent lending guidelines and regulations are increasing the need to consolidate these solutions into one single source solution which are now cornerstones of the mortgage banking process. “The risks and challenges associated with a zero tolerance compliance environment are so great today that the lender has a greater need than ever before to automate their processes”, says Christine Clifford of Access Mortgage Research & Consulting the leading mortgage research firm based in the outer skirts of Washington DC. “The cost and challenges involved with completing all the required red flag checks that are part of the mortgage origination process is too great to manage without
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techspot support from the POS/LOS.” I couldn’t agree with her any more. So let’s review a few examples that support this trend: First American CoreLogic acquired BasePoint Analytics, LLC, an acquisition in the 3rd Quarter of 2009, that accelerated First American’s strategy of providing lucrative and profitable frauddetection services for its clients; In the 4th Quarter of 2009, Equifax acquired Rapid Reporting, a solid fit to their credit services, Rapid Reporting’s Tax, IRS and Social Security authentication offerings are indispensible in today’s origination process. In the 2nd Quarter of 2010, Dexma acquired by Prime Alliance: This merger is very smart for a partnership that wants to extend beyond credit union mortgage originations. Dexma’s experienced team, base of clients and document management technology are strong assets to Prime Alliance’s service offering to credit unions. Ellie Mae’s IPO filing in the 2nd Quarter of 2010 is the boldest move in 2010 given both the risk and opportunity that exists by filing. Once successful, this will most certainly lead to a number of acquisitions and expansion of services in the Encompass origination platform.
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8 Reasons Why Technology Firms Fail After reviewing some of the top M&A activities in 2009 and 2010, to appreciate these successes, let’s review the top reasons why mortgage technologies fail, as seen in www. mortgagetechgraveyard.com. Many of these companies were well financed, venture backed technology firms. However due to many of the reasons below, even a sizable investments behind them was not enough to keep them in the business. Here are some signs that you should run the opposite direction of a company- start up or existing who exhibits these characteristics: 1. Investor & Leadership Makeup: This is probably the most common killer of the mortgage tech startup/ company. If some of the investors and/or executive leadership are NOT seasoned mortgage industry leaders, who understand the very market they are looking to sell to, sober growth expectations and other joint partnerships will most certainly be lacking. Top talent will quickly get frustrated and investor confidence will wane quickly as goals are missed, adoption is slow and the frustrating dynamics of the business take toll; 2. Unrealistic expectations: Adding hundreds of companies and thousands of users quickly is unrealistic. It takes years (literally) to do and/or maintain this. A firm commitment toward growth will cost money. The cost of sales & marketing is always greater than anticipated. 3. Always looking for home runs: As a result of the financial pressures and the need for market adoption, the urge to quickly acquire large companies should be resisted. Not only is it unrealistic that a large mortgage banking operation will experiment on their staff with a new technology or application but the vendor’s training and support is largely untested and poses a frustrating risk to your staff - this can almost be more important than the technology itself; 4. Niche Product & Industry Understanding: The industry has moved away from the ‘niche’ offering and toward the integrated platform which provides all necessary services in a single experience. If they aren’t integrated in the common platforms they probably don’t have the money or expertise to do the integrations. This is where the leadership and investor base comes from; 5. Company Stats & Market Trends: Look at their total number of unique companies (as opposed to users);
techspot if they have a hundred companies as clients, look at the revenue model and ask yourself the question: in a contracting market, could they feasibly lose 30% of their customers (or loan volume for per file or per closed loan business models) and be ok with this? Review their financials to determine their stability. Is the product or company is losing market share (in a ‘tail spin’)? If the company has been around a long time but hasn’t managed the market changes effectively and is losing market share, I wouldn’t consider buying or staying on with such a technology. This is a losing proposition, move on. 6. Not capitalized for the middle to long term: Startups who have gone out of business, stalled out and found a new round of capital (restarts) are companies to avoid. These are companies that have a tremendous amount of risk and unless you see their financial statements to gain confidence in their middle to long term direction, I wouldn’t rest my company’s future on them. Restarts pose even greater risk because they already have a history of letting their clients down; be careful of LOS or other companies who have shut down and are relaunching under new leadership and capital – fool me once, call it a mistake, but fool you twice…etc…in today’s market, without a deep appreciation of leadership and capital, it could be perilous to your operation. 7. Pricing Model and Adoption: In a contracting market, pricing models are moving to a per consumer (prospect or closed loan), per file or per “user” basis; these trends are perfect for today’s SaaS delivery models which is a per user per month model. This is the most economic for the vendor and the client. These models however can be very expensive; so before you pay $90 or $120/user for a CRM solution, maybe you could get a more complete offering that includes marketing, origination, docs and backend fulfillment services for the same cost. Whatever it is, make
sure you compare “apples to apples” when you compare SaaS delivery models because every little service that costs $15, $20 or $50 per user or per file adds up; your total gross costs could be significantly higher if the right questions aren’t asked. 8. Ego: Often the killer of any mortgage technology company. Success in or outside of the mortgage industry can blind investors or executives that success is automatic or guaranteed. If the leadership team does not come across as service friendly or humble in their approach to you, end the conversation there. In my next article, we will look at some of the top technologies in the industry– both companies to watch and established firms making significant strides. Rick Roque, former senior management team member of Calyx Software, presently runs a leading mortgage research & consulting firm called MenloCompany.Com; based in Washington DC, Menlo works with technology vendors and some of the largest correspondent lenders in the United States to best adjust and be competitive amidst the changes in our industry. For comments, feel free to email him at firstname.lastname@example.org
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REAL ESTATE APPRAISER INDEPENDENCE By tim rood
t wasn't long ago, 2005 or maybe 2006, when I was sitting in a GSE Leadership Conference with senior management and one of the COO's challenged his leadership group. He asked, "Are we really the best at risk management, or are we really just good at risk avoidance?" That COO's statement was eerily prophetic. Especially when you consider the fact that prime 30 yr fixed loan product is the fastest growing category of seriously delinquent mortgages. With residential delinquency and foreclosure rates hovering around 14 percent, the U.S. housing market finds itself in yet another sticky situation. On the MBA's recent First Quarter Delinquency Survey conference call, it was disclosed that 4.3 million loans are now 90 days delinquent. Compared to the first quarter in 2009, the seriously delinquent rate increased 238 basis points for prime loans (think GSE 30 year fixed), 173 basis points for FHA loans and 87 basis points for VA loans. With a high number of the jobless having been unemployed for longer than 27 weeks, the harsh reality is many of these borrowers will soon become loss mitigation and loan workout candidates, a responsibility 38
that will likely fall on the shoulders of Fannie Mae and Freddie Mac as loan servicers are not properly incented to mitigate the ultimate losses. Loan servicers give on average three times more attention to delinquent borrowers in their portfolio than they do on loans where they have no credit exposure, i.e. GSE or other government backed programs.
WHY? The traditional compensation model for servicers is based on a flat percentage of loans outstanding in the portfolio. On conventional loans, servicers are generally paid between 0.25 and 375 percent of total unpaid loan principle in their portfolio. Every incremental dollar spent counseling borrowers and mitigating the losses of the end investor (not their own losses) is cutting into the servicers margin. While it is true that there are economic incentives in the MHA program intended to cover the added expense of fulfilling HAMP (Home Affordable Modification Program) requirements, the chips do not stack up from a business model perspective, otherwise you would see servicers treating HAMP participation as a profit center and performing more-, not less, loss mitigation. Instead, loss mitigation activities are performed only to the point of meeting their minimum contractual obligation to the investor and at the least
The Voice of Housing incremental expense. There is much more incentive for a specialty servicer to make the right loss mitigation decision. "Specialty servicers,â€? who are in the business of deciding on whether it is more cost effective to bring a borrower current or liquidate the collateral at the smallest possible loss, are generally compensated in a way tied to how efficiently they control losses. There is economic motivation for specialty servicers to make the right decision for both the borrower and the bank. While it was a wonderful thing for hundreds of thousands of homeowners and their surrounding communities, the sun is setting on MHA and HAMP. I am hearing that servicers and borrowers should not expect to see future announcements from the Obama Administration on a potential "son of HAMP" or "son of HAFA" program.
The bottom line is... We either need to modify/amend servicing contracts to provide proper incentives to servicers to perform an effective level of loss mitigation or we need replace them
with the abundant supply of specialty servicers who are clamoring for a shot at the business. Tim Rood is a managing director of the Collingwood Group. In his two decades of mortgage industry experience. Rood co-founded Capital Financial Solutions, was Vice President at First American, and served as Senior Director and Principal of Fannie Maeâ€™s eBusiness Division.
Rules and Regulation headlines
Does reading the new mortgage rules and regulation makes you want to poke your eyes out with a fork? There are an average of three to four rule changes a week and here are some of them!
Fannie Mae …You say tomato, I say tomato, you say short sale, Fannie says “pre-foreclosure”…that is fannies new word for short sales and deed in lieu. Which they claim are interchangeable but there are different waiting periods—so what’s up with that? Anyway, the good news is that the waiting periods for people who have had either of the two have been changed— Deed in lieu used to be four to seven years – now its two years and 80 percent LTV Pre-foreclosure—) used to be two years, now it four years ant 90 percent LTV Short sale, which is supposed to be the same as pre-foreclosure did not have a specific time period, is now seven years and the LTV will be whatever the eligibility matrix shows seven years from now. So, let’s talk about extenuating circumstances---this is where the judgment of a good, experienced manual underwriter comes in. Fannie defines it as “a non recurring event that is beyond the borrower’s control, that resulted in a sudden, significant and prolonged reduction in income or a catastrophic increase in financial obligations.” Whoa, does that mean job loss? It is now two years and 90 percent LTV. Speaking of the “dates,” they mean from the date the short sale, deed in lieu occurred until the “date” of application. 40
Clarification about multiple bankruptcies, if the borrower AND co-borrower both filed bankruptcy, it is considered one bankruptcy. This all goes into effect on July 1, 2010 Be sure to get the word out to your real estate agents---with the new rules, they should follow up with their past clients who have had deed in lieu or short sales because they might be eligible to buy another home. In addition, if they are listing a home that falls under these categories, they can advise them of the rules, add the info to their database and contact them when the appropriate time has passed. Check out Mortgage Talking Points for your real estate agents! Guess what? Fannie is keeping IO’s alive—but only for purchases, second homes and rate and term refis. Credit score of 720 and 24 months cash reserves. You know the 10-property rule? Well Fannie clarified that the rule also applies if the borrower has co-signed on a mortgage— So let’s say they own 10 properties and cosigned on a loan for their daughter, That’s now considered 11 properties they are financially obligated on so they don’t qualify. And this includes their principal residence. ARM loan qualifying has tighten up – With five years or less ARMS, borrowers must qualify at the note rate plus two percent OR the fully indexed rate. Which ever is more. Oh, and say bye-bye to 7-year balloons—probably no big deal here. It’s back!!! They used to do this in the good old days of loan
Rules and Regulation headlines originating—when you had to chase down inquires to determine if it resulted in additional debt, now Fannie makes it mandatory. Better to ask clients at the time of application than find out when the credit report has to be updated 10 days before closing.
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Bottom line – advise your clients – no, give them a piece of paper that says—NO BUYING ANYTHING OR APPLYING FOR CREDIT UNTIL AFTER CLOSING. SO, I hope we don’t sound like a broker record here (you do know what a record is don’t you?) but we’ve been talking about Fannie’s Loan Quality Initiative since February and now…your whole underwriting world, as you know it, is going to change. A certain percentage of your loans will be audited BEFORE closing, which means that you will have a set of conditions from the underwriter and a second set of conditions from the auditors. Warn your clients and real estate agents of the possibility.
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Okay, getting back to LQI, Fannie came out with a 29 FAQ that is supposed to explain things…but even we had trouble reading it. Stay tuned for the video, it’s supposed to be a blockbuster. Bottom line, we see this as a way that Fannie is putting the responsibility back on you to QC before closing, and because of the reports you have to give to Fannie on a quarterly basis, a way of tracking loan officers and companies who have a higher amount of pre-audit kickbacks. By the way, we’ve created a LQI Matrix for you and your staff—based off of Fannie’s matrix, but easier to follow.
Freddie Mac If you sell Rural Housing of manufactured homes to Freddie, there are a couple of updates. If not, don’t bother reading these updates.
HUD/FHA So, this appraiser walks into a bar and says, who cares what you think about me? Yeah, HUD is receiving complaints about turn around times and excessive fees and FHA took the time to write a two page FAQ basically stating, “…appraisers and lenders, work it out because it is not our problem.” Speaking of FAQ’s – which seems to be the norm these days, FHA just issued a 6-pager to help you better understand FHA’s appraisal ordering policies. It is an easy read because it in Big Letters and a good guide to make sure your FHA appraisal ordering system is HUD compliant.
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Be a Part of The Mortgage Revolution! Coming to Orlando Florida Thursday, July 8th & Friday, July 9th
Hear from industry Super Stars such as Todd Duncan, Carl White, Sue Woodard, Denny Andrews and many more. All in a “Spam Free” environment. Oh yea, did we mention that all profits will be donated to charity!? Go online and register or learn how to volunteer at www.mrev.org. Don’t forget to fan us on Facebook, where you’ll get a ton of news and updates from us. Come network with the best in the biz and at the same time help give our industry a much needed facelift.
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RULES & REGULATION HEADLINES And, It is about time we receive an official letter saying that HUD will not required audited financial statements until January 1, 2011. Let me tell you, it was not an easy task to find THAT letter from Donald Stevens on HUD’s site! Like it was in HUD’s Lender Assessment Sub System (whew, who knew that exited?) We have the 3-page letter for you in case you want to read it. So, here is a fun fact: David Hail, who just wrote an awesome FHA manual that you can buy on the mortgage currentcy website, found a problem in HUD’s handbook regarding “non-purchasing spouse debt”. So what it says NOW, is that if the debts, including losses on income tax returns, MUST be counted in the debt to income ratio—even though that person will NOT be on the mortgage or note. So, let’s say that wife, who will not be on the mortgage, has a Mary Kay business, and shows a loss of $5,000 because of inventory, expenses and whatever…right now, the HUD guidelines state that the $416 per month must be included in the debt ratio, even though the wife will not be on the loan. So how is that fair? David challenged HUD, stating that the “negative business loss should NOT be counted in the rations, and furthermore, it’s a possible violation of ECOA (Marital status)”…but we digress! We have confirmation from HUD OutReach that David is correct…you do not have to count income losses for non-purchasing spouses. If you are originating FHA loans, one of the ways to acquire more deals, is to remember these little-known underwriting rules…that your competitors do not know about. e-Signatures were approved way back in 1995 and the e-Sign ACT was signed in 2000. In 2001, FHA said it was okay to use e-signature on appraisals only. So FHA just issued a mortgagee letter that it is okay to use e-signatures on select documents. We think it is because Apple, with their new iPad, (which works great for electronic signatures,) is pressuring HUD… well, I am just saying here…there might be a connection. Check out the Mortgage Talking points called “Don’t Close Late, Don’t Close Ugly….” for you and your agents—giving them a brief outline of the new rules that may cause closing days! Good to let them know what YOU have to deal with day in and day out. So, we’ve done the heavy lifting for you by reading and interpreting the mortgage rules that only apply to loan originations, processors, underwriters, managers and company owners. There are 14 changes this month, but not all of them are worth reading… however, there are a couple of biggies this month. Try www. MortgageCurrentcy.com for $1 for 7 days
TIP OF THE MONTH
TIP OF THE MONTH Consistency BY STEWART MEDNICK
onsistency is defined as a steadfast adherence to the same principles, course, form, etc. Why is consistency important in general business and in developing a successful business? A great example is Ray Kroc and McDonalds. He revolutionized the American restaurant industry by imposing discipline on the production of hamburgers, french fries, and milk shakes. In the book, “Forbes, The Greatest Business Stories of All Time,” by Daniel Gross, Kroc is defined: …by developing a sophisticated operating and delivery system, he insured that the french fries customers bought in Topeka, Kansas would be the same as the ones purchased in New York City…. Such consistency made McDonald's the brand name that defined American fast food. To build a chain, Kroc knew that he had to impose discipline on the loosely run restaurant industry. And that meant refining standardized operating procedures into easily replicable processes. Forty years earlier, Henry Ford had realized that the mass production of automobiles required the marriage of precision parts to an efficient assembly process. Kroc's insight was to apply the same rigor to the construction of sandwiches. Espousing the idea that "there is a science to making and serving a hamburger," Kroc endowed his beef patties with exacting specifications -- fat content: below 19 percent; weight: 1.6 ounces; diameter: 3.875 inches; onions: 1/4 ounce. Kroc even built a laboratory in suburban Chicago to devise a method for making the perfect fried potato in the late 1950s….
Ray Kroc developed his system based on Henry Ford. The goal of both pioneering great Americans was to replicate and build a product exactly the same over multiple productions. Consistency in product quality, construction, time of delivery, and expected outcome was the foundation of both men’s success. Instead of redeveloping the proverbial wheel, take note of these two highly successful businessmen and build your business in the same fashion. I have created a few steps that may help in this journey. You may modify according to what your specific needs may be and the business you conduct. 1) Write the steps from ‘cradle to grave’ on the development of your product. This may be phone calling to the client, finding a product to fit, ordering needed support services (appraisal, title work, etc.), scheduling the closing, and writing a thank you note. 2) Repeat all actions in a consistent manor so every customer has the same, excellent service and experience. 3) Refine and polish your system. Find good support services, have the same timeline for each loan development, have the same basic dialogue over the phone with clients in the discovery stage of the loan, just to name a few examples. TheNicheReport.com
TIP OF THE MONTH
4) Feedback from your clients so you know how better to serve them. Practice and repetition makes perfect. The more you perform the actions, the better you will become in execution. Consistency is born of repetition, refinement, and execution. Develop a system and make it work well, then repeat with every client and you will find that the work will be less daunting on your end, and more satisfying on the customer’s end; consistently.
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Stewart Mednick is a seasoned mortgage banker and published author. His writing focuses on relationship development, personal empowerment, customer satisfaction, marketing and sales techniques. Stewart is available for marketing consulting, personal coaching and training sessions. If you have a comment or a question for Stewart, contact him at 651-895-5122 or email@example.com
Center Stage with Premier Advantage Marketing THE NICHE REPORT
Direct Mail Marketing!! That’s what Premier Advantage Marketing does best. They will help you generate a continuous flow of cost-effective leads. Premier Advantage Marketing, a division of Budco, is a leader in high-impact, direct response marketing with over 30-years of industry experience. Tom Emmerson Premier Advantage Marketing (PAM) can help you increase your monthly funding and maximize your return on investment by working with you to develop a meaningful, strategic directmail marketing campaign focused on your prospects and your goals. Choosing to work with PAM could be one of the most important decisions you make in your quest to make more loans. Tom Emmerson, Vice President of Sales and Marketing for Premier Advantage Marketing, has graciously sat down with The Niche Report to educate us about the impact an effective direct-mail marketing campaign can have on your business. How has social media affected the business of direct mail? Any successful marketing plan will integrate a mix of communication mediums. The online marketing element of social media serves to reinforce the larger, more important offline marketing message communicated through a direct mail marketing campaign. The powerhouse behind direct mail marketing is that it provides privacy that modern-day online mediums do not offer. Direct-mail keeps your message between you and
your prospect. The silent nature of direct-mail keeps your competitors at bay and increases your private time in the market without dialogue from your competitors. What would you say to someone who suggests that direct mail is a thing of the past? Direct mail is here to stay! Originating loans through direct-mail lead generation is the most effective and profitable means to increase your monthly funding volume. History is known to repeat itself. An inkon-paper direct mail offer is sent at your command, instruction, and direction – and when you use a direct mail professional, your offer finds its way to your qualified prospect’s door. Direct mail looks easy, so why shouldn’t it be a do-ityourself activity? Preparing mail properly has always been tough. Efficient, accurate and deliverable direct-mail requires up-to-the-minute knowledge of mailing costs, mailing list accuracy, proper formats, and much more. Direct-mail is a science that we, at PAM, work with every day…that makes us experts. Without the professional services of an experienced direct-mail marketing company, you run the risk of losing valuable time and considerable money by trying to tackle the job yourself. Premier Advantage Marketing has over 30 years of experience in the industry, so we know what works and what doesn’t, and we know the ins and the outs of getting mail to market. Brokers shouldn’t distract themselves from the business of closing loans to handle the myriad of details involved in getting a direct-mail campaign to the post office. TheNicheReport.com
CENTER STAGE What are the top considerations in choosing a direct-mail professional? The primary consideration really ought to be results. At Premier Advantage Marketing, we begin with the end in mind, and consult with our clients to determine what they want to achieve in results. It’s easy to believe that a lower price is better. We educate our clients not to focus on the cost of the direct-mail. When their focus is placed on better design and better copy, their ability to attract more prospects improves. When we combine this with an investment in a better, more targeted mailing list, our clients reach key prospects they might have otherwise missed. From industry experience, I can tell you, less has never proven to be better. Results are at the core of Premier Advantage Marketing’s vision and values. We believe results begin with meaningful two-way communication that ultimately shapes the business relationship with our client and produces end-to-end solutions that deliver results…reducing cost, increasing revenue, increasing customer satisfaction and increasing speed to market. When we get our clients to focus less on price, and instead focus on the results they want to achieve, they are pleasantly surprised with their results. What is the most important part of a direct-mail campaign? The mailing list is the most important element of any direct-mail campaign! The best way to know who to mail to is to know who not to mail to. The number of leads you generate with your mail piece is directly correlated to the accuracy of your mailing list. You just might be mailing an award-winning mail piece, but it isn’t worth its weight if it lands in the wrong mail box. This goes back to what I said before about beginning with the end in mind. What results do you want? You want leads! This means you need to get your mail piece into the hands of your prospects, not suspects. When you stop mailing to the wrong people, your efforts yield a greater response, and you get better overall results. What effect has the state of the economy had on direct mail? There has never been a better time to mail than now. The downturn of the economy has caused organizations to decrease their target audience and mail less often. Premier Advantage Marketing clients have found their response rates increasing as less and less mail makes it into their prospects’ mailbox. This phenomenon actually increases and promotes readership. What are the strategies for promoting readership? Three seconds! That’s all the time anyone has to catch 46
a reader’s eye. In three seconds or less, a prospect will decide whether to open or read a mail piece or toss it. When we put the right mail piece in the right hands at the right time, we promote readership. Our clients need their mail to be opened. We use every marketing trick in the book to get our clients’ mail noticed first. If it’s noticed first, it’s more likely to get opened first. At Premier Advantage Marketing, we have developed strategic, innovative package designs that effectively ensure your mail piece will receive more attention! So, we’ve hired our direct-mail professional, determined our results, targeted our prospects, and designed our mail piece. The next question is…When should we mail? Consistently! How many responses can a broker anticipate if he mails nothing? It sounds like a silly question, and the answer is fairly obvious. But, surprisingly many brokers don’t see this cause and effect relationship. If you mail every day, you are likely to receive responses every day. Likewise, if you mail every week or every month, you are likely to see responses every month. The cycle invents itself. When business is good, there is a temptation to stop mailing…but once you stop mailing the chance that a new lead will call is slim to none and no new leads means no new sales. When you mail every day, every week, or every month, you stay in constant touch with your prospects. This consistency keeps your pipeline full with new leads and minimizes the peaks and valleys that typically dominate your sales activities.
With over 30 years of industry experience in direct mail marketing, Premier Advantage Marketing (PAM) leads the way in managing and executing strategic direct mail marketing campaigns. PAM prides themselves on their attention to detail and ability to recognize what impacts consumers. Their dedication to implementation drives results. At PAM, one good thing leads to another. Premier Advantage Marketing (PAM) is a division of Budco, a leading fulfillment and direct mail marketing company. For more information, please visit www.thinkPAM.com. Tom Emmerson - VP of Sales and Marketing for Premier Advantage Marketing. Tom has 17 years of direct mail experience with 13 of those years in mortgage marketing. He has designed and copy-written mailers for some of the top companies in America such as GNC, American Express, Merrill Lynch & Allied Home Capital.
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of your clients need a short term loan - even only for a few months, Collateral Lending could be the answer.
Service Lines Commercial real estate brokers owe it to themselves to be aware of all the ways cost segregation can be exploited to add value to real estate transactions. Whether cost segregation is utilized at the point of acquisition or in later years, brokers can rely on the lasting effect it has on the owner’s bottom line.
Marketing Opportunities When you consider the release of this new loan product, a ton of marketing opportunities open up. Just because there is less cash-out product available from Wall Street does not mean that your clients do not have the need. And the clientele that is probably most qualified and most active in Collateral Lending? The higher-end borrower. Just look at recent news headlines. According to RealtyTrac, foreclosures of homes worth over $1 million began increasing at the end of 2009. In 2010, foreclosures of these homes climbed to an astounding 120 percent increase over the previous year. This clientele is typically not aware of Collateral Lending as a viable option. By developing a marketing campaign that helps them understand the loan product, you can help them meet their cash needs and at the same time build a pipeline that is sure to grow over the next 1 to 2 years. So are you ready to originate Collateral Based Loans? Yogi Berra claimed that one of his famous quotes was merely directions to his house, but it is a great saying on making a decision and sticking with it - "When You Come to a Fork in the Road, Take It!" Decide that this loan can help your clients and increase your production and you will be building your pipeline in no time. Tom Krug is a Managing Director of Luxury Asset Lending and the Founder/President of Mind River Marketing, a full service marketing company specializing in the financial services industry. Krug has spent the past 20 years building successful businesses in residential and commercial finance and has been recognized on the Inc 500 Fastest Growing Company list. Krug may be contacted by email at Tom@LuxuryAssetLending.com or by calling 858-720-4761.
William J. McLee, is a Regional Property Specialist for Cost Recovery Solutions, LLC. Mr. McLee has 8 years of business tax experience in addition to sales and management experience with Wrigley Company and US Bancorp. Mr. McLee is featured as a guest expert on real estate, tax and finance in articles in the Minnesota Spokesman-Recorder, Stress Free Living and other publications and is an invited presenter of seminars at the University of Minnesota and other organizations. Mr. McLee is a graduate of Cornell University and received his MBA and Masters in Business Taxation from the University of Minnesota. He can be reached at 952-2371425 or firstname.lastname@example.org.
Buy Now! The Premiere Book On Social Media For Mortgage Finance Professionals!
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Build My Scores is the leader in total credit restoration services. Our focus is on your client’s needs. We offer a personal and customized approach to help bring complete restoration to your client’s credit. We do this because each and every person’s situation is unique. We’re committed to providing you with faster results and a greater opportunity for success, making us your #1 trusted resource for credit restoration services.
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For more information, go to http://MortgageSocialMediaMarketing.com/ebook
Prime & FHA Flagstar Wholesale Lending (866) 945-9872
NetMore America, Inc.
Presidents First Mortgage Bankers
Offer a full array of FHA and Agency products, coupled with industryleading underwriting turn times and technology 24-48 Turntimes, Inside Support, RESPA Help, Friction Free Technology, FHA for Brokers, We value Brokers! Wholesale Lender; 24 hour turnaround time, online submissions, extensive product line 24/7 realtime access.
Our wholesale lending division caters to MORTGAGE BROKERS that wish to send loans for the purpose of providing excellent service to their borrowers.
United Wholesale Mortgage
FHA & Conventional lending
Pacific Union Financial
COMMERCIAL GreenLake Real Estate Fund, LLC 310-462-4637
Manaseh, Epharim & Associates
Private direct commercial loans in CA and NV. All property types except raw land. Our latest fund was raised specifically for loans in this tough economy. We're eager to lend, so please call today!
Acquisition, Refiâ€™s, and Development Commercial Loans. Your source for international and domestic funding.
MMG Capital LLC
Asset-based Hard Money Loans; Nationwide Lender
Remington Financial Group, Inc 480-905-3239
Senior Financing, Mezzanine, Bridge Loans, Hard Money, Equity, and Joint Venture. All Property Types.
ADVERTISE YOUR NICHES HERE WITHIN Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lenderâ€™s information on products, program, procedures, representations, and warranties for details.
HARD MONEY & NON-PRIME B & C LENDING IS BACK. If your client has equity, we have a loan. Loan amounts 100K to 2MM. We are the final decision makers, all decisions made at our location.
ACC Mortgage, Inc. 240-314-0399 X 19
No seasoning requirements, No upfront commitment or processing fees, Minimum credit score 400 - DE, MD, VA, DC, NC, SC, GA, FL
First Mount Vernon (866) 908-FMV1 (3681)
First Mount Vernon
Minimal documentation required, Combined Loan-to-Values to 105% - DE, MD, VA, DC, NC, SC, GA, FL
(866) 908-FMV1 (3681)
GreenLake Real Estate Fund, LLC 310-462-4637
Manaseh, Epharim & Associates 770-840-0112
Private direct commercial loans in CA and NV. All property types except raw land. Our latest fund was raised specifically for loans in this tough economy. We're eager to lend, so please call today! Direct Lender with fast closings. Your source for international and domestic funding. Asset-based Hard Money Loans; Nationwide Lender
MMG Capital LLC 310-295-1121
CONSTRUCTION NEW Bismark Mortgage Company 800-350-7199 x106
Manaseh, Epharim & Associates 770-840-0112
Owner Builder and Spec Construction for residential AL, AK, AZ, CA, CO, GA, HI, ID, IL, IN, KY, ME, MD, MA, MI, MN, MO, NY, NV, NJ, NC, OH, OR, PA, TN, TX, UT, VA and WA New construction and rehab loans for all types of commercial properties. Your source for international and domestic funding.
ADVERTISE YOUR NICHES HERE WITHIN Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lenderâ€™s information on products, program, procedures, representations, and warranties for details.
Service provider classifieds
Service Provider Classifieds Compliance and Audit
Quality Mortgage Services 615-591-2528
Mortgage Compliance Solutions, Post Closing & Default Audits, HVCC Reporting, QC Software, Federal Regulatory Audits
We provide HUD Auditing and QC on every loan type
Credit Repair & Restoration NEW
Credit-Aid Software 800-257-1192
Credit Repair Software. Credit repair business opportunity.
The only full credit repair business in a box
We offer a personal and customized approach to help bring complete restoration to your client’s credit. We’re committed to providing you with faster results and a greater opportunity for success.
Entitle Direct 877-936-8485 or 877-9ENTITLE
Hundreds of mortgage professionals have saved their borrowers up to 35% or more on their title insurance by recommending Entitle Direct.
Mortgage Insurance Agency 866-355-9944
State Licensed Surety Bonds, Errors & Omissions and Fidelity Bond coverage’s for Mortgage Bankers and Mortgage Brokers nationally.
Service provider classifieds
technology a la mode 1-800-252-6633 ext 309
AllRegs (800) 848-4904
Websites and marketing tools for real estate professionals
Products include single and multifamily underwriting & insuring guidelines, federal & state compliance laws and regulations, contract publishing services, policy and procedure manual templates, AllRegs Academy training programs and more
Applied Business Software 800-833-3343
Origination and Servicing software for hard money lenders.
Affordable software that streamlines and optimizes all phases of the loan process â€“ from loan marketing through closing.
The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges.
Global DMS, LLC
The most comprehensive web-based valuation management platform on the market. Utilizing the Software as a Service (SaaS) model Global DMS is able to provide extraordinary value with the shortest implementation time in the industry.
877-866-2747 MBSauthority.com 800-264-7135
Live MBS data, analysis and recommendations. Join us for a FREE trial.
Providing automated online origination solutions, including a customizable, secure MortgageApp for only $75 a month.
Provides a powerful, easy-to-use loan origination system that streamlines mortgage loan processing.
Appraisal & AMC Appraiserloft (877) 229-7799
A leading provider of comprehensive collateral valuation products targeted towards the mortgage lending, servicing, and insurance industries.
National Valuation Service 786-581-9171
Comprised of thousands of fully vetted Independent Business Owners who as Appraisers, provide valuation and consulting services in 50 States.
Service provider classifieds
Training & education NEW
AllRegs (800) 848-4904
AllRegs Academy offers online, audio and classroom training, continuing education, certifications, study guides, practical guides and customized training at your site on compliance, underwriting, servicing, FHA, VA, SAFE and more.
marketing & lead Gen CMG 702-290-9210
OSI Express 866-674-1999
Premier Advantage Marketing Tom_emmerson@budco.com
Quick Qualifier Software (888) 684-9273
Get certified to sell the most powerful loan in the mortgage business today – The Home Ownership Accelerator – HomeOwnershipAccelerator.com
Not just mortgage flyers and open house flyers, we are a powerful financing analysis tool for refinance and purchase, greatly helping loan originators.
Powerful, targeted, personalized direct mail campaigns. Specializes in lead generation programs for the mortgage industry. www.ThinkPAM.com
Prequal & Marketing Software for Loan Officers. Use our software for Conventional, FHA & VA closing cost worksheets. Make Open House flyers with finance options and color pictures. Easy to learn and easy to use!
Branch Opportunities American Pacific Mortgage 866-625-9352
Join American Pacific Mortgage and become a direct lender with the option of brokering
Franklin First Financial 800-408-6421
Mortgage banker with financial strength and security – enough to not only weather but to thrive in the current economic climate. Licensed nationwide and operating out of New York, New Jersey and Florida, Franklin First Financial is a place to learn and grow, with excellent career opportunities sure to fit your future plans.
Freedom Mortgage Corp 800-220-9498
Looking for individuals with mortgage experience who possess a high level of ethics and a desire to originate loans the right way
Guaranteed Home Mortgage Company, Inc. 888-572-3602
Specialized Retail Platform for Experienced Loan Officers
Sierra Pacific Mortgage 800-447-3386
Retail Branches and Wholesale Lending Nationwide. Privately owned specializing in residential conforming, FHA, VA and Jumbo. Wholesale: www.spm1.com Retail: www.spmloans.com
LENDER & RESOURCE DIRECTORY
All Credit Considered Mortgage B&C LENDING IS BACK www.weapproveloans.com National Sales Manager 240-314-0399 X 19 firstname.lastname@example.org
a la mode, inc. Websites and marketing tools for real estate professionals www.alamode.com 1-800-ALAMODE email@example.com
AllRegs Leading information provider for the mortgage industry www.allregs.com (800) 848-4904 firstname.lastname@example.org
American Pacific Mortgage Corporation One of the largest independent retail banking and branching companies in the country www.apmortgage.com Melissa Arntzen (866) 625-9352 email@example.com
Applied Business Software Origination and Servicing software for hard money lenders. www.TheMortgageOffice.com 800-833-3343 firstname.lastname@example.org
Appraiserloft A leading provider of comprehensive collateral valuation products targeted towards the mortgage lending, servicing, and insurance industries. www.appraiserloft.com 877-229-7799 email@example.com
ATTENTION LENDERS!! Buyers of Distressed Debt NicheBuyers@gmail.com
Buildmyscores.com The leader in total credit restoration services. Weâ€™re committed to providing you with faster results and a greater opportunity for success, #1 trusted resource for credit restoration services. www.buildmyscores.com 206-377-9991 firstname.lastname@example.org
Calyx Software Affordable software that streamlines and optimizes all phases of the loan processâ€”from loan marketing through closing. www.calyxsoftware.com 877-862-2599 email@example.com
Best Rate Referrals Specializes in direct marketing services www.bestratereferrals.com 800-811-1402
Bismark Mortgage Company Residential Construction Loans www.bismarkmortgage.com James Minarsich 800-350-7199 x106 firstname.lastname@example.org
BlitzLocal Provides our clients with every tool necessary to run a profitable internet marketing campaign www.blitzlocal.com 888-811-2448
CMG MORTGAGE INC One of the nation's leading wholesale mortgage banks with offices in San Ramon CA and Phoenix AZ www.cmgbanking.com John Cathro / Mike Lee 702-290-9210 / 925-708-2236 email@example.com / firstname.lastname@example.org
Credit-Aid Software Credit Repair Software. Credit repair business opportunity www.credit-aid.com Barbara Starr 800.257-1192 email@example.com TheNicheReport.com
LENDER & RESOURCE DIRECTORY
CreditCRM THE ONLY full credit repair business in a box www.creditcrm.com 877-256-8162
Flagstar Wholesale Lending One of the largest wholesale and correspondent mortgage lenders in the U.S. www.wholesale.flagstar.com 866.945.9872 firstname.lastname@example.org
Franklin First Financial www.franklinfirstfinancial.com 800-408-6421 DocMagic The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges www.docmagic.com 800-649-1362
eMagic Providing automated online origination solutions, including a customizable, secure MortgageApp for only $75 a month.www. emagic.com www.emagic.com Chad Northington 800-440-1625 email@example.com
ENTITLE DIRECT Savings up to 35% or more on title insurance in 30 states www.EntitleDirect.com/mortgage 877-936-8485 or 877-9ENTITLE SpecialistCenter@EntitleDirect.com
First Mount Vernon I.L.A. Privately-owned, equity-based lender which specializes in lending to borrowers who require fast closings www.FMV1.com 703-823-6800
Freedom Mortgage Branch Opportunities www.fmbranch.com 800.220.9498 firstname.lastname@example.org
Global DMS, LLC Collateral Management Technology www.globaldms.com MattMcHale 877-866-2747 x1527 email@example.com
MBSauthority.com Live MBS data and analysis, lock recommendations, newsletters, and more! FREE trial! www.MBSauthority.com Barry Corse 800-264-7135 x 2 firstname.lastname@example.org
Manaseh, Epharim & Associates Domestic and international financier, offer up to 100% financing to qualified investors/ borrowers www.meandassociates.com R.D. Walker email@example.com 770-840-0112
MMG Capital LLC Asset-based Hard Money Lender; Nationwide www.mmgcap.com Chris Gleason 310.295.1121 (ext. 301) firstname.lastname@example.org
GreenLake Real Estate Fund Private Commercial Lender in CA & NV Kamau Coleman 310-462-4637 email@example.com The Mod Post www.TheModPost.com (877) 812-4327
Guaranteed Home Mortgage Company, Inc. Established and well-funded Mortgage Banker since 1992 www.ghmc.com and www.joinguaranteed.com Kelley Berkheiser or Louis Tesoriero (888) 329-GHMC firstname.lastname@example.org
The Mortgage Lender Implode-O-Meter Tracking the Housing Finance Breakdown... the WHOLE truth www.ml-implode.com
LENDER & RESOURCE DIRECTORY
Mortgage Insurance Agency, Ltd. State Licensed Surety Bonds, Errors & Omissions, and Fidelity Bond coverages for Mortgage Bankers and Mortgage Brokers nationally www.mtgins.com David Jackson, President (866) 355-9944 email@example.com
National Valuation Service, Inc Comprised of thousands of fully vetted Independent Business Owners who as Appraisers, provide valuation and consulting services in 50 states 786-581-9171 firstname.lastname@example.org
Premier Advantage Marketing Specializes in lead generation for the mortgage industry www.ThinkPAM.com Tom_emmerson@budco.com
Presidents First Mortgage Bankers Leading Wholesale Lender www.presidentsfirst.com Bruce Lawner 1-800-507-0423 email@example.com
Quality Mortgage Services, LLC Full Service Mortgage Compliance Solutions www.qcmortgage.com Contact: Chip Langley Phone: 615-591-2528 Email: firstname.lastname@example.org NetMore America, Inc. Next Gen Mortgage Banker: Wholesale/Retail Branching www.netmoreamerica.com Michael Arnold 877-490-3140 email@example.com Quick Qualifier Software Prequal & Marketing Software for Loan Officers www.mortgagesoftware.com Thor Skonnord (888) 684-9273 firstname.lastname@example.org
OSI Express Not just mortgage flyers and open house flyers, We are a powerful financing analysis tool for refinance and purchase, greatly helping loan originators www.OSIExpress.com and www.EZMortgageFlyers.com OSI Customer Care 866.674.1999 email@example.com
RateLink Providing mortgage professionals with timely and accurate data as a means to a competitive advantage www.ratelink.com 800-938-5193
Remington Financial Group, Inc Senior Financing, Mezzanine, Bridge Loans, Hard Money, Equity, and Joint Venture. All Property Types. www.remingtonfg.com 480.905.3239 firstname.lastname@example.org
Sierra Pacific Mortgage Retail Branches and Wholesale Lending Nationwide 800-447-3386 email@example.com
Mortgage Social Media Marketing The Premiere Book on Social Media For Mortgage Finance Professionals! MortgageSocialMediaMarketing.com/ebook firstname.lastname@example.org
Waquis We provide HUD Auditing and QC on every loan type www.waquis.com/qc Joe O'Neill 310-696-9515 email@example.com
Xetus Provides a powerful, easy-to-use loan origination system www.xetus.com Scott Stein 650-237-1225 x123 firstname.lastname@example.org TheNicheReport.com
BRINGING UP THE REAR
Easy To Use!
Amazing Software ~ Current Guidelines Automatic Calculations ~ Accurate APR
- continued from page 58
Beautiful New Mediterranean Style Home
Family Oriented Floor Plan & Park Like Setting
Printable PDF’s 3 Nice Bedrooms 2 Full Baths Bright Kitchen Family Room Central A/C Cozy Fireplace Open Floor Plan Big Back Yard 2 Car DT-Garage
Jim Jenkins, Real Estate Agent\Broker The Jenkins Team 888.123.4567 www.JenkinsTeam.com Finance Notes
HomeSetting Style e aneanvate Park Lik r r e it e Pri Med l NewPlan with Larg fu ti u Bea ted Floor Rate
Closing Cost Est
Seller/Lender Pays Total $ Required
QUIET AND COMFORTABLE
Located in a Family Neighborhood. With nice Low Maintenance Landscaping, it is Close & Convenient to Schools,
Shopping and Freeways.
This financing is designed to assist you in selecting the loan program that most closely suits your budget. Financing is shown for comparison only. This is not an offer of credit or commitment to lend. Loans are subject to buyer/property qualification. Rates/fees are subject to change without notice. Total Cash Required may include prepaids/impounds, not cash reserves which may be required for some conventional loans.
Total Payment may include taxes, insurance & mortgage insurance for loans when required, but does not include HOA.
APR shown is for 1st loans only. 2nd loans do not include prepaid finance charges. A full disclosure of your closing costs, including the APR, will be provided when you select a financing program and negotiate the purchase of a home.
Uncle Sam has $$$’s for you!
Bob Smith, Senior Mortgage Consultant Office: 888.555.1212 Cell: 800.123.4567 Email: email@example.com t 1234 Main Street, Hometown, 92869 ~ Licensed Mortgage Broker enUSA tate Ag Real Es 2322322 Whether you are a �irst time or step up ll Jones, Mary 23.4567 Cerealty.com homebuyer, Uncle Sam has a tax credit that 800.1 friendly @ can give you a bag of money. mary
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And I do love windows, don’t you. I always ask for the window seat when on a long flight. And I even like opening windows to let fresh air in when hanging around my house. The problem with this “window,” is that if I were to open it, I’m fairly certain that whatever air would come in as a result, would be so toxic as to kill me within seconds. Like a poisonous gas that would dwarf the power of Zyklon B. The New York Fed declined to comment for the WSJ story, as did representatives from Goldman, Morgan, JPMorgan Chase, and Citigroup, which I thought was, collectively speaking, very transparent of them. Bank of America, however, did say the Over 800 Stunning Variations following: Free Co-Branding ~ Free Updates "The efforts to manage the size of our balance sheet are appropriate and our policies are consistent with all applicable accounting and legal requirements.” As if that’s even remotely the point. The WSJ also pointed out that it was excessive borrowing, or “leverage,” as the banksters are fond of calling it (unless it’s a homeowner, of course, in which case “excessive borrowing,” is only a euphemism for “irresponsible deadbeat”), that was a big part of what caused the “issues” of 2008.
These credits apply directly against income taxes owed, and may actually create a refund for some homebuyers.
First time homebuyers* did you know that you may be eligible to receive a tax credit up to $8,000? Now is the time for you to achieve the dream of homeownership.
8 $50,83 $2,522
Step up buyers** are you looking to buy a bigger home? You may be eligible to receive a tax
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According to the data, the banks' outstanding net repo borrowings at the end of each of the past five quarters were on average 42% below their peak in net borrowings in the same quarters. Though the repo market represents just a slice of banks' overall activities, it provides a window into the risks that financial institutions take to trade.
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that people were all upset about for a few months, as I seem to recall. It’s all better now, right? I mean they hardly need any taxpayer support now, beyond a few trillion in free loans, and some suspended accounting rules that allow them to not recognize losses, right? That’s no big deal, why that’s practically free market. And quit it with all the “disastrous” talk, okay. From now on, how about we refer to the events that took place during the fall of 2008 as being “challenges,” or better yet, “issues”? The WSJ article went on to say:
Excessive borrowing by banks was one of the major causes of the financial crisis, leading to catastrophic bank runs in 2008 at firms including Bear Stearns Cos. and Lehman Brothers. Since then, banks have become more sensitive about showing high levels of debt and risk, worried that their stocks and
BRINGING UP THE REAR credit ratings could be punished.
Damn, that was beautiful, was it not? “Since then, banks have become more sensitive about SHOWING high levels of debt and risk…” They’ve become more sensitive about SHOWING it, not that they don’t do it anymore. So, you see… they’re not lying, they’re just being more “sensitive” to our needs by not sticking in our face the fact that not a damn thing has changed since they all cashed out on breaking the world. Well, that’s different… thanks Lloyd, John, Vikram, Jamie and Brian… I do appreciate your newfound sensitivity. Tell you what… if this was all there was with these guys, then I’d probably be willing to let them all off with a securities fraud conviction, but it’s far from being an isolated incident. These guys are now operating essentially as if they are beyond the law, beyond even the scope of our democracy. Did you see them report last month that their trading desks all made money every single day of the first quarter of 2010? And then a guy from Bloomberg who’s apparently quite adept with numbers figured out that if a trader was someone with a 70% chance of making money on any given day the odds of him or her making money for 63 consecutive days would be 5.7 billion to one? And I looked it up and found that, to give that mind-numbing numerical probability some context, the chances of being dealt a royal straight flush in five cards is only 650,000 to one. Obviously, whatever these banksters did 63 days in a row during the first quarter, it bears no resemblance to “trading”. And yet they touted it, as if we should all stand back and applaud their superior intellect, trading expertise, and general prowess with all things financial. Well, I have a different idea of how these guys need to be treated. They are failures. Not a one of them would still be in business as the company they are today, were it not for the sycophants we have at Treasury, and the weakkneed rubes we’ve elected to represent us, to say nothing of the administration, all of which decided that taxpayer largesse was in order. It’s not a question of what’s merely legal anymore, fellas. It’s a question of whether or not you’re the right guys to restore confidence in a financial system that’s proven itself to be morally and legally bankrupt. You know, so that maybe… just maybe… the day will come when someone other than the federal government will
want to invest in a mortgage backed security of one kind or another. Because if that goal can’t be achieved, then I’d say that the banks of the future need be nothing more than another public utility. Are you feeling me? My God… lowering your debt at the end of the quarter to appear one way or the other? Really? Well, all I can think of is a quote from Clarence Darrow, who once said: “I’ve never killed a man, but I have been known to read a few obituaries with great pleasure.” Shape up, banksters. Because you’re currently on a path that doesn’t end well for anyone. Mandelman out.
Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on Ml-Implode.com called Mandelman Matters. He also publishes a Monthly Museletter and you can follow "Mandelman" on Twitter. Send your reponses to firstname.lastname@example.org.
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BRINGING UP THE REAR
Bringing Up the Rears: Special Banksters’ Edition BY MARTIN ANDELMAN
loyd Blankfein, John Mack, Vikram Pandit, Jamie Dimon, Brian Moynihan, Et
Those names should ring some bells by now, but in case you can’t place them all, they are the names of the CEOs of Goldman, Morgan, Citi, JPM Chase, and the new guy at BofA who replaced Kenny Lewis at the beginning of this year. Now, there are all sorts of reasons that I could go after these guys for being enormous rear ends. I mean, just the fact that any of these CEOs still has her job is nothing short of astonishing. Traditionally, as far as I can remember, CEOs that captain their corporate ships only to go fatally crashing into the cliffs of insanity get canned, right? Not only did these guys keep their jobs after, at the very least, spectacularly failing, but they also picked up very nice bonuses to boot. So, I’d have to say, very well done there. But I’m not even going to worry about any of that today. No, today I’m only concentrating on what this group of overbearing oligarchs has done lately, like as in over the last five quarters, according to the Federal Reserve Bank of New York. That’s right, new stuff. They didn’t do enough to destroy the global financial system over the last decade, so I guess it’s a matter of why-quit-on-a-winner sort of thinking? 58
Apparently, data released by the Federal Reserve Bank of New York shows that 18 banks, including those listed above of course, have been lying about their levels of debt that are used to fund their trading of securities at the end of the last five consecutive quarters, lowering them by an average of 42%, and then increasing those debt levels back to the real numbers in the middle of the following quarters. Oh, I know… it’s not really “lying,” in this, our horribly-distorted-by-bank-lobbyists-world, I’m sure it’s actually perfectly legal, and equally sure there’s some banking lawyer out there who can set me straight on this. If such a lawyer ever contacts me I think I’ll introduce myself by saying: “Hi, I’m a human being. What are you?” The Wall Street Journal reported the story saying: The data highlight the banks' levels of short-term financing in the repurchase, or "repo," market. Financial firms use cash from the loans to buy securities, then use the purchased securities as collateral for other loans, and buy more securities. The loans boost the firms' trading power, or "leverage," allowing them to make big trades without putting up big money. This amplifies gains—and losses, which were disastrous in 2008.
Were they now? Disastrous? I hadn’t heard… pray do tell. Disastrous for whom, exactly? Not for any of these fine fellows, right? They all did pretty darn well, following that little speed bump of a financial hiccup - continued on page 56
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