Online Financial Tips

Archive for September, 2010

Mistakes happen. Humans make errors and sometimes these errors can fatal results. Doctors and other professionals are vulnerable to malpractice lawsuits. This is the reason why malpractice insurance policy exists. It protects professionals from becoming destitute. We all know how much one malpractice lawsuit costs. Not having this type of insurance can be devastating for some. In fact, there are quite a few cases wherein doctors were not able to recover from this financially.

If you are in the medical field, ask your employer your options when it comes to malpractice insurance. Do they provide one for their employees or do you have to provide one for yourself? Ask for the coverage and other details pertaining to it. This is so important that it should be the first thing that you ask for as soon as the company shows an intent of hiring you.

We all know that sometimes accidents happen. We do not want to cause devastation to someone, especially one that will traumatize a patient. However, it does happen and when it does, it is best to become prepared. If you are looking for an insurance, you better look for one that will give you the best coverage. Policies and procedures are different among insurance companies. So make sure that you get detailed information about it. Never discount the importance of a malpractice insurance because regrets happen in the end especially if you do not have this type of insurance to back you up when the bills coming from the malpractice suit comes pouring in.

There is no question we are in a fiercely competitive commercial lending market. Banks and other lenders have more money to lend than credit worthy borrowers seek to borrow. Interest rates remain historically low. Pressure continues to mount to lower lending costs to attract new customers.

Commercial real estate lending is no exception. Banks and other commercial lenders are battling for borrowers and, in the theme of cutting costs, many are placing more responsibility for documenting commercial real estate loans on loan processors with only limited knowledge of the fundamental risks involved. An unfortunate consequence is that many lenders are “lending blind”.

What is “lending blind”? Lending blind is approaching commercial real estate lending with substantially the same approach as lending to residential homeowners. Lending blind is making loans secured by commercial real estate without fully understanding the underlying commercial real estate project and the collateral risks it presents. Lending blind is closing one’s eyes to important legal, environmental and land use issues uniquely applicable to commercial real estate and ignoring available risk-shifting techniques in the hope or unfounded belief that if the issues are not carefully considered, maybe they won’t exist.

Make no mistake: Commercial real estate lending is not the same as residential real estate lending. Many lenders faced with customer resistance to higher loan costs may wish to close their eyes to this reality. Ignoring this reality, however, does not change it. Ignoring this reality may on the surface seem to cut costs, but it can endanger bank profits and jeopardize capital.

“Sound and safe lending practices” is not just a phrase used by banking regulators. It should be a way of doing business.

Failing to focus on genuine risks presented by commercial real estate lending is not a sound and safe lending practice.

Believing a commercial real estate loan is properly documented through use of pre-packaged computer generated loan documents, without also requiring qualified, in-depth analysis of land use controls imposed by documents of record and zoning, knowledgeable examination of survey, lease subordination, insurance, access, borrower authority and other legal issues, and without fully understanding environmental risks presented by existing, former or contemplated tenants, occupiers, and adjacent land owners, is not following sound and safe lending practices.

Blindly following a loan document check-list and filling the loan file with documents and materials that “evidence” a well documented loan, without a genuine understanding of the limitations, pitfalls, and legal red flags the documents may raise, is not following sound and safe lending practices. Using the ostrich approach to lending is a game of Russian Roulette. The result can be catastrophic to bank profits and capital if and when the loan goes bad.

Banks and other commercial lenders following these unsound and unsafe banking practices do not like this message. They often assert their loan processors are “good people” with excellent training and years of experience using their canned document software.

The fact that a lender’s in-house loan processors are “good people” is not in question. The fact that they are well trained to input relevant data so a computer can generate a beautiful set of loan documents is not the issue.

The issue is what may lie beyond the documents.

A perfectly generated set of “standard loan documents” may be of little value if they fail to adequately address unique issues raised by the commercial real estate project serving as collateral. To be certain, each commercial real estate project is different. Unlike owner-occupied residential real estate, it cannot safely be “assumed” that commercial real estate collateral is legally suitable for, or can even legally be used for, its intended use.

A beautifully drafted Mortgage on commercial real estate is of little value if the project does not have a legal right to commercially reasonable access or parking.

CASE IN POINT: How secure is a loan on an 800 person banquet facility in a mixed use center if the banquet facility has a legal right to park only 155 cars?

CASE IN POINT: What is the collateral value of a hotel on a highly visible highway interchange, which has as its primary means of access only a license to use a private drive that can be closed at any time? [Is the appraiser legally responsible for discovering this fact when making the loan appraisal? What kind of access does the typical title insurance policy insure?]

Obtaining a Lender’s Title Insurance Policy with specialized commercial endorsements is a useful method of shifting risks away from the lender, but the lender must understand how to interpret each endorsement to know what it insures.

CASE IN POINT: While attending a loan closing as an “accommodation” for a lender making a large loan to one of its “best customers” to purchase a warehouse and manufacturing building, with instructions from the lender to simply “oversee execution of closing documents (the lender had prepared) and approve title”, it was discovered by lender’s counsel upon review of the lender’s required zoning endorsement that the borrower’s intended use of the facility was expressly prohibited by the applicable zoning ordinance. The ALTA 3.1 Zoning Endorsement to be attached to the loan policy disclosed that the borrower’s intended use was expressly excluded as a permitted use on the land. Neither the lender nor the borrower had read the endorsement or, if they had, they failed to understand its meaning. The transaction was aborted by the regretful but thankful borrower – who would have been unable to operate its business if the transaction had proceeded. Failure to recognize this restriction before funding would have almost certainly meant bankruptcy for one of the bank’s “best customers” and a huge non-performing loan for the lender.

Experience shows that lenders should not assume that borrowers and their counsel will always conduct an adequate due diligence investigation to ascertain all associated risks that may impact the project and important underlying assumptions for a loan.

A lender must also avoid the trap of over-reliance upon a borrower’s representations and warranties in the loan documents. If the borrower is mistaken, what is the consequence? Declaring a material default?

CASE IN POINT: A Mortgage securing a $1,650,000 loan contained a warranty from borrower that “all leases encumbering the Real Estate are, and shall remain, subordinate to the lien of the Mortgage.” One lease was, in fact, not automatically subordinate to the Mortgage. The Lender’s Title Insurance Policy included an exception for all existing leases and tenancies. The non-subordinated lease contained a Lessee’s Option to Purchase the entire strip center for $1,520,000. Will declaring a default for breach of warranty solve this defect? What is the lender’s collateral position if the Lessee exercises its Option to Purchase?

The business of lending is about making sound and safe loans that profitably perform as planned. Yield is the key. Not foreclosure. The ability to declare a default and start enforcement and foreclosure proceedings is a remedy of last resort. It is not a viable substitute for diligent evaluation of material loan predicates and will rarely fix problems with underlying collateral.

Sound and safe lending requires comprehensive understanding of all relevant issues confronting each commercial real estate project serving as collateral. If lenders are going to make commercial real estate loans, they should be following sound and safe lending practices. To do this, they must either learn how to fully and meaningfully evaluate all of the attendant risks associated with their collateral, or engage counsel with specialized knowledge and experience in commercial real estate lending to perform this function.

Turning a blind eye to the uniqueness of commercial real estate collateral, and to the limitations of many well meaning but unknowing in-house loan processors, is neither a sound nor a safe lending practice.

Independent, focused and knowledgeable lender due diligence is a must.

A recent study by the AMA says that male doctors are sued more than females, and the most sued are general surgeons and OB’s. This is not a surprise to our firm, we are a medical malpractice insurance company/broker who has been providing general surgeon medical malpractice and OB medical malpractice insurance for 16 years.

Both specialties can have similar characteristics. They perform lots of surgical procedures and have a limited relationship with the patient, when compared to the patient’s family physician. (Exception if the OB is also the patients Gyn)

Why males over females, male physicians can have more tunnel vision and be seen as less caring. Meaning they concentrate so hard on doing the procedure, that they can forget there is a scared person they are working on.

It is simple Physicians who are likeable are less likely to be sued. We have found this in our experience; doctors who are always hurried and not personable often have the most claims, and those who are not had the least. Studies show those MD’s who are the most kind to their patients do not get sued. Tips for an amicable doctor-patient relationship:

Sit down for a minute with patient and be eye level, or if the patient is on the exam table sit on a
stool and have them sit above you.

- Talk at a normal pace and look the patient in the eye
- Force yourself to listen and ask questions to show you are listening and you care
- Explain the procedure and ask if they have any concerns and listen to them
- Shake their hand or pat their shoulder

If possible call the patient the night before the procedure if you’re a surgeon, and or go see them in the hospital one more time than necessary. Talk with the family answer their questions or concerns.

Think about the person, this may be their first time in a hospital; they and their families are scared. For you this is another of many procedures to come, but for them this is a big event. Slow down and show you care, and if the procedure goes wrong at least the patient and the family have a favorable image of you. Otherwise you become the faceless nameless, or worse the rude cold doctor who harmed them or their family member. Part of many malpractice claims is the sense of revenge, or “that jerk has to pay”, this can be avoided with a little effort.

What a surgeon or OB/Gyn wants their image to be, if the procedure goes wrong, is the patient and or the family feels: Dr X is such a great person and he/she tried everything and this was just one of those things. But what great physician Dr X is, he/she was very caring, kind, he explained that this was not a for sure thing.

Parting thoughts, remember you became a physician to help people, show this with your patients. Besides you lessen the chance of a law suit, you also will build a very successful practice since people will refer you to their friends and family.

HCP National is a medical malpractice company, who specializes in surgical medical malpractice, General Surgeon malpractice insurance and Ob/Gyn Malpractice Insurance

Online credit card processing involves many fundamental frameworks. Before starting any online credit card processing

The home equity loan interest rate that is available when you are thinking about applying for a loan should be a serious consideration in whether or not you choose to get the loan. If however you have financial needs that force you to take out a loan, take the time to review the important factors that impact the rate before choosing a particular lender. A small change in percentage points on the loan can make a significant dollar difference.

Defining the Terms

The amount of home equity is the amount of cash you would receive if you sold the home at market value and paid off the existing mortgage. In practice, this is not usually what happens. Instead the home owner increases the amount of loan against the home based on the increased value of the home. Equity in the home can increase if the market value increases and if the principal portion of the mortgage has been reduced by regular payments.

Where are the Best Loans Found?

Home equity loans are more popular now than in the past, in part because home owners may be looking for a way to pull cash value out of the home to meet obligations. However, the downturn in the housing market may make the home market value lower which means that there is not as much equity or collateral in the home. This makes less money available as collateral for a second mortgage.

How is the Interest Rate Calculated?

The interest rate for your second mortgage is affected by several different factors. If your credit score is high, the interest rate is likely to be somewhat lower than if you have a poor credit score. The amount of the loan you are seeking will affect the interest rate. Your rate may be higher if your loan-to-value ratio is high.

Types of Interest Rates

Interest rates on a home equity loan are usually either fixed or variable. Variable rates tend to be somewhat lower than fixed rates at the beginning, because they offer more protection to the lender. If interest rates in general increase, the rate charged on the individual loan can be adjusted upward. If interest rates in the economy are low, a fixed rate is advantageous for the borrower, since the cost of the monthly payment won’t increase over the repayment period.

Why Do Borrowers Choose a Home equity loan?

The primary reason to get a home equity loan is to take care of large financial obligations such as home improvement, schooling costs or medical bills. Since the loan is secured by collateral in the home, interest rates are usually much lower than increasing your credit card debt. It is for this reason a home equity loan is sometimes used to pay off high-interest credit cards.

Repayment Period of the Loan

In general, borrowers try to spread loan repayment out over a long period, so the monthly payment costs will be less. This practice results in a much larger cost for the interest portion of the loan, since the interest will be calculated on the longer period. Sometimes a lender will reduce the interest rate if the loan is taken for a shorter term.

No one wants to have an unbearable burden of debt, especially in shaky economic times, but sometimes an equity loan is the best option to manage large financial obligations. Before signing on the bottom line make certain that you have the best home equity loan interest rate available.

Before you go into any dealership and embarrass yourself, get a copy of your credit report. There is nothing worse than someone coming into a dealership bragging about how good their credit is only to find out it is not as good as you thought also if you know you haven’t paid anyone in your entire life. DO NOT come in thinking that you have any bargaining power. I have seen one erroneous entry on a credit report change a rate from 6 to 15 percent, just because the consumer had no idea that someone has made an incorrect entry on their credit report.

In my experience this is the biggest issue consumers have when trying to purchase a new vehicle. Contrary to popular belief, the banks and not dealerships set interest rates. You can get a free credit report annually. The three (3) reporting agencies Equifax, TransUnion, and Experian all of which will give you a free copy of your reports. Banks that grant auto loans primarily use Equifax and TransUnion. Therefore these bureaus need to be accurate for you to obtain the best possible interest rate when purchasing your new or pre-owned vehicle. There are 3 things that influence interest rates:

Credit Score Year of Vehicle Term (number of months financed)

Obviously the higher your score the better interest rate you will get. Just as food for thought, a 650 Equifax score is granting rates of around 9-10 percent on brand new vehicles. So if you are looking at an older vehicle and if your score is lower than 650 you should expect no less than a 10 percent interest rate.