Great Falls Commercial Lending

Great Falls Commercial Lending

martes, 11 de febrero de 2014


Due to the improvement in the American economy, many investors have chosen to fund the purchase of the commercial real estate properties. The commercial real estate is any property that is not used for residential purpose. Some of the examples of commercial properties are shopping malls, IT parks and others. Any property built and developed to host a commercial activity can be grouped under ‘commercial real estate’.
The experts say that there are billions of dollars in the loop, waiting to go to fund an economically viable and profitable business. Funding can be sourced through private equity funds, pension funds, life insurance companies, REITA and other sources and it can be used for the purchase of commercial real estate properties. Even banks have relaxed their underwriting criteria, so that more amount of capital is available in the market.

Reason for the hike in the investment activity in commercial real estate
The first and the foremost reason that the investors are very much motivated to invest in this market is that the yield is expected to be high. In a few years, the real estate has moved from ‘out of favor asset’ to ‘in favor asset’. People always look for something to invest which has a very less risk involved in it. In the risk and return threshold, any asset that has high return and very less risk involved in it is considered to be a very perfect solution for investing. The results of the stock and bond market are highly unpredictable. The bonds that were considered to be safe suddenly became undesirable, due to the economic condition.
In this uncertain global economy, the high probability of turbulence in the bonds and stock markets has made the real estate, a better option for the people to invest with very little risk. They can surely expect high yield or return, in the future. The solid income in the future and the less risk factor involved has made the domestic and the commercial real estate, more attractive in the eyes of the investors.

Forecast for commercial real estate and the elements involved in it
All the investment results in the coming days of 2013 would be positive news for anyone who is planning to be a part of the commercial real estate property arena. The supply and demand game in the commercial real estate market is a complex and is always fluctuating. The demand and the supply are negatively co-related. When the supply decreases, the demand increases. Thus, the rents spikes out and people look out for new construction opportunities. This type of market growth fuels the practitioners, who are very specialized in this industry.

May it be a broker or an investment manager, the number of commercial deals for real estate in this year is forecasted to be very high. This high growth in the investment activities in this industry would lead to more opportunities and commissions for all the elements in this industry. With more number of funds available for the industry, the brokers and the investment managers would experience a high fee for the processes, the number of jobs related to this industry increases and moreover, the output of this industry would increase providing high yield for the investors.

Do you need a loan to to buy a commercial property?.
Call us!.

Great Falls Commercial Lending

1 Howe Ave, Suite 303
Passaic, NJ, 07055
Tel. 973-767-2850
Fax. 1-877-767-2150

miércoles, 13 de noviembre de 2013

Want 18% returns? Become a subprime lender — Barry Jekowsky wanted to build "legacy wealth" to pass down to his children. But the 58-year-old orchestral conductor, who waved the baton for 24 years at the California Symphony, didn't trust the stock market's choppy returns to achieve his goals. And the tiny interest earned by his savings accounts were of no help. Instead, Jekowsky opted for an unlikely course: He became a subprime lender, providing his own cash to home buyers with poor credit and charging interest rates of 10% to 18%. It may sound risky, but “it helps me sleep better at night,” he says. “Where else can you find [these] returns?”
It has come to this. Unable to save enough for retirement with traditional investments, baby boomers in search of yield are becoming their own private Countrywide Financials. They’re loaning cash from their deposit accounts and retirement plans and hoping for a big pay day: specifically large returns that will boost their income and maybe even allow them to pass an inheritance on to their children. There is no official data, though it’s estimated that at least 100,000 such lenders exist — and the trend is on the rise, says Larry Muck, chairman of the American Association of Private Lenders, which represents a range of lenders including private-equity firms and individuals who are lending their own cash. “We know the number of people who are doing this is increasing dramatically — over the last year it’s grown exponentially,” he says.
Often referred to as hard-money lending, the practice has undergone a significant shift in the past three or so years. It used to be that individual lenders were millionaires who could afford to loan cash and handle the risk of not being paid back. Now middle-income pre-retirees, ranging from chiropractors to professors, are joining their ranks.
These lenders say the arrangements are a win-win: They are helping buyers who would otherwise be shut out of the housing market while earning an attractive return.
Critics say they are gambling with cash they cannot afford to lose. If borrowers stop paying the loans, lenders may not be able to take back the cash they invested, which could put their retirement at risk. On a larger scale, there’s also the threat of a new wave of foreclosures. “You’ve got unsophisticated lenders and unsophisticated buyers [and] it sounds like a very risky combination,” says Doug Miller, a real estate attorney and executive director of Consumer Advocates in American Real Estate, a nonprofit based in Navarre, Minn., which assists consumers with conflicts of interest in residential real estate. 
Many of these so-called mom-and-pop lenders are using their retirement accounts — self-directed individual retirement accounts and self-directed 401(k)s — to fund other people’s mortgages. Unlike regular IRAs and 401(k)s, self-directed accounts permit investing in alternative assets, like real estate. Cash is not technically withdrawn from the account, but rather a portion of the account equal to the dollar amount the borrower needs is invested in loan. The borrowers’ monthly payments, including interest rates that can be up to 15%, are paid into the retirement account, which ends up taking ownership of the property if the borrower defaults.
Lending from these accounts has been on the rise over the past few years. Pensco Trust Co., a custodian of self-directed retirement accounts, says it has more than $600 million in secured loans, most of which are mortgages — a figure that’s been growing at a 15% clip since 2009. Another custodian, Polycomp Trust Co., says the number of loans secured by real estate has grown 18% over the past two years.
The move toward mom-and-pop lending comes in the wake of what experts say is the creation of a perfect storm: Banks are still skittish about lending to home buyers with poor credit. Meanwhile, investors who have endured years of low returns from plain-vanilla investment portfolios are itching for something more.
How the loans work
The operations often function like a game of telephone. Subprime home buyers, who know they have no shot at getting a mortgage from a bank, start spreading the word to friends and acquaintances that they are on the lookout for anyone who will lend to them. Eventually, the word reaches someone who is willing to lend his or her cash. Other times, a group of individuals pool their cash together to fund the loan.
There is no official checklist used to decide who gets approved or denied for these loans. Some individual lenders will only work with real estate investors who plan to renovate and resell the property or want to rent it out. Others are open to lending for owner-occupied homes. The loans can be hundreds of thousands of dollars or much less than that: say, $25,000.
What all these lenders have in common, however, is their willingness to lend to borrowers with low credit scores. In some cases, they do not even check their scores. They point to examples of otherwise reliable borrowers who fell on hard times during the recession and were unable to keep up with loans. Many say they work with borrowers who intentionally stopped paying mortgages (even though they could afford the payments) when they ended up owing more on the loans than the home was worth.
Some will even consider borrowers while they’re in foreclosure. A few weeks ago, mortgage broker Mark Goldman received a call from a homeowner in distress. A 60-year-old architect in San Diego had fallen behind on his second mortgage and was facing foreclosure. The caller wanted to know if he could refinance his way out of this mess. Complicating matters, his credit score was in the low 500s. (FICO scores range from 300 to 850.) Goldman knew that traditional lenders would not consider the homeowner — so he offered a different lifeline: He directed the homeowner to his friend who offered to loan him $357,000 of his own cash at a roughly 10% rate.
Instead of focusing on credit scores, lenders say they require borrowers to make a large down payment, typically at least 30% to 40%. Similarly, homeowners who are trying to refinance will need the same amount of equity. (In Goldman’s case, the homeowner had 35% equity.) Lenders say this lessens the chances that they’ll incur a loss should a borrower default. Also, by requiring a lot of equity, the chance that a borrower will walk away from the home if values suddenly drop is diminished. Separately, some will only work with borrowers in markets where home prices are rising. That way, if they have to repossess the home, they can resell it at a higher price in the future. 
These lenders require quicker repayment than banks. Repayment periods vary from as little as six months to as long as 10 years. Many of these loans require interest-only payments, and at the end of the repayment period a payment of the total balance (often referred to as a balloon payment) is expected. Lenders say the terms can work for borrowers who are planning to sell the home within this time period or who plan to refinance with a regular lender in the future and need this time to improve their credit score.
Lawless territory
Critics say the loan terms are reminiscent of the subprime lending that led to the recession. If borrowers are unable to make the balloon payment or to refinance into another loan at the end of the repayment period, they could face foreclosure.
Another concern: Lenders are operating in an anything-goes territory with little federal or state oversight. In most cases, private lenders are expected to follow the same mortgage lending regulations that banks have to adhere to, but there’s little way for the government to know if lenders are complying with the rules unless borrowers complain to a government agency. “The problem is how do you find them, and it’s something the federal government is not equipped to deal with,” says Richard Painter, corporate law professor at the University of Minnesota and former chief ethics lawyer for President George W. Bush and the White House.
Separately, lenders are supposed to be registered with the state where they are originating loans, but many mom-and-pop loan officers are not, says Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. And since most of these lenders do not originate a large number of loans per year, they are not required to report their activities to the federal government. “It’s a shadow business,” says Cecala.
Many lenders are looking for cover by sticking to investment real estate only. New mortgage rules announced by the Consumer Financial Protection Bureau kick in next year, which primarily impact mortgages for owner-occupied homes. But the rules laid out by the bureau don’t necessarily exclude investors, which means these lenders could find themselves in hot water. For instance, lenders who provide interest-only loans starting next year won’t be protected should borrowers who end up in foreclosure file lawsuits against them. Those borrowers could claim the lender didn’t do a thorough job confirming that they could afford it.
Unstoppable trend?
In a sign that the trend may be here to stay, boot camps are training average Joes to become private lenders. Last month, Wealth Classes, a financial-education company based in Walnut Creek, Calif., that launched in 2007, hosted a networking retreat for 250 students who recently became lenders. Many of the company’s students end up lending to subprime borrowers, though others lend to real estate investors who don’t want to wait weeks to get a mortgage from a bank, says George Antone, founder of Wealth Classes. (Private lending transactions typically take about a week or two to go through, while a mortgage from a bank usually requires at least one-month of waiting time.)
Randy King, 61, joined Wealth Classes about three years ago when he started using his own cash to fund other people’s mortgages. A former U.S. Air Force servicemember, King, who is based in Colorado Springs, transitioned to buying fixer uppers and selling them and is now a lender for borrowers — many of whom are subprime — who are buying investment properties.
It’s not just mom-and-pop lenders who are becoming subprime loan officers. The strategy is picking up on an institutional level as well. Experts say a growing number of private-equity funds and hedge funds are pooling together individual investors’ cash and using those funds to lend to subprime borrowers at high interest rates.
Going forward, experts say, it will be difficult to slow down privately funded subprime loans. This funding spreads mostly by word of mouth, so there’s no official advertisement plug that anyone can pull. Consider King. He recently visited his chiropractor who inquired about his lending operations and then asked if he could jump into one of the deals as well. The chiropractor explained where he would get the funds to become a loan officer: He would use some cash he had saved and withdraw equity from his home using a home-equity line of credit.
Most of all, though, the appeal of profits unavailable anywhere else are likely to keep fueling this lending. Mark Goldman, who is also a real estate lecturer at San Diego State University, says a student earlier this year mentioned he was $50,000 short of the cash he needed to purchase a home that he planned to renovate and resell. Banks wouldn’t give the student a loan because he could not provide documentation that proved his income. Goldman was intrigued and offered to loan him the cash at a 17.25% rate. The student accepted, and after a few months of renovations sold the home in September and paid Goldman back.
MarketWatch was on the phone with him after he closed another deal with this borrower this month. “Make me proud and make us both money,” he said as he walked away to his car.

 Need a hard money lender?:

Great Falls Commercial Lending
1 Howe Ave, Suite 303
Passaic, NJ, 07055
Tel. 973-767-2850
Fax. 1-877-767-2150 

lunes, 4 de noviembre de 2013

Stated Income Commercial Property Loan

Stated Income Commercial Loan is a hassle free solution when looking out for financial support. Unlike the full document commercial loan, the SICL is light and does not require full documentation. In this type of loan, the borrower is not required to prove that they can afford loan re-payments from their own income or assets. Instead, this type of loan relies on the commercial property in which the loan is being invested either in terms of the property real estate value or the rentals it potentially can earn.

Main purpose
This kind of state income commercial loan is designed keeping the borrower’s benefit in mind.  Here, the borrower need to come up with 30 down payment that can be from his owns funds or a combination of 20% of funds and a second mortgage from the current owner up to 10%. This kind of invested commercial property does not have to be possessed in the name of the borrower or the operating company but it can be held in the name of the holding company.

Since this loan is literally undemanding and easy on the borrower, it is usual done only on a first trust basis. Of course, this also depends on the type of commercial property, credit of the guarantor and the underwriting considerations.    

Key benefits:

 Less Paper Work: The approval process is simple and involves minimum documentation, when compared to the more traditional commercial loan. In most cases, since the loan is only underwritten to the property cash flow or potential cash flow, it is not necessary to provide any detailed documentation, which would have been the case, if the borrower’s income was being assessed and tagged, to the loan.

Fast approval process: This commercial loan has a faster turn-around time, since the paper work is at its minimum. This loan lays emphasis more on the property cash flow hence the approval process is not hampered as against the case of conventional loan process, where the borrower’s income proof and credibility is scrutinized in detail before the approval takes place.
No verification is needed on the secondary repayment source such as the borrower’s income and also such loans usually come with a reduced credit scoring requirements making it easier and more flexible for the borrower.
This loan sees a quick closure, usually around 30-45 days from the start to finish of the commercial plan

Stated income commercial loans have a few simple terms that need to be fulfilled in order to be eligible for this loan.

  • 1.     The type of business for which the commercial loan is being applied for should have been in business at least for 2 full years

    2.      Although the credit score is very relaxed, there still is a cap of 650 and above credit score of the guarantor to be eligible for this loan.

    3.      The guarantor and the operating company cannot have bankruptcy that is more recent than 3 years       

With the above pre-requisites in place, securing a loan is easy and hassle free. 

Great Falls Commercial Lending
1 Howe Ave, Suite 303
Passaic, NJ, 07055
Tel. 973-767-2850
Fax. 1-877-767-2150 

Need of a Commercial Loan Modification.

Lenders are very interested in helping borrowers in the modification of their commercial loans. Commercial real-estate borrowers used to get help easily before than they do these days. As commercial mortgage modification comes into existence, borrowers, who qualify, are able to negotiate in terms of reducing the interest rate, extending the term of their loan, deferring past due balances and extending interest-only payments for unchanging period.

Lenders are quite willing to modify commercial mortgages. The reason behind commercial loan modification is that most of the commercial mortgages in the U. S will have balloon payments, which borrowers are not able to satisfy. Hence, it is obvious that the borrowers need to refinance when balloon payment becomes due. As financial institutions do not want to lend money, borrowers have got trapped in a situation that they make huge payments or go onto default as they are not capable of refinancing. Nowadays, it becomes commonplace to do commercial mortgage modifications, due to unwillingness of lenders to foreclose on properties.

Previous limitations about modifications have been relaxed by the Internal Revenue Service for fixed kinds of loans that is particularly held by REMIC’s. It means that borrowers got a chance to escape defaulting for getting a modification. Such a novel and beneficial change even advances a low-risk and smooth transition for all of those involved in it.

This means a modification can occur even if a hardship is foresighted in the future, such as a balloon payment coming due a year from the date, the borrower applies for a modification. This is a boon to borrowers: no longer do they have to go into default, ruin their credit and risk foreclosure, just to get a modification. Now, let us see how to apply for a commercial mortgage modification. Before lenders get informed by borrowers about the modification, loan documents of borrower should get reviewed.

Documents that are supplied by borrowers, to lenders, for modification are same as the ones the borrowers submit with the original loan application. Essential documents include profit and loss schedules, tax returns and proof of accounts. Lenders also need to provide borrowers information of present leases, payment histories of tenants, if the borrower is a landlord.

Great Falls Commercial Lending
1 Howe Ave, Suite 303
Passaic, NJ, 07055
Tel. 973-767-2850
Fax. 1-877-767-2150 

Reasons behind hiring Commercial loan modification specialists.

It becomes significant to call for commercial loan modification experts if it becomes impossible to deal with the monthly payments for paying off mortgage. It is also essential to consider such move by borrowers, when they are not able to deal with balloon payments, which are due at the end of long-term or even if they are not able to refinance the debt. These specialists also have the ability to provide required help for the development of ability of the borrower for negotiating with the lender, in terms of modifying the loan terms. It is because banks are usually unwilling to restructure the commercial real estate loans for a purpose that doing so may mitigate their incoming profit flow.
As a huge number of borrowers are willing to make a request for adjustments to the payment compulsions, doing negotiation with lender for commercial loan modification becomes tougher. Banks are also willing to become strict for restricting the number of approved reductions in monthly payment compulsions. Banks will make the rule of limiting the number of approved reduction in monthly payments strict as there are several cases, resulting loss in cash inflow, which, in turn, may harshly affect their operations.
If observed from the borrower’s point of view, he fights disputes in an unprofessional way, due to the fact that he does have, a lot of exposure. This is the critical situation where the help of specialist is needed, who can provide adequate assistance and support as failure results into loss of property or even a foreclosure. These specialists can apply for different loan workout strategies as they are aware about different situations and even can decide on what the best approach is, for making changes, which will help the petition get approved by the bank.
Another possible and common way of strengthening the position of the property owners by these experts is by making the analysis of the loan documents. They can even find out a few violations that are committed by the lender against rules, by making thorough observations of the elements of the contract. Those who commit violations need to pay penalties that include declaration by a court that the stipulations of the agreement like foreclosure may not be forced, on legal basis. As a result, it becomes simple to induce the bankers when they realize that they stand to lose, if they do not approve, the proposal. A financial situation may develop in which the owner does not believe that he will return to the right financial path. When this happens, he can agree to the use of commercial short sales.
In such a process, the purchaser may agree to buy property, for a significant discount. As a result, the selling cost gets mitigated, as compared to the loan cost, which is not paid yet. A few things are needed to be considered by the owners and they include increased taxation as the forgiven cost can be considered as a type of profit for property owners. 
Great Falls Commercial Lending
1 Howe Ave, Suite 303
Passaic, NJ, 07055
Tel. 973-767-2850
Fax. 1-877-767-2150  

What Commercial Loan Modifications stands for?

In an old saying, modifications are known as workouts. There are numerous appearances in which commercial loan modifications are skills, which can include fixing the rate, reducing face rate of the mortgage, changing margin utilized for loan and changing the index. An important and costly lesson has been learned by many lenders in 1970’s and 1980’s. Long term lending does not work as well as it should. Lenders were provided with an amount for long duration of time generally for thirty years in 1960 and 1970’s, which turned out to be a financial disaster.

Different banks in 1970’s greatly caught with long durations of low interest loans in a world of fast increasing interest rate, which turned every long duration loan into a losing scheme for the lender. Nowadays, the biggest issue is that no capital market is available for commercial loans. There have been almost 40 percent rejections in value from the year 2007, to date. Lenders have hugely reduced their LTV’s and the issues have clearly become evident.

One more chance is to lengthen the loan term, making amortization duration lengthier, in order to lower the payment and to provide relief to the borrower. There are a few cases in which loans, which got cast making use of twenty year amortization are being modified to 25, 30 and unbelievably in a few cases, there were forty two year amortization schedules. It can minimize the payment for making it comfortable for borrowers and return loan to a performing status.

A huge disaster is developing in America and the World is engaged in a business called Mortgage business. In a recent Business Week article, it is said that complete debt totals for each of child, man and woman in the U. S are $6.4 TRILLION that is $21,333.33. Big challenge for both Lenders as well as Borrowers is similar like setting up a value for a piece of property. Many things should be taken into consideration such as location, employment, expenses, economy, future prospects, income and occupancy.  Between the year 2010 and 2012, nearly $1.4 Trillion dollars worth of commercial mortgages are planned to balloon, which has been seen as one of the biggest retreats of capital in the market. Lenders do not want to lend and if they want to, it is at high levels and costs, which make no sense, if capital needs of different borrowers are thoroughly observed.

It has been recognized by the Federal Government that a great disaster is threatening the Commercial Mortgage market. It has been mentioned by the FED that there is a single way of stabilizing the market and that is to engage a combination of workouts and modifications. A white paper also has been issued by the FDIC, which set forth twelve scenarios, under which a bank is able to modify a loan.

It is quite veracious that the purchaser likes to stay in possession of the property and is willing to own as well as operate the building. Money, energy, effort and a significant amount of time has been spent by borrowers for the management of the property. No Judgments filed as the process of loan modification starts outside of the court system. The medication process stands from offering and helps both the lender and borrower to compromise on issues.

Great Falls Commercial Lending
1 Howe Ave, Suite 303
Passaic, NJ, 07055
Tel. 973-767-2850
Fax. 1-877-767-2150