Lending Specialists
Here’s something you don’t see everyday
Could you use a source for loans to folks that are not residents, have no social, income, green card, whatever.
All sorts of properties can be used as security. One of the loan requirements is they do need to be naturally respirating & have a pulse. Hopefully, they are from this planet, but if you are living in Southern California, that may be a questionable assumption.
Give us a call if you need more info.
This is part 1 of an excerpt of an article written by Paul Elis, paulelis@pmbcapital, that was originally published in a trade association’s newsletter some time ago. He gives some food for thought about investing in loans.
Some Common Objections To Mortgage Opportunities May Be Ill-Considered
Both investors and brokers (we’ll refer to both as “lenders”) frequently express objections to loan requests for reasons that I believe often don’t survive reasoned and experienced analysis. The following are the two most commonly heard reasons for turning down loan submissions based on flawed reasoning or inexperience, together with my responses. My opinions and experience apply primarily to non-consumer, investment property fundings and not necessarily to owner-occupied residential properties.
Objection One: The Loan Term Is Too Long
In my experience, this is the most often heard ill-considered objection for a number of reasons. First and foremost, in most cases it just doesn’t matter how long the loan term is, most private money loans simply don’t have a long life span. Whether the note is written for 10, 15 or 20 years, most deals I have written over the last thirty years are repaid in less than three years. In fact, I have never written a loan for over ten years that has gone to full term.
Secondly, and also very important, the lender may be missing out on a good opportunity because a long-term loan is usually made in a safer investment context than a short-term loan. , Borrowers who are seeking or will accept short term financing are looking to bandage an acute financial problem whereas many long-term borrowers have a better strategic concept of investment success.
Third. There is an old adage in investing that says, “Stick with your winners”. All lending, no matter how secure the deal seems to be, has some element of risk and a certain percentage of deals will result in problems. Investing in longer-term deals will have a better overall safety record and possibly a better yield performance than skipping from one short-term mortgage investment to another.
This is part 2 of an excerpt of an article written by Paul Elis, paulelis@pmbcapital, that was originally published in a trade association’s newsletter some time ago. He gives some food for thought about investing in loans. The entire article is available from us if you want to read it.
Objection Two: The Loan-To-Value Ratio Is Too High
This objection may be justified but only after being analyzed in conjunction with the borrower’s credit and the general desirability of the realty. The LTV considerations and the credit considerations are, in my opinion, a function of each other. When one of them is weak, the other needs to be Proportonately stronger. Admittedly, it’s a judgment call..
Having multiple parties personally “on the hook” for the loan adds a self-enforcing dynamic to debt repayment. And, I find that dealing with “solid citizens” is more problem-free than poor credit borrowers and this extends to areas other than just the receipt of timely payments. High credit borrowers are likely to meet their obligations.
A caveat is the practical aspect of relying on strong credit in the case of simple non-judicial foreclosure situations leading to investor losses.
Another concern about automatically relying on strong credit has to do with the amount of the loan that may be in default or foreclosed. Having two or three or four excellent borrowers personally “on the line” as to the debt is likely to work out okay when the amount of the financial problem is manageable.
The lender’s objection to a loan predicated only on LTV may also be misguided if it fails to give some consideration to the overall desirability of the security.
Banks generally require both reasonable credit and a certain amount of equity. My belief is that this is faulty logic. I want either a ton of equity or a ton of credit; enough of either that it won’t dissipate during the next recession. I believe that excellent credit from several strong signatory parties generally creates an excellent safety factor for the lender and can frequently be acceptable in approving a high LTV mortgage request.
The number of homes entering foreclosure in California fell to a four-year low in the second quarter of the year, according to a recent report.
The report credits the foreclosure lull on a more stable housing market as well as policy changes in the mortgage servicing industry. Hopefully this will improve the affordable housing markets .
A total of 56,633 Notices of Default were recorded during the April-to-June period, down 17 percent from 68,239 in the previous quarter, and down 19.2 percent from 70,051 in second-quarter 2010, according to DataQuick, a southern california reporting firm
Last quarter’s activity was the lowest for any quarter since the second quarter of 2007 at 53,493. This is particularly noteworthy because 2007 was pre “bubble burst”
“A lot of theories are being floated as to why the numbers are down,” said John Walsh, DataQuick president. “Bank policy changes. Legal challenges. Politics. Holding back temporarily so as not to flood the market. The fact of the matter is that no one really knows, outside of lending and servicing industry insiders. One thing is certain: Homeowner distress spreads fastest when home price declines are steepest. And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us.”
On a similar vein; the statewide median sales price was $250,000
in the second quarter, while this was down 7.4 percent from $260,000 a year earlier. In first-quarter 2009, when foreclosure activity peaked, the $227,000 median was down 39.5 percent from $375,000 a year earlier.
