Bank Lending
Bank Lending
Bank Lending
List Price: 50.5
Price: 47.97
Multifamily Lending and Apartment Lending, Good News
Apartment lending remains one of the bright spots within the commercial mortgage business and borrowers can still expect long term, fixed rate financing, high leverage loans and low rates.
For example, we are still seeing 30 to 35 year fixed rate financing, though 5 and 10 year fixed is more popular with borrowers. Amortization schedules remain at 30 to 35 years with some government backed programs. As far as leverage, borrower can still get 80% financing on purchases (85% on loan request over ,000,000) and 75% on cash out refinances. Rates are strong as well with most in the 6% – 6.25% range(2/10/09) though for larger loans rates in the 5%’s are available.
Apartment Lending, Multifamily Lending
What the bad news? Conventional financing is limited and multifamily lending is getting more conservative from a global perspective. Historically multifamily underwriting has been focused almost exclusively on the subject property. Now, apartment lending is becoming more like typically commercial mortgages, where the entire borrowers financial situation is scrutinized.
Meaning the borrowers personal needs will be examined, other businesses will often be looked at, etc to make sure that the borrower cash flows overall. (Keep in mind though that some programs, where loan amounts are over ,000,000 the borrower personally is still not looked at.) This global underwriting is often cumbersome for borrowers that are not use to it, but this is just the new reality and borrowers will have to be willing to “play ball” if they want to get their multifamily property financed.
All in all, despite the recent changes, apartment lending remains one of the most viable sectors of the business. Most importantly, the liquidity is still there with terms that still make sense for borrowers. Borrowers should be ready to provide more documentation than they are use to, but compared to other sectors where financing is all but gone, it looks really good.
Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan a national commercial mortgage firm. Their focus is on commercial loans from 0,000 – ,000,000. 248 885-8797. apartment loans or commercial bridge loans or commercial real estate loans
In Defense of Payday Lending
Few industries are more reviled than payday lending, which primarily services the working poor by offering short-term loans at high interest rates. Payday customers borrow an average of 0 for a period of two weeks, or until their next paycheck comes in. The money is handed over on the spot, once the payday store can verify that the customer has a job, earns enough to afford the loan, and hasn’t recently defaulted with another vendor. Payday loans are in high demand: There are 22000 payday storefronts in the United States and in 2009 they loaned a combined billion. And yet the industry is fighting for its survival. Montana just voted to make it illegal for the payday-loan industry to operate profitably, so lenders are loading their wagons and wheeling out of “The Land of the Shining Mountains.” They’ve already moved on from Oregon, New Hampshire, North Carolina, Arizona, Georgia, and Washington, DC, because of similar regulations. The annualized interest on payday loans runs about 400 percent, but the reality is that payday firms see returns closer to 10 percent, or about the same as other less-demonized financial service providers. Now there’s a danger the federal government will quash the rest of the US payday industry. The Frank-Dodd Financial Reform bill, passed in July, created the Consumer Financial Protection Bureau (CFPB), which posseses the power to regulate paydays at the national level for the first time. The vaguely written law doesn’t allow the CFPB to …
Principles Of Lending
Principles Of Lending
Principles Of Lending
List Price: 49.95
Price: 47.45
Real Estate Investors – Discover How To Raise Cash For Re Deals
Real Estate Investors – Discover How To Raise Cash For Re Deals
The Private Lending Presentation Kit Is An Easy And Affordable Done-for-you Template For Real Estate Entrepreneurs To Create Your Own Stream Of Private Lenders Giving You Cash And Allowing You To Do Deals In These Tough Real Estate Times
Real Estate Investors – Discover How To Raise Cash For Re Deals
When Micro-financing Meets Social Networking: What Every Financial Institution Should Know About Peer-to-Peer Lending
Article by Clifford Brody
In todays economy, many banks are tightening their belts and increasing restrictions on the size of the loans they are willing to extend, and the people they are willing to extend these loans to. The credit crunch has affected people all over the world who are in need of consumer loans to pay for expenses and mounting debt. Many are beginning to explore lending solutions other than traditional bank loans to secure the financing they need. Faced with the challenge of finding a lender, many individuals are turning to anonymous lenders for help, via the Internet.
Peer-to-Peer (P2P) lending is a growing trend that utilizes the power of the Internet, the proliferation of social networking sites, and the popularity and effectiveness of microfinancing to bring together individuals in need of loans with other individuals who are looking to lend. In most cases both parties are complete strangers and never actually meet in person. Relationships are built and transactions are made completely over the Internet.
Since its inception in the mid-2000s, P2P lending has seen a massive growth in users and funded loans. Prosper.com, one of the industrys leaders, now boasts a member base of over 970,000 funding over 9,000,000 in loans. To keep up with trends in the industry, it is essential that financial institutions are fully aware of and understand P2P lending systems and processes. There is a very real possibility that P2P lending may someday become a bank-offered service, so it is vital that P2P lenders are adequately trained in regulatory compliance requirements for the lending industry.
How P2P Lending WorksThe P2P lending process operates through national websites such as peer-lend.com, prosper.com, and lendingclub.com, and internationally on sites such as zopa.com. These sites connect borrowers with little or no collateral and investors with a need to earn stable returns, allowing them to help each other outside of the bounds of traditional lending.
The process begins with the borrower expressing a need for a certain loan amount. The prospective borrower can provide as much information as necessary to prospective lenders, including his/her credit score, existing debt, the use of the loan and any financial or personal history or information s/he thinks would be important. Lenders then compete with each other to make the loan, bargaining on rates, and typically lending at lower rates for borrowers (averaging 10-16 percent) than are available with unsecured bank loans.
Lenders decide whether to invest their money in the borrower based on his/her past financial history, credit score, etc. However, since the process takes place on a person-to-person basis, instead of an institution-to-person basis, social and historical factors play a much larger part in the final decision to lend. For instance, lenders may search for prospective borrowers who share common interests or may lend based on the reason or need for the loan.
Once lenders make the decision to lend, the size of the loan is completely up to them. If a borrower is in need of an ,000 loan, multiple lenders may fund the loan, each lending anything from to the full ,000. This technique decreases each lenders returns; however it also dramatically decreases the risk to each individual lender. Since the loan amounts are so small and the possible returns higher, P2P lending can be lucrative for many small-time investors.
When enough bids are gathered to complete the full loan, the amounts are deducted from each lenders bank account and deposited into the borrowers account. The borrower then makes regular direct monthly payments of principal and interest to all of the lenders, typically through the P2P website, until the loan is completely paid off.
Risks of P2P LendingInstitutions and individuals considering P2P lending must be aware of the inherent risks of the system. For instance, what happens when people do not repay these loans? Since loans are made and distributed online between strangers, what is stopping people from simply taking the money and running?
Surprisingly, the majority of P2P lending sites boast dramatically small default rates (some as low as 1.7 percent), far below those of traditional bank lending. Experts and industry insiders cite the small loan amounts, low interest rates and personal relationships developed through the social networking aspects of P2P lending as the reasons for its low default rates. However, these lenders arent relying solely on these factors to ensure the security of loans made through their sites. Many P2P services hire collection agencies if borrowers fall behind on payments, typically sending requests for payments after just 30 days. P2P services have also begun reporting to credit bureaus to further solidify the online lenders as legitimate sources of safe loans.
Regulating P2P LendingThe Securities and Exchange Commission (SEC) filed a cease-and-desist order in November 2008 against many P2P lending sites, which remained in enforcement until they officially registered with the agency. Eventually, the SEC declared that loans used in P2P situations would be classified as securities. These websites then issued promissory notes, which were sold to lenders, and registered every existing and new loan as a security with the SEC.
Currently, large P2P sites such as prosper.com have argued against SEC regulation, citing that they are not investing entities as much as they are lenders, whose regulation should come from the Consumer Financial Protection Agency. However, since these sites operate outside of the traditional banking system and are still in their infancy, classifying and regulating them appropriately may take time. For instance, these entities are not insured or regulated under the Federal Deposit Insurance Corporation (FDIC) (as is done for online banks) since they cannot be classified as financial institutions. As their popularity grows, changes in legislation may occur to account for new technologies and financial systems.
A global compliance foundation is a necessity to all lenders, and it is vital that P2P lenders are trained accordingly. To comply with federal, state and global lending regulations, P2P lenders should be knowledgeable in the following areas of compliance:
Regulatory Agencies. Audits and Examinations. Bank Secrecy Act (BSA). USA PATRIOT Act. Right to Financial Privacy Act. Truth in Lending Act. Fair Lending. Equal Credit Opportunity Act (ECOA). Fair Credit Reporting Act.
Compliance training for P2P lenders should address trade practices such as unfair credit practices, discrimination and disclosure requirements, interest rates and fees and important laws and regulations.
Benefits and ReturnsIndividual lenders using P2P services do so for a multitude of reasons. Direct P2P lending is both a sound investment with high rates of returns (9 percent on average), and a morally fulfilling venture.
Many P2P lenders have also seen impressive returns with small risks. Similar to bank-regulated microfinance services, small amounts are loaned to customers for a small fee., Since most P2P lenders lend typically anywhere from to 0 per loan at a rate of 16 percent, returns can be significant for these small-time investors, while losses (although rare) are almost insignificant.
Sites and institutions that facilitate P2P loans have also reaped the benefits of this new system. Many have seen incredible growth, either by charging membership fees or by taking a percentage of each loan. With the steady growth in world-wide popularity and the proliferation and automation of the process, these sites and institutions have increased their profit share while providing a valuable and helpful service to people all over the world.
Final WordSince its inception, P2P lending has grown in popularity as sites continue to sprout up all over the world. Industry insiders have projected that P2P lending will only continue to grow as the process leaves its infancy and moves into the mainstream. As P2P lending continues to mature, many customers are already looking to their banks and bank employees for information and advice on P2P lending and investing. All financial institutions must keep up-to-date on these and other growing trends in Internet investing and alternate lending sources in order to provide their customers with sound advice and industry insight, and to ensure that the P2P lending services their customers are using are safe and compliant.
Clifford Brody is Founder & Chief Executive Officer of The Edcomm Group Banker’s Academy http://www.bankersacademy.com a 23-year-old education and consulting firm dedicated to serving Banks, Credit Unions, Money Services Businesses (MSBs) and all areas of the Global Financial Community with thousands of generic and customized training programs in areas such as BSA/AML, Regulatory Compliance, Teller Training, Systems Training, Sales and Service Training, and many more.
The Edcomm Group Bankers Academy http://www.bankersacademy.com is headquartered in New York, NY. For more information, email cliff.brody@edcomm.com or call +1.212.631.9400.
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