Online Financial Tips

Archive for November, 2011

We are in the midst of the most challenging credit environment in a generation. Many lenders have closed their doors forever and virtually all have tightened their lending standards. Even borrowers with clean finances, good credit and healthy down payments are finding it difficult or impossible to get their projects funded. What a difference a year makes.

We’ve been living in an era of cheap money for a-long time now. Interest rates and marginal income tax rates both began to moderate and trend down as America and the Federal Reserve embraced the supply side of the economic equation. But cheap money does not, necessarily beget copious amounts of lending even if willing borrowers abound.

Look at our situation right now; rates are so low that when you factor in inflation money is practically free. There are plenty takers willing to invest in commercial property or undertake a new development project but the banks aren’t funding loans.

It is not the cost of money that matters, it’s the flow. The key to a vibrant credit market is liquidity. Most financial Institutions have no real interest in holding the loans they write.
They could hold on to their commercial mortgages and earn some interest but so what?

They could earn interest by buying Government bonds and Government bonds have no risk. Most financial institutions either sell or borrow against their mortgages so they can get more money to loan out again or to invest in other core business activities.

What has happened recently is that the secondary market for mortgages seized up. No one was willing to buy mortgages so, if banks wrote them they were facing the prospect of holding them and, thus, tying up their capital at substantial risk. They opted not to write them. No loan buyers in the market, no loans. It doesn’t matter how low rates go.

To facilitate the efficient buying and selling of mortgages Wall Street turned them into bonds. They took hundreds of loans at a time, of all different quality, bundled them and called them collateralized mortgage obligations (CMO). These CMOs were bought and sold and repackaged and borrowed against again and again, The CMOs included good mortgages and poor mortgages and even some dreaded “sub-prime” mortgages. Eventually, no one could figure out who owed what to whom and what actual property was backing what bond. Investors stopped buying. In very short order volume in the secondary mortgage market dropped by more than 80%. No loan buyers, no loans.

So what is a borrower to do? At my firm, MasterPlan Capital, I talk to borrowers every day. I can assure you they don’t care about the CMO market or how hard it is to find buyers for mortgage paper now-a-days. They want their deal funded as-soon-as possible credit crunch or no credit crunch.

I’m a commercial real estate investment banker; it’s my job to get my clients the money they need quickly, efficiently and on the best terms available. I had to find funding sources and investors who were un-phased by the credit market’s liquidity problems.

The answer should be obviously to professionals and borrowers alike; find lenders who don’t sell their loans.

A mortgage lender who holds the loans it originates is wholly unaffected by the fact that there are few buyers. He just doesn’t care. There is a name for these unique lending companies, there’re called “portfolio lenders”. They issue mortgage loans and they keep them in their portfolio, collecting interest over the life of the loan and receiving their principle back at maturity. Portfolio lenders have the freedom to be flexible and write loans they want to write rather than writing a loan that will be sure to appeal to a very discriminating debt purchaser. They close deals much faster and with less paperwork and less documentation than lenders dependant on the whims of the market. Portfolio lenders are still in the game while the big national banks, insurance companies and Wall Street sit on the sidelines and wait for the market to become liquid again.

I’ve been able to identify and establish relationships with quite-a-few portfolio lenders in several segments of the financial industry. By turning to this special group of money sources I’ve been able to secure approvals for clients who simply could not get financed through traditional outlets.

I’ve had great success with hedge funds, real estate investment trusts (REITs), and private lenders.

Hedge funds crave risk while others shun it. They pride themselves in being aggressive and having the ability to see the value in a deal when others can’t or won’t. These hedge funds are largely unregulated and can invest wherever they see fit. Best-of-all hedge funds are flush with cash. They have tons of money immediately available and can make decisions and close deals in just days. Once you have identified a fund that has a taste for real estate and a desire to make deals all you have to do is bring them what they want. And once you’ve made them money in a deal you’ll have a funding source for life.

REITs are similar to hedge funds in some respects but they are often publicly traded and thus lack the flexibility inherent in hedge funds. A REIT is a specialty company that must, by law, operate in the real estate sector and distribute substantially all of it’s income to it’s shareholders. Most REITs directly invest their assets in income producing real estate such as apartment buildings, retail centers, hotels or office buildings. But some are in the business of making loans. The trick is to find them and then to come to understand their lending criteria. By and large they are portfolio lenders so if your building or development project falls within their investment parameters you can close loans all day regardless of the credit environment.

Private lenders are individuals or privately owned business entities that seek high yields on their investment capital by lending it out against commercial real estate. Once called “hard money” lenders they are now main-stream and represent the fastest growing segment of real estate finance. There are literally hundreds of firms that hold themselves out as private lenders. The trick is knowing which ones will truly come through with the money on closing day. Working with a legitimate private lender can be extremely rewarding, they identify with property owners and investors and write loans based on the merits of the deal not a set of Government imposed guidelines. A good private lender on your team is like money in the bank. But, beware, a disreputable private lender can ruin your deal and your reputation.

When seeking financing for commercial real estate I suggest you start with a simple but important question. Ask the lender if they sell their loans or portfolio them. If they tell you they hold their loans for their own account in their own portfolio, you’ve found someone who can afford to ignore the credit crises and write you a check no matter what the market happens to be doing.

Debt settlement is one of the financial solutions. It is a process of settling a debt which involves negotiating a lesser pay off amount to resolve the outstanding balances owed to creditors. Does everyone in debt need debt settlement? NOT REALLY! Debt negotiation may not be suitable for you under certain circumstances.

First, if you don’t have enough cash in hand, you may not be able to settle the full settlement amount. In normal situation, you are required to make payment right after the settlement is made. Without sufficient fund, you are not able to negotiate with your creditors for a better amount. In this situation, debt negotiation is not your choice. You should opt for debt consolidation or other alternatives.

Secondly, your credit report would show that you have debt settled rather than debt paid in full. Your credit history may look bad for you until the debt has been completely removed from your file. Besides, if you fail to get the written statement from your creditors stated that you have no longer owed anything on the debt, other collection agencies may send you reminder letters to chase for debt.

Thirdly, it is not zero cost for debt negotiation. Once you have signed up with the debt settlement company, you are bound to pay an upfront for enrollment purpose. At the same time, there is a monthly fixed expense for you. You are required to pay additional monthly service charge which costs about USD20 for getting the service. Isn’t it an additional financial burden for you?

To sum up, there are shortcomings for this financial solution. If you are not too sure how you could be benefited from this service, consult the professional financial consultant first before making any decision.

It is now very easy to obtain quick cash to take care of your unexpected expenses. Loans are nowadays available very easily and can be obtained with minimum documentation. The online savings account payday loan is one such type of cash advance that you can apply for while browsing on the internet. You can get the money that you require to pay off your bills and any other expenses and clear the borrowed sum by your next paycheck.

You can even apply for payday loan with savings account only. The money that you require is directly deposited into your savings account. This advance requires you to have full time employment and an account where your monthly income gets deposited. The loan amount ranges around $100 to $1000 depending on the lender and your repayment ability. The interest rates levied on such type of quick money advance are usually quite high. It can be anything around $15 to $20 for every $100 borrowed. Such high rates are charged owing to the quick processing of the loans and the risk involved due to the easy availability of cash.

Online Service

The alluring features of the online savings account payday loan are its convenience and hassle free procedure. Some people do not have the time to stand in long queues and apply for the loans, wait for the processing to take place and await the results. These advances are instantaneous as they get cleared the minute you submit the application form online. You are required to provide details like your name, address, bank account information, employment details when you submit the form.

The lenders online give quick approvals. The type of advance can also be called a faxless payday loan for savings account. It does not require faxing documents to and fro to the offices. With electronic funds transfer, the money is directly deposited in the account, which can happen the same day or at most within 24 hours of submission.

No credit check done to qualify for such personal advances. If you have regular employment, with an active savings account, you can assure yourself of the needed amount. This feature makes this option a draw for those with bad credit and really in need of fast cash to clear their expenses.

Online savings account payday loan is an expensive but timely pay substitute for many in need of money. With so many lenders available online, the competition is fierce and you can take advantage of this to land the best and most inexpensive deal to overcome your financial crisis. Do remember to avail these advances only when you absolutely need them and repay them as soon as possible to avoid penalties or increased interest.

The traditional commercial lending market has dried up, especially for construction loans. Anyone seeking a commercial construction loan will need to find a private equity fund to accomplish their funding needs. I have discovered just such a fund that is actively lending large commercial construction loans for both domestic and international projects.

The private equity fund has $1B in liquid cash and $2B in stand-by letters of credit from their investors. The fund uses a bond wrap around the note in Germany to recoup their cash and replenish the fund every 60-90 days. This private equity fund for commercial construction loans ($20M+) is very transparent, after NCND agreements are executed with their master broker. They will provide capacity and proof of funds through an attorney affidavit and will also provide title company contact information to verify closings. The bottom line is these guys have money and are funding projects.

This private equity fund will finance 100% of the construction cost (including land acquisition) as long as the appraised completed value is 80% or less of the construction loan amount. Typical rates and terms for a quality domestic construction project is 9.5% interest only, interest reserves until stabilization, 6 points paid out of loan proceeds, 3-5 year term with funding in approximately 60-90 days after Letter of Intent is issued. There are no “upfront” fees, yet the fund requires a 3rd party review fee ranging from $16,000 to $24,000 based on the size of the project after an LOI is issued and the client has received proof of funds. Also, after commitment is issued, the borrower is required to place 1% of the loan amount in a bonded and insured pre-closing escrow account which is used to satisfy closing conditions. The principal’s signature is required for all disbursements and any unused balance is credited back to the borrower at closing. Other than that, this is essentially 100% financing for large commercial construction projects.

The documentation required is similar to that of conventional underwriting which includes an appraisal, environmental study, feasibility study, approved permits, corporate tax returns and personal financial statements on all borrowers. For seasoned developers with “ready to break ground” construction projects in excess of $20M, this may be a viable solution until commercial banks decide to return to this market. This construction loan process starts by completing a 2-page Intake Form and speaking with the master broker. Once their NCND agreement is signed, the principal will be in direct contact with the private equity fund and their attorney through closing.

When you take out your home insurance policy, consider the geographical location of your home. If you live in an earthquake prone area, the basic home owners’ insurance policy would not be enough to protect your home. Earth quake insurance is the policy that covers the cost of repair and replacement of damaged property as a result of earth quake. There are additions which provide coverage for other property on your land like, garages, sheds, gazebos etc.

When you are shopping around to get a lower rate for your home insurance, these are factors to bear in mind:

o How much coverage do you need in your earthquake insurance? How do you calculate your need? It is advised that you base your price on what it would cost you to rebuild your house or replace damaged property as against basing it on the actual market value. This would determine the extent of coverage that you need.

o Consider the age of your home. Older homes attract higher premiums. So if you really are concerned about the cost of your home insurance policy, you might need to look for a new house.

o Building materials used in constructing your home also affects the rates you have to pay. If you are thinking of building or buying a home in an earthquake prone area, you need to ensure that the building material is wood. Because frame houses withstand earthquakes better than other types of houses.

o People who live in earthquake prone areas generally have higher home insurance premiums. If you can relocate, then do so. That is if you are so desperately serious to lower your home insurance rates but if you really love where you live and cannot see yourself living anywhere else then brace up and get ready for higher home insurance rates.

A sure fire way of getting lower insurance rates is comparison shopping. You’ll be amazed to discover that you may have a price difference of about $500 to $1,000 in quotes. So go online get different quotes and find out which serves your best interest. Remember cheaper is not always better; neither is costlier!

It used to be that if your credit was bad, you were out of luck. These days, if your credit needs a boost, you can still qualify for a loan at many dealers, but probably not at your bank. Banks do not like the risk and are not set up for the risk of a bad credit loan. But a car dealer with a sign out front that states they will finance, will probably accept your loan and they are set up for the risks.

These dealers are called Auto Loan Brokers. They can be either a subprime lender or a hard money lender. A subprime lender loans money at a higher interest rate than the prime rate and they will work with the customer to hammer out a deal that both of them can live with. They will require some financial information from you, but not as much as a bank. A hard money lender has even less restrictions and asks for less information, but charges a higher interest rate because they feel they are taking more risk (which they usually are). You will usually need to provide some type of collateral for a hard money lender. Often times the subprime lender is the way to go and this type of lender can help you establish your good credit rating again.

With the present challenging credit market many people feel that it will be very hard for them to get a new or used car. As we have demonstrated above, that is just not the case. But you just have to be careful who you are dealing with. Check their references and check with the Better Business Bureau. Also check the internet for references to their company (and maybe even their names). If all of your research pans out, the deal may be a good idea.

Remember, an auto loan can do a lot to improve your bad credit and most companies are straightforward and would love to work with you. To many people’s surprise, their present situation can work out to greatly improve their future.