Good news continues to flow in that benefit the California real estate market, Interest rates are at the lowest level in recorded history. The largest institutional banks settled for a staggering 25 Billion dollars with the Federal government for inappropriate foreclosure activity and now the California Homeowners Bill of Rights is completely implemented.  All have led to a resurgence in the California real estate market that will benefit homeowners as prices should continue to increase due to the positive economic factors.

But probably the best news is that foreclosure activity is down 65% from January 2012.  Couple this with the banks being much more active in “working things out” with delinquent homeowners and with the Homeowners Bill of Right instructing California lenders to stop the process of dual tracking will only lead to more future positive news for homeowners and real estate professionals throughout California.

When can a Private Equity Loan Help your Borrower

When can a Private Equity Loan Help your Borrower

 

Hard Money Loans for Mortgage Brokers – While most Mortgage Brokers focus most of their time and energy originating “A” Paper Loans, situations do come up when even an “A” Paper Borrower might need a Private Equity Loan in order to “close the Deal”.

Most of the time this situation occurs when the “A” Paper Lender is dragging their feet or better yet going crazy with underwriting conditions that are imposed on the Mortgage Broker’s Borrower.

We have seen instance after instance where due to a small insignificant matter led an “A” Paper loan going down the drain.  In such a situation time might not be available to close escrow with another “A” Paper Lender in the time agreed to in the Purchase Contract with the Seller. Or in the case of a simple refinance where the Borrower needs funds for a Business or Investment purpose a Private Equity Loan can provide a Mortgage Broker’s Borrower the funds they need when the “A” Paper Lender proves difficult.

When might a Borrower Need a Private Equity Loan?

 Following are the most common situations where a Mortgage Broker should suggest a Private Equity Loan to their Borrowers:

 The Borrower has Credit Issues:

  • Current and past delinquent mortgages and consumer credit that are not acceptable to the big banks and other institutional lenders.

The Borrower has Income Issues:

  • This covers everything from limited income documentation to no income  documentation whatsoever, either way the big banks aren’t accepting the income documentation

There are Property Condition Issues: 

  • Deferred maintenance and contemplated property additions not allowed with traditional bank financing

In additional there are numerous types of properties that the big banks and institutional lenders will not often fund, some of which are:

  •  Churches
  •  Gas Stations
  •  Auto Repair Facilities
  •  Fix & Flip Transactions
  •  Vacant Land
  •  Unpermitted property additions

The Borrower Needs the money FAST: 

 When money is needed faster than the big banks or institutional lenders can provide – Hard Money Loans for Mortgage Brokers

A Mortgage Broker that offers a Private Equity Loan to their Borrowers can prove be a good business decision for both the Mortgage Broker and their Borrowers.

Mortgage Brokers should ALWAYS inform their Borrower/Clients that anytime a Private Equity Loan is obtained that a plan should be put in place to pay the loan off, by either refinancing when credit, income & the property is acceptable to an institutional lender or by simply selling the property.

Often times Borrowers contact our company directly or through their Mortgage Broker to obtain funds for a GOOD business or investment deal that would not remain available when allowing for Institutional Lender’s loan processing time frames.  We always suggest a plan to pay the loan off, whether that plan includes credit repair, income documentation matters or necessary improvements to the property’s condition.  Often times income documentation is a much harder challenge, since the underwriting requirements of institutional lenders often demand two years’ documentation of business income and often the same time frame for employed Borrowers.

This type of situation provides an opportunity for Mortgage Brokers to earn a commission from originating the Private Equity Loan and later another commission from originating the institutional refinance. Hard Money Loans for Mortgage Brokers.

We’re currently offering Private Equity Financing at interest rates that range from 9% to 12%, with most of the loans our company funds having an interest rate of approximately 10%.

Whenever a Mortgage Broker has a Borrower who might need or benefit from obtaining a Private Equity Loan all the Mortgage Broker needs to do is provide us with the address and the “Deal Points” and our company is usually able to make a lending decision, which includes a proposed interest rate, loan terms together points and closing costs.

Submitting the Borrower’s information to our company can be done over the phone or through the Mortgage Broker Portal on our company’s secure website.

We always provide a preliminary underwriting response the day a Mortgage Broker submits the Borrower’s information to our company.

Private Equity Loans are very much like institutional loans but with only a few differences.  The primary differences being the approval requirements and the funding speed.  Private Equity Loans are much easier to get approved when credit or the condition of the property is an issue.

The typical time frame from Mortgage Broker loan submission to funding in typically “1” to “2” weeks.  There are instances when it takes longer but that is usually associated with title matters or matters not disclosed by the Borrower that later pop up at the last minute that requires additional time to resolve.

Our company is highly dedicated to serving the needs of the Mortgage Broker community and their Borrowers with Private Equity Financing.

Our company has a convenient online Broker portal just for Mortgage Brokers on our company’s website that makes it convenient to obtain a loan quote on a potential loan or to get a formal loan approval on a loan in process.   Our website is fully secure and is an accredited SSL domain.

If you are a Mortgage Broker and would like to obtain additional information on how a Private Equity Loan can be a valuable choice for both you and your Borrower, then please call our company at (888) 797-7970.

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Mortgage vs. A Deed of Trust – What’s in a Name?

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Mortgage vs. A Deed of Trust – What’s in a Name?

Mortgage vs Deed of Trust – Have you ever heard the term “I need a mortgage” or “I just refinanced my mortgage” or another other statement that contains the word mortgage? Was the person making that statement talking about a property in California? Was that person you?

The public has a huge misconception when referring to the legal document used in California known as a mortgage when discussing real estate financing. This is due to the fact that there is no such thing as a mortgage in California. Our country is comprised of 50 states with each state having its own unique laws and customs. States are free to adopt whatever type and form of legal real estate documents.

California is known as a “Trust Deed State” which refers to California legislation requiring that for promissory note to be used as a lien on a property it must be secured with a deed of trust.

The word “mortgage” has simply been adopted by California society as the normal and customary way of referring to a deed of trust, whether knowingly or unknowingly. In fact, there is a mortgage company or bank on just about every corner that advertises low rates on mortgages. So even the lenders and banks who lend money to purchase or refinance real estate in California are using the wrong word. There are many other such misconceptions often used customarily in society.

The main differences between a mortgage and a deed of trust are listed as follows:

 

Mortgage Deed of Trust
2 party instrument 3 party instrument
Borrower: Mortgagor Borrower: Trustor
Lender, Mortgagee Lender, Beneficiary
Trustee: Has Power of Sale
Reconveyance by Mortgagee Reconveyance by Trustee
Foreclosure by Judicial Action Foreclosure by Trustee Sale

 

As you can see the title of the parties to each respective document is referred to differently, but in each document there is a borrower and there is a lender. It’s just the deed of trust that has the 3rd party that a mortgage doesn’t have. The 3rd party to a deed of trust is the trustee. This is the main difference between the two documents.

The trustee has authority “authorized” by the borrower when they signed the deed of trust. A trustee can be a person, a Title Company or even the beneficiary as it is acceptable for the lender to also be the trustee. The trustee handles reconveying the deed of trust when the loan is paid off or processing a foreclosure sale.

The other main distinction between the two documents is in the way a foreclosure is processed. A mortgage requires that a lawsuit is filed in court and the process is handled in a court of law. The process of foreclosing on a deed of trust is by way of a non judicial process known as a trustee sale. This is processed and conducted by the trustee. A trustee sale is processed outside of court. After simply recording several documents, mailing out notices by certified mail and advertizing in the newspaper for 3 weeks a trustee sale can be held on a street corner or on the courthouse steps. The process is fast and simple.

After a foreclosure sale of a mortgage there is a Right of Redemption period for 1 year allowing the borrower the opportunity under certain circumstances to redeem their property. With a deed of trust that is foreclosed on by way of a trustee sale there is no Right of Redemption. Once the property is sold the borrower has no right to redeem their property. Mortgage vs Deed of Trust.

A deed of trust does allow the lender the option to either foreclose judicially or hold a trustee sale. A judicial sale will take about 1 year to complete and a trustee sale only takes 4 months. A judicial sale does provide for a deficiency judgment which allows the lender the option to foreclose on the property and also get a judgment against the borrower. Lenders almost always though choose the trustee sales route since the timeframe is so much shorter and there is no right of redemption.

The trustee to a deed of trust holds “Naked Title with Power of Sale” for the entire term of the loan. If a borrower has a 30 year mortgage the trustee possesses the power of sale for the entire term of the loan. The power of sale provision only becomes effective if the borrower defaults on their payments. The trustee’s power of sale is only removed when the borrower pays off their loan. The trustee will then issue a deed of reconveyance to the borrower. This action releases the deed of trust against the borrower’s property. It is at this point the trustee’s power ceases to exist.

If the borrower makes the monthly payments and eventually pays off their loan then the differences between the documents will have little to no effect on the borrower. Most borrowers will never even realize the differences. Mortgage vs Deed of Trust.

So, in the future, if someone in California tells you they’re getting a mortgage you can let them know what they really mean is they’re getting a deed of trust.

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Probating an Estate in California

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Probating an Estate in California

Death and Taxes are the only sure things in life that we all know are inevitable.

The Federal Government and the State of California have not lost sight of at least the tax part.

There are laws that the government, through our elected representatives, has passed providing for taxes to be assessed on certain Estates of deceased people. The government will want to confirm what is “Owed in Taxes” and then collect the taxes due prior to heirs receiving their inheritance. There are a number of exceptions such as the size of the estate and legal form of ownership prior to the death of the decedent.

When someone dies in California there is a process known as Probate. Simply put, Probate is the process of distributing the assets and paying the debts of the deceased person according to their request, such as is instructed by the Decedent in their Last Will and Testament. Or if someone died and did not have a will (also known as a “Dying Intestate”) the court will then make a determination as to who gets what under the theory of law known as the “Process of Intestate Succession”.

So often the Executor or Administrator of an Estate will need to petition the court to inform the court as to who receives what. At the same time, a dance with the tax man occurs as to what the value of the Estate is or what the value of certain assets are and if there is what’s known as a “Taxable Event” – on other words, the tax man will calculate the taxes due the government.

The process of settling and distributing the assets and money of the Estate to the appropriate parties can be very challenging and can often lead to a delay of a year or more.

As part of an overall Estate planning process, everyone who has an Estate valued at a minimum of $100,000.00 needs to obtain legal advice as to what the correct Estate structure should be. The right choices and decisions made prior to death can lead to a substantial savings in aggravation and taxes at a very difficult and trying time for all involved.

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Nothing Ventured Nothing Gained

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Nothing Ventured Nothing Gained

Starting a business is the dream of many Americans, the risks are high but the rewards can be great.

Money is always a necessary evil for anyone when they take that deep breath and make the decision to live the American Dream and start a business.

Starting a business almost always requires a substantial sum of money from the person attempting to get a business off the ground – money that many would-be business owners just don’t have. Sources such as family and friends can lead to disappointment due the their lack of excitement in the new business venture.

Potential business owners then often turn to “their” bank thinking that it can’t wait to jump in and fund their new business venture. Many future business owners might have poor or even bad credit when deciding to start their new business ventures – credit that their bank just might not find inviting when reviewing the loan application for the new business.

Well unfortunately, traditional lenders do have very stringent lending standards when lending to a new business, primarily due to the fact that so many businesses fail in the first several years and many lenders in the past have gone down with the ship with the business owner when the business failed. So naturally, lenders are very careful in what business they lend on and who they lend to.

Potential business owners can look to lending sources that don’t require the same stringent lending standards that the big banks do when lending money, lenders that will lend to business owners with poor to bad credit or have had a business failure in the past.

Equity lenders will lend the potential business owner the necessary money to get the business up and running based on the equity in the real estate they already own. Business owners can use their personal residences, rental properties or other investment properties to obtain the money needed to get things going.

The interest rates on equity loans are higher than traditional banks but when the money is used wisely for a business that has a good product or service that is in demand then the cost of money would be considered a wise business choice if it leads to a successful business and profits to the business owner. Later on, when the business is humming along and the need to expand the business arises then an equity loan can once again be used to finance the business expansion and thus provide the business owner additional profit.

Equity = Business Profit

Now go out and get that business going!!!!

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Dealing with Reverse Mortgages after Death

Dealing with Reverse Mortgages after Death

The advent of Reverse Mortgages a number of years ago was a godsend to many “older” Americans who had built up substantial amounts of equity in their properties.  Reverse mortgages allows homeowners the ability to “tap into” their equity to obtain monthly funds for living expenses or to refinance a loan that requires a monthly payment and obtain a Reverse Mortgage that has no monthly payments.

When Reverse Mortgages first come on the scene they quickly garnered a bad reputation.  There were stories about lenders stealing houses and precluding the now deceased homeowner’s heirs from their inheritance.  There are currently commercials running on both TV and radio touting the virtues of Reverse Mortgages and the fact that the equity in the property will still be there for the beneficiaries of the homeowner.

The terms of Reverse Mortgages have improved over the years but they still remain one of the most costly mortgage any homeowner can obtain.

The terms of Reverse Mortgages provide for the payment in full of the outstanding principal balance following the death of the Homeowner.  The standard time frame to pay off a Reverse Mortgage  is “9” months, but there are many lenders who don’t even allow that much time to pay the Reverse Mortgage back in full prior to initiating a foreclosure proceeding.  Our company  has seen on many occasions where lenders were not willing to hold off foreclosing since once a Reverse Mortgage goes into default and a foreclosure is initiated an “Insurance Fee” is charged to the Estate under contract signed by the now deceased homeowner that can amount to many thousands of dollars a month.

If a person holds title in their name the laws of California require that the person’s assets must be Probated in a court of law.  This can take many years due to required court procedures, but can be extended even longer if there are disagreements between the beneficiaries.

Many times the Reverse Mortgage lender will require that the Reverse Mortgage be paid off in full prior to the completion of the Probate court action.  The only option available to the Beneficiaries who don’t have the available funds on hand or the ability to borrow the money from another source is to obtain a Probate Loan. In this situation the Executor or the Administrator of the Probate Estate signs the Probate Loan on behalf of the Probate Estate to pay off in full the Reverse Mortgage.shutterstock_263647079

Since Private Equity financing does not live by the same restrictive lending requirements of the big banks it’s possible to obtain a Probate Loan even if the Reverse Mortgage lender has initiated a foreclosure proceeding.  Our company has on many occasions has been able to fund a Probate Loan to pay off a Reverse Mortgage that was already in foreclosure.  The Beneficiaries often were very happy since they thought there was just no way to ever get a mortgage and thought their only option was sell the property.

The Probate Loan process is quite simple.  If the Executor has received Letters of Testamentary from the Probate Court that contains Full Authority then all that has to be done is:

  1. “Notice of Proposed Action” this is short Judicial Council form signed and filed by the Executor with the court and served on all required Beneficiaries and parties.  This is where the Executor states to the court and to all other Beneficiaries what action is intended to be taken under Executor authority.
  2. “Waiver of Notice” this is a form that is prepared by the Executor and served on the other Beneficiaries to sign and is further filed with the court providing court proof of each Beneficiary’s concurrent with the proposed Probate Loan.  This provides for a waiver of the standard “15” day waiting period provided to all other Beneficiaries to object to actions taken by Executors.

If the Executor was issued Letters of Testamentary that contains Limited Authority or if the Decedent died without a Will and the court appointed an Administrator then under each option a Motion has to be filed with the court petitioning the court to issue a court order acceptable to the title company approving the Probate Loan that was requested by the Executor of the Estate.

There a number of different types of Probate Loans available in the marketplace today, such as those that are not secured by real estate to loans that are secured by real estate.  Due to the size of most  Reverse Mortgages, a Probate Loan that is secured by real estate would be required since Probate Loans that are unsecured are so much more expensive that it would be foolish to even consider.

Our company is well versed in all the ins and outs of maneuvering investor underwriting requirements and court procedures that are necessary to expedite, fund and close a Probate Real Estate Loan.

Probate Loans are funded by Private Investors or Private Investment Funds and are structured, analyzed and underwritten much like a Traditional Private Equity Loan. The interest rates, terms and costs are on par with any other type of Private Equity Loan.  Probate Loans are currently exempt from all the cumbersome regulations, loan disclosure requirements and rescission time requirements under the Dodd-Frank Consumer Lending law that went into effect on January 10, 2014.

We have been called upon on many occasions to step in at the 11th hour and provide a Probate Loan just prior to a scheduled Trustee’s Foreclosure Sale.  We’re well versed in the Probate Loan process and have many years of experience providing Probate Loans to Executors or through the Probate Estate’s attorney.

If there is a Probate Estate that might benefit from a Probate Loan then please contact our office at (888) 797-7970 to speak with one of our helpful loan consultants who will be happy to analyze the situation, address any questions you may have and let you know how our company can assist with a Probate Loan.

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Alternative Lending Can Help You Close More Escrows

Alternative Lending Can Help You Close More Escrows

Alternative Lending Programs – If  Realtors could have their prayers answered… it would be that every Buyer would be a cash buyer. Escrows would close faster, there would be a lot less work for already overworked agents and no escrow would ever get canceled due to the Buyer not able to get financing.

In realty most Buyers need financing and in most situations are able to obtain the standard Fannie Mae loan. In today’s world there are many instances where a homeowner makes the big decision to sell their home, realizes a large amount of money, makes an offer to buy another property and then reality hits.

The Buyers receive the unfortunate news that for some reason something in their loan application is preventing them from obtaining loan approval to buy their new home. The Sellers can’t sell, the Buyers can’t buy and you the Realtor didn’t receive your commission. This situation is a sure loss to everyone involved.

In many situations like this Alternative Lending just might be the answer to everyone’s problem. The qualifying requirements are easier and there are many programs available to accommodate just about every Buyer’s specific situation, whether it be negative credit, difficulty proving income or the subject property not being up to institutional standards. Alternative Lending Programs.

Alternative Lending can be broken down into “3” basic categories:

Nonprime

For those Buyers that are just “outside” the lending requirements of the major banks and institutional lenders.

Subprime

For Buyers who have additional credit and income challenges.

Private Equity

shutterstock_265252865For Buyers who have substantial negative credit or are buying a property that is in bad condition or just needs the money NOW.

Most Alternative Lending programs require a 20%-25% down payment and if the Buyer has the funds then many of the income and credit impediments of “A” Paper lenders are eliminated, the Buyer can get approved for financing and everyone wins.

Some of the situations where Alternative Lending can help you close more escrows are:

1. Buyers who have lower FICO Scores

Bankruptcy…Loan approval right after bankruptcy

Foreclosure…No need to wait many years to get financing

Short Sale…Not considered a foreclosure

2. Buyers whose Tax returns don’t tell the whole income story.

Bank statements…12-24 month bank statements to prove income

Stated Income…Available in certain situations

3. Condominiums complexes that are not FNMA/FHLMC approved

No need to obtain a FNMA condo certificate

4. Down payment documentation

Less requirements in sourcing the Buyer’s down payment

Additional benefits available with Private Equity are the ability to finance a property that has substantial deferred maintenance. This can help with a client that is an active Fix & Flip Buyer or for a client that is interested in venturing out and buying a property that needs a little more than the basic TLC.

The next time you have a Buyer who is having a problem getting loan approval take a few minutes to look into how Alternative Lending can provide the lifeline necessary to close that escrow.

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Marketing Secrets for Originating Private Equity Loans

Marketing Secrets for Originating Private Equity Loans

Originating Hard Money Loans – It’s common knowledge that most loan agents started in the “A” Paper Market, with many loan agents spending their whole career on that side of the mortgage market…..…often never realizing that there are Qualified Borrowers who want and need real estate financing, but just can’t get approved by traditional mortgage lenders.

Many of us at our company have heard of instances where Borrowers in need of financing contacts a Mortgage Broker who then runs their credit or checks their income and summarily notifies them that “They don’t Qualify “, due to either their FICO scores being too low or their income not adequately reflected on their tax returns.

The Borrowers are then forced to walk away without a loan and the Mortgage Broker goes the other way without a commission.

The result of this event is; the Borrowers are still out there and still need a loan. Originating Hard Money Loans.

The above situation has happened to many Mortgage Brokers……….has it happened to you?

Often Borrowers who don’t qualify for FNMA financing, but have a pressing need for funds will be interested in nontraditional financing where getting the lowest rate is not the driving force.

There are four main reasons why Borrowers would be willing to finance with Private Equity Financing.

1.Credit not up to FNMA, FHLMC and Institutional standards
2.Income not documented as per institutional lending standards
3.The Subject Property’s condition not being up to institutional standards
4.The Borrower has an opportunity and needs money NOW!

The above “Borrower Situations” while possibly being a reason for FNMA and other institutional lenders declining the loan, Private Equity Investors will welcome the opportunity to provide a loan the Borrowers needs.

The main qualifying requirement is EQUITY.

When the opportunity presents itself and a prospective borrower has one of the above Negatives and there is equity in the subject property, take the time to investigate further if there might be a Plan “B” or even a Plan “C” financing option the Borrower might consider accepting.

If you are looking for additional commission income and are willing to invest a little time and effort in generating Private Equity Borrowers then the following marketing strategies might provide you some suggestions to increase your monthly loan origination and of course your monthly income. Originating Hard Money Loans.

Foreclosure Borrowers
There are many data sources available that provides a complete list of every property that is in some stage of the foreclosure process. Reviewing the data can be done quickly to determine the properties that have equity and that are potential candidates for a Private Equity Loan. Marketing to the potential Borrowers can be done by mail, telephone or by direct contact.

Reverse Mortgages
The death of a parent while tragic enough can be made so much worse when the reverse mortgage that was taken out by the decedent prior to death isn’t paid fast enough and goes into foreclosure. The children or heirs are then forced to either sell or refinance the property to satisfy the reverse mortgage. Institutional lenders will not touch a property that is in foreclosure but a Private Equity Loan can in many instances provide the funds to pay off the reverse mortgage and allow the heirs to keep the property in the family. These leads are included in the data comprised in the foreclosure list mentioned above.  Often a review of the property data will reveal if the loan in foreclosure is a reverse mortgage or just a traditional mortgage.

Probate Loans

Many heirs are “Hot to Trot” to get money or money is needed to pay estate expenses, including attorney fees. Institutional lenders never tough these situations but Private Equity Investors are willing to lend the money needed prior to the probate being completed by the court. Most Executors of Estates have what is referred to as “Unlimited Authority”, where the need for court approval isn’t necessary. In the situations where the Executor or Administrator of an Estate has only “Limited Authority” then a simple court hearing can be set up to obtain court approval for the Probate Loan. The process is quick and simple and usually takes less than 30 days. Marketing to Probate Attorneys by either a direct mail or E-mail campaign informing the attorneys that your company provides Probate Loans can lead to additional monthly closed loans and additional commission.

Tax Liens/Judgments
There are many Borrowers who either have a Tax lien or Judgment that they want to pay off since the penalties and interest are so high in some instances that it makes sense to borrower the money with a Private Equity Loan to pay off the liens. There are many services that provide a list of property owners that have either a Tax Lien or a Judgment. A simple letter or better yet a well designed post card mailed to the property owner might make the phone ring and provide additional monthly commission income.

Delinquent Property Taxes 
This information is available from the county where the subject property is located. Each county puts out a list of delinquent properties that are getting ready to go on the auction block for a Property Tax Sale. A mailing campaign to owners of each property that has equity can lead to additional Borrowers and commission income. These Borrowers are very motivated to resolve their property tax problem. Originating Hard Money Loans

Fix & Flip Borrowers
Many real estate investors make a full time business buying, fixing and later selling properties, and they’re in a hurry, since “Time is Money” or the property is in such bad shape that no FNMA or institutional lender would even touch the property. These situations are great opportunities to provide these types of Borrowers Private Equity Financing. It’s a great way to set up an ongoing business relationship with Borrowers who will come back for financing often. Many of these Borrowers can be referred to you by Realtors you might already be doing business financing their “A” Paper Borrowers. Originating Hard Money Loans.

Deferred Maintenance Properties
This situation usually occurs when a Borrower applies for financing and in the course of interviewing the Borrower or from the appraisal it is determined that the property in not up to FNMA or institutional property standards. If the property has equity then a arranging a Private Equity Loan for the Borrower might get the Borrower the funds needed.

Properties “A” Paper Lenders Don’t Like
There are so many here that we just can’t list them all but think commercial properties, auto repair, small stand alone buildings, attached buildings or even churches.

Most of the time the Borrowers have good income credit but the loan amount is below the “minimum loan amount” for many institutional lenders. Many commercial lenders have a $500,000.00 minimum loan amount. There are many Borrowers that own properties that are in need of loan amounts that are less than the minimum loan amounts of many institutional lenders. Your title company can provide you a list of properties that would be great candidates for a Private Equity Loan. There are so many potential opportunities available with these types of properties to generate additional Borrowers and monthly commissions. Originating Hard Money Loans

We hope the above marketing suggestions will give you additional ideas to increase your loan origination business and your monthly income. Like most things in life……….Nothing Ventured Nothing Gained…………take some time to go outside your comfort zone……………….…your business and your income just might benefit.

Our company provides many helpful resources to our Mortgage Brokers who are currently originating Private Equity Loans or for those who are considering setting up a Private Equity marketing program or just want add Private Equity Loans to their available loan programs for their Borrowers.

Call us at (888) 797-7970 or E-Mail us at info@westarlending.com and we’ll be happy to assist you with marketing and sales support. Originating Hard Money Loans

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Getting a Probate Loan

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Getting a Probate Loan

First a little information and explanations might be helpful.

A probate loan is a loan made and secured by the assets of an estate in some stage of probate. Probate is a court procedure where the court determines or complies with the last wishes from a person who died, known as the decedent. If the decedent owned assets and/or liabilities then the totals of all assets and liabilities are known as a probate estate. When a person dies and has an estate valued at over $100,000.00 in California the estate must go through court and be probated. This is the process of overseeing all aspects of the distribution of assets and payment of claims of the estate.

Many people unfortunately die every day and some of these people owned real estate that has been be directed in their last will and testament to be inherited by another party. Since the time necessary to finalize a probate in California can take many months or even years the need often arises where the estate or a beneficiary of the estate might require money prior to the final distribution of the estate.

Some of the uses of the money from a probate loan can be:

  • Paying immediate expenses of administrating the estate
  • Paying ongoing monthly contractual estate obligations
  • Paying court costs and expenses
  • Paying attorney fees
  • Paying off creditors of the estate
  • Getting money for a beneficiary

The normal lending sources such as banks, credit unions or mortgage banking companies just don’t fund loans to probate estates. The procedure of making a loan to a probate estate is simply using the assets of the estate to secure a loan. The loan is not qualified as to credit and income as the decedent of the estate is dead. The beneficiaries do not YET own the assets of the estate since a probate requires a Writ of Final Distribution prior to ownership being transferred to the ultimate beneficiaries. When the estate is in the probate process, ownership to the assets remains vested in the estate.

Any probate loan that is funded is not the obligation of any of the beneficiaries, but may become a liability of them if at such time they inherit a property that is secured by a probate loan. However many probate loans are often structured to have the loan paid off prior to the distribution of the asset to the final beneficiary.

When an application for a probate loan is made it is typically extended to the probate estate under authority of the executor or administrator as part of their appointed duties. The normal procedure is for the executor or administrator of the estate to sign on behalf of the estate. The party signing is not personally liable as they are only signing in the course of their designated responsibility.

When applying for a probate loan value is everything. So it is requirement that there be adequate equity in any real estate offered as security for a probate loan. As such equity is everything when it comes to obtaining a probate loan.

It is very common for people to die with free and clear property or properties that have very small mortgages and thus have substantial amounts of equity. Beneficiaries designated to inherit real estate can take comfort in the fact that if time and money is an issue then taking advantage of a probate loan to get the money now just might make life a little easier.

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The US Mortgage Market: A look back at the past (Part 1)

The US Mortgage Market: A look back at the past (Part 1)

 

Mortgage Market Meltdown – This is the first installment in a 3 part series where we are going to delve into some of the causes and effects which led to the great mortgage meltdown and the resulting real estate recession.  We have broken down the 3 parts in this series into yesterday, today and tomorrow.  Basically where we’ve been, where we are and where we might be going.

In this first installment we are going to look into what caused the Mortgage Market Meltdown.

In the years from 1997 to 2006 the price of the average American house increased by over 124%.  This rise in the value of people’s homes led to the highest increase in net worth of American households over an equivalent time period in American history.  The equity in people’s homes quickly became their major net worth component.  During this time many homeowners made the decision to refinance their homes and pull cash out by increasing the balance of their mortgages.  They used the money obtained from their homes for just about any purpose.  Lifestyle spending was the predominant use of the money from their homes.

Easy credit and the belief that home prices would continue to go up was driving real estate prices higher each month.  The California real estate market was acting very much like the Wild West.  No one thought about consequences and the potential risks they were taking. The thought by many homeowners that home prices would never go down was the word on the street.   During this period the motto was “just about anything goes” and just about everyone got a loan.  If you had a pulse and fogged a mirror then you could get a loan.  If you had bad credit, no problem, there was a loan program for you.  No income, no worry there was a loan for your situation too.  No questions about credit, income or where the borrowers got the down payment.

In 2006 at the height of the real estate market the estimated value of residential real estate in the United States according to the Federal Reserve Board was over 24 trillion dollars.  Written out it looks like this: $24,000,000,000,000.

Loans such as Stated Income and No Doc programs ran rampant.  The acronyms such as SISA, (stated income, stated assets) or NINA (no income, no assets) were available up until 2007.  A new segment of the real estate market was born during this time which became known as the Sub-Prime Market.  These were loans programs that had additional reductions in both credit and income requirements allowing for borrowers to get approved when even FNMA & FHLMC were not willing to lend.

The following loan programs were being advertised and offered by banks and mortgage lenders all across the country:

  • Bad credit loans
  • Poor credit Loans
  • No credit loans

Borrowers who where currently in bankruptcy at the time their loan applications were submitted were also able to get approved.  The only requirements were that they had to dismiss their bankruptcies prior to signing their loan documents.  People in bankruptcy are prevented from signing contracts as any agreements they sign would be void.  So you can say that the banks did have standards, they didn’t want any void loan documents.

Borrowers were granted loans by the big banks and other institutional lenders due to pressure to lend to everyone with the goal of home ownership for everyone.  FNMA (Federal national Mortgage Association) and FHLMC (Federal Home Loan Mortgage Corporation) which combined purchase the majority of loans funded in this county greatly relaxed their loan purchase standards.

The affects of people that never qualified or should not have been granted financing caused a supply/demand imbalance resulting in pent up demand that led to increase in real estate prices.  When the monthly mortgage payments became too difficult for those granted financing many of their homes fell onto foreclosure.  This situation in the real estate market started the downward slide and led to the worst recession since The Great Depression of 1929.

By 2004 the Federal Bureau of Investigation (FBI) had warned that an “epidemic” in mortgage fraud was taking placed in the mortgage industry at a level never seen before.  This situation was able to be perpetrated due to the relaxed lending underwriting standards. Mortgage Market Meltdown

During 2007 mortgage lenders were forced to initiate foreclosure proceedings on 1.3 million properties.  This was a 79% increase over the foreclosures that were initiated in 2006.  By 2008 over 9% of all mortgages in the country were in some stage of foreclosure.

Just about every bank, mortgage company, credit union and any other real estate lender lost vast sums of money from borrowers defaulting and from the losses from foreclosing on numerous properties.

By 2008 banks and just about every other lender including private lenders suffered substantial losses never before seen in our country.  Many lenders pulled out of the lending business and the ones that were left became very conservative in their lending practices where just about no one could get a loan.

The two major players in the secondary mortgage market are FNMA (Federal National Mortgage Association) and FHLMC (Federal Home Loan Mortgage Corporation) revised their lending standards.  The two mortgage buyers comprise over ¾ of all residential mortgages annually.  These 2 entitles do not make loans directly to borrowers wishing to purchase or refinance their homes.  What FNMA & FHLMC does is buy loans that are made by banks and financial institutions thus providing them additional capital to allow them to lend to the next borrower who walks in the door.

The way that FNMA & FHLMC controls the mortgage market is through Seller Servicer Agreements that are entered into between each institution that is approved to sell loans to the respective agencies.  The 2 agencies have underwriting guidelines and requirements as to what loan products they will purchase.  So as such the originating banks and institutions adjusted their lending policies to coincide with the loan quality they are able to sell to FNMA & FHLMC.

So when FNMA & FHLMC lowered their underwriting standards and requirement in and around 2003 the banks and financial institutions went along with the reduced, underwriting standards and purchase requirements.  In addition pressure was put on the lending community through the Community Reinvestment Act (CRA).  Another government law that has unlimited power over those regulated.

Part way into the mortgage loan melt down FNMA & FHLMC tightened up their lending standards.  The pendulum swung the other way and the underwriting lending standards were brought to a level where if anyone did want to get a real estate loan were not able to get approved.

The news on the street was property values were dropping, no one wanted to purchase and for the few that did couldn’t get financing.  So what little demand existed went to near zero causing the real estate market into free fall.

An additional negative impact on the mortgage market was from the effect caused by those who either could not afford to purchase or those who could barely afford to purchase but who had the intention to hold onto the properties just long enough to sell for a nice profit.  Well many of these people were left holding the bag when values started to drop at rate where they were just not able to sell prior to their mortgage balances exceeding their property value.  The result was that selling became impossible.

Many of these people also became victims to the mortgage melt down defaulting on their mortgages, going into foreclosure and ultimately losing their homes and having to relocate.  The negative effect on their credit was to be felt for many years.

The Federal government the party who is so often looked at to come and save the day held hearings and set up investigative boards in an attempt to determine what and who caused the mortgage meltdown.  Many programs designed to bail out the banks were put into operation and billions of taxpayers’ dollars were transferred to banks and institutions to shore up their financial situation in an attempt to prevent a run on the banks and further financial calamity.  The government involvement and participation can be argued made the overall situation worse or at least allowed the real estate recession to continue on longer than if things had worked themselves out without government involvement. Mortgage Market Meltdown.

In addition to the billions in losses suffered by homeowners and the additional monies lost or squandered by the government led to the largest private and public sector losses in the history of our country.

As an additional insult to injury the state and national economic recession led to a substantial increase in the unemployment rate which let to additional job losses and resulted in additional foreclosures.

In an attempt to find blame citizens and elected politicians rallied around the idea that it was the lending community that was to blame due to their reckless lending policies.  Just about never was the cause of the mortgage melt down thought to be from the irresponsible behavior of the borrowers or from political pressure imposed upon banks and lending institutions.

New regulatory agencies and government bodies were enacted by congress along with billions in expense of operating the new government agencies to oversee the mortgage market.  The changes in the regulatory policies has led to substantial additional costs and reporting requirements for banks and real lending institutions.

In part 2 we will look further into the regulatory changes and the point where the market turned around.

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US Home Buyers 2013

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US Home Buyers 2013: Competing Against Multiple Offers

Multiple Offers – What a difference a year makes. Just a little over a year ago property owners were hard pressed to find buyers to step up and purchase their properties when they made the decision to sell.

Like many other things in life, what is good on one side just might not be as good on the other. What we mean here is if people who currently own real estate make the decision to sell, it’s a good time since sellers will most likely receive multiple offers and should get a good price for the properties they’re selling.

But if the decision is not to leave town or become a renter then the lucky sellers who were so popular with all the buyers must now join the same group of buyers when a property is found that they want to purchase. The chances of having to compete against multiple offers is a real possibly.

Many buyers are aware of this multiple offer situation and often, in an attempt to be the winning bidder, will make an offer to purchase that just might be more than they really wanted to offer – the motivating factor being that they are so tired of walking away as a losing bidder.

Some of the people that work at our company have been involved in multiple bidding situations. Some were great decisions where they benefited from buying a property where the property continued to go up in value, but there are a couple of other people that paid too much when they purchased, since they were the last person to buy just before prices started coming down.

People who invest in the stock market have become very familiar with price fluctuations. Real estate is just like any other commodity on the stock market where the laws of supply and demand dictate prices. Many potential buyers often get caught up in the frenzy of the moment in an attempt to be the winning bidder and put a stop to the difficult task of searching for another property. Sometimes they end up paying too much.

More Buyers than Sellers

According Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), the number of available homes for sale has reached a low that has not been seen since 1999. The percentage of buyers in the market to purchase is up over 40% from year ago. Currently the supply/demand ratio is out of balance. The market now can only be described as a seller’s market.

Many sellers are purposely pricing their homes at prices low enough to prompt buyers to make multiple offers in an attempt to be the winning bidder. The sellers usually benefit from multiple offers from buyers. There are those that believe that low balling the asking price is a manipulative act by sellers and causes buyers to enter into a situation of one upping each other in an attempt to out-maneuver each other with no knowledge as to what actual prices the sellers really want for their homes.

It is so important to take into consideration comparative property sales when making an offer for a near identical property. In addition, the location and condition of the property to be purchased must be taken into consideration when making purchase offers. A bad location will, in most instances, not get better over time and properties that need repairs will cost buyers additional money following the close of escrow. This will actually add to the acquisition price of the properties.

The forces that are currently driving the recent rise in prices and the corresponding increase in buyer’s offers are due to several factors, including:

  • Ultra low interest rates on mortgages
  • Low available of real estate on the market
  • High rental rates
  • Increase in consumer confidence
  • Fear of missing the real estate boat

 

The following 2 charts were compiled by the federal governmental department known as the Federal Housing Finance Agency (FHFA). For some reason this agency has little name recognition but plays a very large role in governing the extension of credit in our country. The Federal Housing Finance Agency is the regulatory body that regulates both FNMA (Federal National Mortgage Association) and FHLMC (Federal Home Loan Mortgage Corporation). Combined, these two quasi-governmental sponsored entities (GSE) play a part in over 75% of all residential mortgages made in our country annually. The data provided in the past by FHFA has been reliable and as such we are happy to provide the information. We thank the FHFA for allowing us to re-publish the following data. Multiple Offers

National Home Price Recovery Strong; Regions Mixed

U.S. house prices rose 0.7 percent from January to February according to data released this morning by the Federal Housing Finance Agency (FHFA). FHFA said this was the fifth consecutive time its seasonally adjusted Home Price Index (HPI) had risen more than a half-point from one month to the next. Monthly prices have not declined since January 2012.

House prices have now increased 7.1 percent over the last 12 months to a level last seen in October 2004. The HPI is now 12.5 percent below the peak it reached in April 2007.

All divisions reported price increases for the previous 12 months but ranging from 1.9 percent in the Middle Atlantic to 14.0 percent in the Mountain division (Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, New Mexico) and 15.3 percent in the Pacific region (Hawaii, Alaska, Washington, Oregon, and California.)

FHFA uses the purchase prices of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to calculate the monthly index.

As can be seen from the 2 charts real estate prices are going back up. Multiple Offers

It has been a long time since the possibility existed where it could cost less to own rather than rent due to record low mortgage interest rates.

With the increase in home prices, sellers who might have not considered selling just might be swayed into putting their properties on the market which should lead to a balancing of the supply/demand ratio. There has been an increase in construction of residential properties and their arrival soon on the market should help further to level out the supply imbalance.

Buyers should consult their real estate brokers or agents to get complete information of all comparative properties when determining a sale price for their homes. Buyers need to make certain that the price offered is not at a price that can be considered “overpaying for the neighborhood.”

Buyers should never lose sight that just a number of years ago billions of dollars were lost by buyers paying too much and when prices fell they ended up owing more than their houses were worth. This situation can have devastating financial consequences.

If a property has been located and it’s apparent there will be or currently are multiple offers then buyers need to do their homework and decide on the highest price they are willing to offer. Make the offer and if it the price offered is not as high as others then stop and look elsewhere for a property to purchase.

Don’t get caught up in the frenzy of the moment and get carried away. Do your homework, take your time and be persistent. The right property awaits you. Multiple Offers

 

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