The Importance of an Accurate After Repair Value
There are a great deal of new investors looking to get into the fix and flip business. We do rehab loans for these types of transactions, and work with new investors on a regular basis. While we have a lot of successful investors we have worked with, one pitfall they must avoid is using an overly aggressive after repair value for their base assumptions.
A good after repair value, or ARV, should give an accurate representation of what the property is actually going to sell for once the rehab is complete. This value needs to be accurate, as all other numbers will be based upon this assumption. Having a great real estate agent certainly helps these investors wrap their hands around this all important number, but it is important that they do not rely only on their agent, but rather roll up their sleeves and do their own research as well.
One very simple thing that can be done is for the investor to actually drive the comps for the property. It surprises me how often people are willing to walk into a deal without looking at the properties they are using as a basis for their after repair value. Even if no other research is done, actually looking at the properties in person, seeing the neighborhoods and considering any differences between sales comps and their subject property will certainly bring a quality perspective on the true after repair value. Looking at comps on paper is a great place to start, but if buying, fixing and flipping property is to be a business, you must get out and see the properties you are comparing in person.
Another item that seems to get overlooked a lot is the days on market. Investors who are working with me are paying interest on their loan. It's not cheap money, and every day the property is held is another day of interest that must be paid. That debt service is something that can easily be overlooked. Pricing a property properly so that it will sell quickly and reduce the amount of debt service that must be paid is incredibly important. Knowing this going in and adjusting your after repair value estimate accordingly can really payoff.
There are a lot of other potential pitfalls, and I will be writing about more soon (so check back in!). For more information about hard money lending, please visit our California hard money page on the web!
2012-01-23 17:43:16As the banks continue to take back properties, buying distressed, bank owned properties and reselling them continues to be a hot business. As a facilitator of rehab financing, I work with a lot of rehabbers in the California area. Generally speaking, those who are the most active tend to target the entry level market.
There are a number of reasons why this may be. For our purposes, the sale of an entry level home once it is rehabbed tends to be quicker than the sale of a luxury home or a step up home. Many people overlook this aspect when going in, but it is important to consider. Every day spent holding a property cuts into profit as loans require debt service. At double digit interest rates, this can add up quickly, especially on a higher end home.
Another plus to working with the entry level homes is the rehab budget. Typically speaking, an entry level home is not going to need the upgrades that a higher priced or luxury home is going to need. This cuts down on the cost to actually rehab the property to the point where it will sell for a profit. This is not to say that there should be no upgrades, but the cost of upgrades at the entry level to really make a home pop when compared side by side to other entry level homes is usually not the same cost burden you would need to upgrade a luxury home to make it stand out from the crowd.
When financing these types of transactions, we typically are financing based on the after repair value of a home. This value is very important, not only to us, but to the borrower as well. It is common for our loan amount to be equal or greater than the purchase price of a property, but this does not mean that we can finance all of the costs. This is due to the fact that we are going to have a fund control account set up for the work to be done and an interest reserve account set up to cover the debt service for anywhere from four to six months.
If you would like to learn more about our lending or rehab loans, please visit our hard money home page.
2012-01-04 23:16:42QR Codes and Real Estate Marketing
If you don't know what a QR code is, now is a great time to get familiar with what they are. QR codes are those box shaped jumbled up looking bar codes that you are likely starting to see in many places. I guess that is the best way to describe them! However they are described, though, knowing what they are and how they work can really help in your marketing efforts.
QR codes basically are scan-able codes that create an action. Users scan these codes with their smart phones (apps for scanning these codes are readily available and free). The most common action is to take the user who scanned the code to a particular website, and that is what we are going to focus on for our discussion today.
There are a number of uses for these codes. Of course you can place a QR code on the back of your business card and have it take people to your website. You can also include them in print advertising, again bringing people to your website. But what about going a step further?
You can have a QR code link directly to a video walk through of a home you have listed. Put that QR code on the home fliers, add it to any print advertising and people can simply scan the code and get a tour of your home on the market. Take it even further, you could have multiple QR codes on your fliers, linking to informative sites about the area surrounding the home you have listed. A map of local parks, local restaurants, etc. The possibilities are endless.
In addition, how do you think your prospective clients will view you if you can show them this type of marketing? It is not hard to do, but it does show your creativity and it shows that you are on the cutting edge. People like that.
To get started is easy, here is a free QR code generator, you can create as many QR codes as you want, and link each one to a specific page on the internet (or link them to other specific actions). In addition, here's a link to a free SEO guide that is useful. If you combine the QR code marketing with the ability to get a property listed at the top of the search results when people are searching for it, you are well on your way to making yourself stand out from the crowd - which is what it takes these days, good luck!
2011-10-04 13:58:46Alternative Financing Options With Hard Money
These days financing for real estate transactions can be a challenge. The banks have tightened their lending standards to the point where even quality borrowers may be unable to obtain the loans they need. This is compounded further among the smaller community banks, which make a lot of the local commercial, mixed use and other real estate loans that are not secured by an owner occupied single family residence.
For those with financing issues, a potential alternative is hard money. There are both pros and cons to using hard money. The benefits include looser qualification standards. For non consumer loans, often times you can qualify without much paperwork. On commercial properties, the debt coverage ratio does not determine whether a loan can be made or not. For self employed borrowers, low or no doc options are available. Additionally, there is the opportunity to get creative with hard money financing.
Cross collateralization is an option that many banks don't consider, but with hard money it is a very viable option. In addition, properties in need of repair or rehab can be financed. Closing a loan on a rehab property that has major repairs needed, even section one and two items, is a reality. In addition, closing on these properties using a fair market or after repair value as a loan to value basis (rather than the purchase price) is a possibility (see our breakdown here of rehab loans). All of this flexibility means more opportunity to close loans that banks simply cannot these days.
Of course there are trade offs. At the top of that list is the cost. Hard money loans are typically more expensive than bank loans. Points are charged on practically all hard money transactions. These can range from 2 or 3 on up to ten or more in some cases. The interest rate is also notably higher, with typical rates ranging between 10% and 14%. The length of term is also a trade off, with most of these loans being interest only with a balloon payment due after anywhere between one and five years. Finally, while the qualifications are much more loose than the banks require, hard money lenders are going to require much more equity in the deal. Most loan to value ratios on hard money these days are going to cap out at 60% max, often times less.
For many quality borrowers who have either hit a rough patch, or have a temporary issue obtaining financing, hard money can be a great option. When used as a bridge loan to bridge the gap between the present and some point in the future when bank financing can be obtained, this alternative form of financing can allow borrowers to take advantage of the current real estate market. For more information, please visit our hard money loans page.
2011-08-09 13:39:58More Downside to Come in Housing?
With all that has gone on over the past few years, one question many have is with regards to the housing market. When will it bounce back? Have we hit bottom yet? How far can things fall?
I took a look at some very interesting numbers, and what they indicate to me is that we still have a ways to go. Depending on factors such as interest rates, unemployment rates and the average annual income in America, we could be in for some additional pain. I don’t want to believe it, but some of the numbers are a bit scary.
Looking at the very basics, two major factors in the housing market equation have to be income and interest rates. Should income stagnate, and interest rates rise, buying power is certain to fall. It’s a simple matter of math, the higher the interest rates are, the more your home loan is going to cost. The more your monthly payment is, the less you can qualify for.
Right now, we are sitting on interest rates for 30 year fixed mortgages of less than 5 percent. This is historically very low. It was only 20 some odd years ago when rates were in the 10% to 14% range. With all the stimulus programs coupled with the huge amount of debt America is carrying, it seems very likely that rates rise in the future, perhaps the not too distant future. What happens to the housing market if we see 8.5% rates again? How about 12.5% rates again?
If you couple that with incomes that are not increasing at the same pace as they were 30 years ago, you have the makings of a prolonged downturn. Read the full article with detailed numbers here - Why the Housing Market is Still in Trouble.
2011-07-05 19:51:37Real Estate Online Marketing - Using Linkedin for Greater Visibility
I use the internet for a good portion of my marketing. There are many ways I do this, but today we're going to focus on one way to improve your visibility using Linkedin.
Linkedin is a great resource. The fact that it went public recently only helps, as more and more people are aware of the site. It is a high authority site for the search engines, and a great site to network on. You can do a lot of what Facebook allows you to do, but everything is business related. Facebook is great, but typically I don't use it for business purposes. Linkedin, however, is another story.
Today we are going to look at how to use your Linkedin profile to generate greater visibility for you online. First, if you don't have a Linkedin profile, go sign up and get one, it is free. I won't go into detail on how to populate your profile, there simply is not enough space in one post to do so, and instead I'm going to concentrate on two areas.
The first area is your actual profile. Make sure this is set to public. There is a radio button that you can click that makes your public profile visible to everyone. In addition, I check every box underneath except picture. This means my headline, summary, specialties, positions, etc. are all public.
The importance of this is that the search engines will be able to crawl your profile and index you accordingly. This brings us to point two. Be sure to completely fill out your summary and specialties. When people run a search for you (as many looking for a real estate agent or loan officer do) and find your Linkedin profile, everything you want them to know about you and your specialties will be front and center.
When completing this area, be sure to use keywords that match what you do. If you are a short sale specialist in San Francisco, say so. A little known fact is that Linkedin also has an internal search engine. For people looking for someone to network with, adding these buzzwords will help you get found within that internal search engine. Every bit of visibility you can bring to the table will add up in the long term to a strong online presence that you can leverage for more business.
There are many more ways to tap into the power of Linkedin, check out my Linkedin marketing post, and I will look at more in the future. I've created a real estate networking group, feel free to join as I will be sharing internet marketing ideas with that group as well - you can find it here. You can also take a look at how I've set up my personal profile here: http://www.linkedin.com/in/hardmoneyloans. Feel free to add me as a connection, I'm always happy to network with other professionals.
2011-06-03 19:12:15
For real estate investors just starting out, or for those looking for additional leverage, hard money rehab loans have a lot to offer. Typically, these hard money rehab loans are short term, maybe 12 months in length. For those able to obtain this type of financing and pair it with an equity partner or gap financing, the ability to purchase rehab property with zero cash out of pocket is realistic.
These equity partners, or gap financiers, can typically take anywhere from 20-50% return on their money. Sometimes this is in conjunction with participation in the project (a percentage of the profit) as well. While this may seem awful expensive, even in comparison with the hard money rehab loans we deal with, for those looking to get into real estate investing who have no money to work with, it certainly is a viable option.
For transactions in California, we are able to secure the hard money debt, and can also help borrowers with deals under contract find equity partners or gap financing. When going this direction, it is important to calculate all of the costs involved with the money you will be borrowing, and usually that means you need to find more attractive deals than normal. If you are able to find the right deals, though, being able to invest without having to use your own capital may be advantageous to you.
Visit us on the web for more information on hard money rehab loans, or give us a call directly to discuss the options we can provide.
2011-05-26 18:06:07
With recent changes being made in the lending industry, owner occupied hard money has become increasingly difficult to obtain. Many hard money lenders who had made these loans in the past have stopped, choosing to only make loans for investment or business purposes.
Residential hard money can take two basic forms these days, consumer and non consumer. The distinction between these two qualifiers is important, so today we’re going to touch on the differences.
Generally speaking, many hard money lenders are shying away from consumer loans. These are loans made to consumers, for consumer purposes. Owner occupied hard money would be considered consumer, as the owner intends to occupy the property. That is pretty basic, and generally understood. However, there are other situations where a loan can be considered a consumer loan, even when it is not an owner occupied property.
The main test of consumer vs. non consumer loans comes down to the use of funds. If a borrower is going to use the funds from a transaction to buy a car, pay down consumer debt, send their kids to college, etc, it is considered a consumer loan. This is true even if the property is an investment property, simply due to the consumer use of the funds.
Non consumer loans are loans made for non consumer purposes. Examples of residential loans that are non consumer would be, for example, a fix and flip or a refinance of an investment property to cash out and purchase additional property. Many times these transactions are made to corporations or LLC’s, which is fine. Whether made to an individual or an entity, however, the use of funds is what truly dictates whether the loan falls under consumer loan guidelines.
For more information on owner occupied hard money and non consumer residential hard money, or to discuss any scenarios, please visit our hard money loans page.
2011-04-21 13:15:26
Today I’m going to take a break from discussing loan related topics to focus on real estate SEO and some resources that can help get your site ranked in the search engines so potential clients can find you.
According to the National Association of Realtors, 87% of recent home buyers in the United States indicated that they utilized the web during the transaction. 32% said that they first learned about the house they eventually bought from the internet. So what does all this mean?
It means that if you are not utilizing the internet in your real estate marketing plan, you are leaving out a growing segment of potential clients.
Most of my clients these days find me using the internet, and I’m a big proponent of leveraging the web to gain exposure and clients. Although many people may feel like establishing a strong online presence is something they cannot accomplish, the truth of the matter is that it is imperative that you do so.
As time marches on, the internet is only becoming a larger and larger part of everyday life. Think about the last time you wanted to find a business, did you pick up the yellow pages, or did you simply Google it?
It does not take much to get started. If you don’t have a website already, and think you don’t have the means to create one, think again. Check out this step by step guide on creating a blog. It is simple, and with a little bit of time even the least tech savvy can create a professional looking site that is user friendly, fully controlled by you and able to get ranked in the search engines. Pairing a blog with an Active Rain outside blog can be a great combination!
For those who do have a site, the next step is promotion. For a basic guide on promoting a website, take a look at this free SEO report. Choosing keywords, building content and creating links is all covered in a very straight forward manner. This report can help you get started on the right track very quickly.
To round out our SEO resources, we also have a site that you can use to build backlinks. The solutions provided here range from individual backlink building campaigns to full blown SEO solutions. In addition, you can find a phone number under the “contact us” tab at the top, and are welcome to call for advice, questions or to have a custom package built specific to your needs.
To get ranked and found in the search engines does not have to be difficult nor expensive, it just has to be done! Hopefully these tips and resources will give you the information you need to take your business to the next level, good luck!
2011-04-05 17:10:20Debt to Income Ratio Required for Hard Money Loans?
It used to be that hard money did not take into account a borrowers debt to income ratio. With the recent changes to lending regulations, however, even hard money loans require a debt to income ratio, or DTI, calculation to be made to ensure a borrower has the ability to repay a loan.
This is true for consumer lending on residential 1-4 unit properties. In a nutshell, if you are going to live in the home or use the proceeds from the loan for consumer purposes, you must document your income and ensure you have the ability to repay the loan. Even for hard money loans.
While a debt to income ratio must be calculated, there is not a hard and fast cap on what it must be when dealing with hard money. Generally speaking, though, you will need a debt to income ratio of less than 50%. This means a maximum of 50% of your gross monthly income is being spent on housing expenses and other monthly debt obligations.
While hard money is an alternative lending source for borrowers who cannot obtain conventional financing, it is not a “non-qualifying” money source these days, especially for consumer loans. Just because a property has equity does not mean a hard money loan can be made for a borrower. While debt to income ratios may not be in play for loans made for business or investment purposes, for any consumer loan you will be required to fully document your income and satisfy a debt to income requirement.
If you are able to document your income and satisfy a debt to income ratio requirement, hard money can provide an option that will allow the purchase of a home regardless of credit history. This includes recent short sales and foreclosures, two events that often preclude a borrower from obtaining conventional financing for years following the incident.
Feel free to contact me for more information on hard money loans or to discuss any questions you may have regarding your eligibility.
2011-03-08 17:55:55
Due to the current financial conditions, credit is becoming increasingly hard to come by. Many individuals who used to be able to walk into any bank and get a loan to meet their needs are now finding that there may not be any banks willing to lend to them, despite excellent credit scores and strong financials.
This is especially true for real estate investors, and in particular residential real estate investors. Individuals who own too many properties (some banks may determine 4 properties too many, some as high as 10) may have a hard time obtaining any kind of financing to purchase additional real estate through traditional banks.
As an alternative, hard money financing has become more mainstream in the markets today. The result of this, however, is a shift in hard money lending. Those who are finding they need hard money for the first time may be asking themselves what is hard money and how can I qualify in todays market? If you find yourself in this position, here is a brief rundown on what you should know.
Just as banks have tightened their standards, hard money lenders have as well. Gone are the days where you will be able to find hard money loans for 80% loan to value. Also gone are the days where credit plays no role in the decision making of the hard money lenders.
These days, conservative loan to value ratios are the rule. 50-60% loan to value is fairly common. First position is preferred. Major credit issues can increase the rate, lower the loan to value or even completely disqualify a borrower in some cases.
Borrowers looking for hard money these days may want to educate themselves on the changes in the hard money world. For those who have not been in search of a hard money loan for a few years, the changes may be dramatic.
With that being said, however, hard money is a very feasible option for many real estate investors. The above mentioned changes to the private lending world have created a shift in the average hard money borrower. My average hard money borrower has good credit, good assets and is looking to leverage those assets in order to invest in additional real estate today. For borrowers who fit that bill, there is money available. The cost is higher than what you would expect to find with a bank, but obtaining a hard money loan is less expensive than taking on a partner, and the money is available regardless of the number of properties you may own!
Check back in as I will be addressing a number of topics related to hard money today. If you have questions, don't hesitate to call. I can help with your California hard money or private money needs (sorry, not nationwide!). My toll free number is 877 462 3422, you can ask for Chris.
2011-03-04 13:21:30
Fix and flip loans are a great vehicle for real estate investors these days. With the number of foreclosures and bank owned properties still at or near all time highs in many locations throughout California, opportunity is there for investors to profit.
Fix and flip loans are typically short term loans that incorporate funds to cover interest payments for 4-6 months and have a builders control account that can be drawn on to rehab the subject property. These days, our fix and flip loans are funding to 60% of the after repair value. Regardless of the after repair value, however, fix and flip loans do require cash from the buyer. We typically require a minimum of 20% of the total project cost cash in from the buyer.
For investors getting started, coming up with a substantial amount of cash may be difficult. We also have equity partners that are willing to partner with borrowers to supply this upfront cash contribution in exchange for a percentage of the profits on the back end of the flip. This is not cheap, but it is a great avenue for those borrowers who are short on funds to close quality deals.
For those who do take advantage of an equity partner, we will have some borrower requirements. We will need to see that they do have some experience (either with real estate investing, contracting experience or a combination of both), or we will need to see some strength elsewhere in the file (for example, great credit, assets in retirement, etc).
Right now, we are only able to offer this program here in California, but for California real estate investors, we can truly offer some aggressive fix and flip loan programs. In addition, the draw process to access money for the rehab is very straight forward, allowing for advances on funds so there is no out of pocket costs in addition to the cash required at close. If you would like more information, please view our rehab loans overview.
2011-03-03 17:50:03Today I'm going to take a brief look at credit score factors. As hard money lenders, credit did not used to make a big difference. Today things have changed, and even in the hard money world, credit is playing a part in lending decisions.
Most people are in the dark when it comes to the factors that determine their credit score. Here is a basic rundown on credit score factors:
35% of your credit score comes from payment history. Late payments, collections, charge offs, repossessions, foreclosures, tax liens, bankruptcies and judgements all fall under this category.
30% of your credit score comes from accounts owed. Credit cards, mortgage loans, auto loans, lines of credit and installment loans all factor into this area.
15% of your credit score comes from the length of credit history, how long your accounts have been open in other words.
10% comes from new credit. This includes credit inquiries, both soft and hard.
Finally, the last 10% comes from types of credit used. A mortgage loan, auto loan, credit cards, etc. The mix of credit used.
IF you would like more information, take a look at our in-depth write up of credit score factors.
2009-11-06 12:33:47There are many home staging companies in California. However, if you are interested in selling your property, but you don't want to incur the cost for a professional consultation, you have the option of attempting to stage your property on your own.
Home staging in California is quickly growing in popularity, especially among those flipping houses for profit. A well staged home can help the property sell more quickly, and for more money. This is due to the fact that a properly staged home gives a better first impression. Through a good first impression and excellent curb appeal, it makes sense to spend some effort on staging your home.
If you are planning a home staging project in California, there are several things you will want to keep in mind. First, the goal of staging a home is to make it appeal to the widest range of buyers possible. What you believe is in good taste may not be what the majority of people feel is sophisticated, elegant, or in good taste. This is one of the toughest hurdles to overcome, and is one reason to consider hiring a professional for consultation, even if you do the work yourself.
Staging companies are intimately familiar with what works well in the current market, and can make a wide variety of suggestions to ensure your property appeals to the largest amount of homebuyers. In addition to this, home staging companies in California are familiar with what buyers in specific price ranges like as they usually work closely with real estate agents in the markets they target.
If you are planning on doing your own home staging in California, there are a few things that you will want to keep in mind. A clean home shows much better than one that has not been thoroughly cleaned, and this needs to be at the top of your list. In the case of home sales, a clean property is one that has been cleaned from top to bottom. A good suggestion is using a cleaning service for this, there is some cost involved, but the property will be cleaned properly.
We're talking about cleaning the grout between the tiles in the bathroom, cleaning under any and all furniture and more. After a complete cleaning has been done, it is much easier to then work on the actual staging of the property.
There are many resources on the web for staging your own property. You can start by taking a look at this free home staging checklist, it will give you the basics in a short, concise manner.
2009-09-02 13:42:24Commercial loans are in the hot seat these days. As the real estate problems expand into the commercial loan segment, we are seeing a change in how commercial loans are made.
Accourding to Realpoint Research, delinquencies on commercial loans hit almost $29 billion, that is a $10 billion dollar increase in June alone. This has been led by delinquencies in California commercial loans.
This is a huge increase in delinquent commercial loans year over year, close to 600%, and promises to put an additional damper on new commercial loans being funded. To compound the issue, at the same time of rising delinquencies, vacancies are also increasing, making it more difficult for borrowers to obtain institutional financing for a refinance of their commercial loans. With debt coverage ratios skewed, many find themselves in a situation where there is no take out loan for the existing financing.
One area where commercial loans are still moving is the hard money segment. With the huge downturn in residential real estate, commercial loans are still seen as a "safe" investment by many private investors. With institutional lenders tightening standards, and with commercial properties unable to meet the strict debt coverage ratio guidelines of many banks, hard money commercial loans have become a viable alternative to many borrowers in need of commercial financing.
While hard money lenders typically do not underwrite based on the debt coverage ratio, it is a consideration these days in the tightening lending environment. Many banks will require a 1.25 debt coverage ratio, but a hard money lender may be willing to work with DCR's even slightly below 1, depending on the property type and strength of the borrower.
I specialize in private money financing, and can help property owners find a creative source for their commercial loans. If you are in need of commercial loan financing, and are having problems with institutional lenders, feel free to call or email me to discuss your situation.
2009-07-24 18:15:00Commercial Loans - Using a Commercial Mortgage Broker
If you are in need of commercial loans these days, it might be a good idea to look into using a commercial mortgage broker. Financing has changed dramatically, and the days of being able to walk into any bank to obtain a commercial loan are over for many borrowers, even well qualified borrowers.
A good commercial [...]
Commercial loans resources
For the moment, we will be focusing on commercial loans and commercial lending. We will look at a wide variety of topics, including commercial loan terminology, using a commercial mortage broker, commercial lending underwriting standards and more.
Focusing on tools to help you better understand the commercial loan process, we will also be offering resources and [...]
Commercial Loans – Hard Money Options
In today’s market, financing options can be much more limited than in the past for commercial loans. With the onset of the subprime meltdown, commercial property values and commercial lending remained strong. As the real estate market worsened, however, defaults on commercial loans have gone up dramatically, and commercial lending has tightened. This has further [...]
Commercial Mortgages
Welcome to our loans blog, we will initially be focusing on commercial mortgages, commercial loans and other issues related to the commercial lending world. Enjoy!
Commercial loans updated Mon Apr 6 2009 4:59 pm EDT
Commercial loans in today's real estate market can take more searching and better packaging to fund than in the past. It is important to work with a commercial loan expert when attempting to secure commercial lending. This page aims to help with that process by exploring the different commercial loan options available and the pros & cons to each option.
New bankruptcy law could lead to more loan modifications
There is a lot of buzz going around right now regarding the new bankruptcy legislation. If you have not heard, this legislation is set to allow bankruptcy judges the authority to modify loans on primary residences. While the banking industry is opposed to this legislation, I don't see any way it does not get put into effect.
This bankruptcy legislation is referred to as a "cram down" by the banking industry, but truly it will help to stabalize the real estate markets. Currently homeowners are at their lenders mercy when seeking a loan modification. From my experiences and conversations, the lenders are not easy to work with, and are very reluctant to offer a true modification.
What's more, the modifications that are being offered are more like band aids, short term fixes. Without long term fixes, there is certain to be more foreclosures on the way.
This next wave of foreclosures, however, will be different than the first. So far we have seen people who could not afford to make their payments, people who maybe should not have owned a home. We have also seen the adjustable loans and option arm/neg-am loans that have reset to much much higher payments that are not affordable. This new wave of foreclosures, however, is people making business decisions to walk away from their homes.
When homeowners make a business decision to walk away from their home, it produces a foreclosure that is not on anyones radar. These are people who do have jobs, good credit and the income to make payments on their homes. The business decision, however, comes when they owe more than their home is worth, or maybe they have a long term adjustable loan that the bank will not renegotiate. This wave of foreclosures is the wave that can be prevented with the new bankruptcy legislation.
By allowing bankruptcy judges to adjust the principal balance of a loan, and adjust the payment, it forces the idea of a loan modification to work. It may not be the best solution, but we are in a terrible mess right now, and the only way out is to slow the foreclosures. This legislation has the potential to do just that.
I work with hard money lenders, and talk with people in all types of situations every day. I truly believe that something of this nature is needed.
Check back in, I will be looking at the legislation in more detail as it takes shape!
2009-03-09 19:33:15With all the talk about loan modifications, I decided to start putting together some resources for those looking to do their own loan modification. There are a number of companies out there today that will attempt a loan modification on your behalf for a fee, but for those who want to do it themselves, I've found resources to be somewhat slim.
I've put together a list of loss mitigation contacts and phone numbers. This is a pretty good sized list, with many of the major lenders included. Phone numbers change for these loss mitigation departments, and I have listed multiple numbers for many of the lenders included. If you are having problems finding a number for your lenders loss mitigation department, take a look to see if they are on this list.
I have also put together a sample hardship letter. This is a basic format to use if you are behind on your mortgage and are looking for a loan modification to help. You can copy the text to a word doc and simply change the sample to meet your needs.
For more information on loan modification check back in. I will be adding and updating resources over the coming days and weeks as I am able. There should be free resources for people who are looking to modify their own home loan. Take a look at my posting about loan modifications, and check out the loan modification resource links in the right hand navigation links.
2008-12-02 15:59:34
Loan modifications are the new buzz among real estate professionals and homeowners in distress alike. With the current financial mess, and the continued slide in the real estate markets, banks are now starting to ramp up efforts to keep homeowners in their homes.
Financial institutions don't want to foreclose on your house. It costs them time and money, and they would greatly prefer to have a borrower who can make their mortgage payment. With the recent destruction of the housing market, though, many borrowers don't have options previously available. If you lost your job three years ago and could not make your mortgage payment, you could simply sell your house and buy something smaller or rent. If your company transferred your job, you would just sell your home and move. With one in seven homes in the United States underwater (there is more owed on the property than it is worth), those options simply are not there today.
These days, many are stuck with the loan they have, the home they have, and it really seems overwhelming to try and work with your financial institution. Don't feel that way. It can be a tedious process dealing with the bank, but if you work at it, you can succeed in working out a loan modification with your bank or lender.
The first thing to do is actually contact your financial institution. It would amaze most people to know how many people get in trouble, and simply do not ever contact their bank. Call the customer service number that is located on your monthly statement and ask for the loss mitigation department. Keep this number, along with your loan number, handy, you will be using it often if you are traveling this path. The loss mitigation department is who you want to talk to, whether you are looking for a lower rate, a principal reduction, a short sale or any other loan modification. When you call them, you should have a call log as well. Log each call, who to spoke with, and what was discussed.
When you call, they will ask for some paperwork from you in order to review your file. I suggest having a good game plan before moving forward from here. Decide what you want. You need to know what you want, and ask for it. Do you want a principal reduction, a short sale, a reduced interest rate? There are many options, and how you decide to proceed can impact on the outcome of your request. This brings me to the next topic. When you call, they will want some paperwork. Usually this includes an expense itemization, hardship letter and income documentation. When they start asking for paperwork, many people think they need professional help. I'm not a huge fan of this, but that is my personal opinion.
There are many loan modification companies out there, they employ attorneys, and will go through the loan modification process for you. Most charge between $1,200 and $4000 for their services, payable upfront. I really do not encourage clients of mine to take this step, unless there is something amiss with your original loan paperwork, or some legal aspect that you need to correct. For the most part, I believe you can do this yourself. What I do suggest, though, is to get yourself informed so you understand what you are doing and what you should expect. Take a look at this group, they have a loan modification package that gives you the information you need to do this yourself, saving thousands of dollars upfront. In addition, they have been around for a while, and have been doing modifications for their clients even before this current downturn. Many of the loan modification companies you might hear about have just sprung up to take advantage of the market. I would undertake this loan modification process myself, with some research and work, you can have a do it yourself loan modification..
Good luck, next I will be looking at BPO jobs and services in more detail, check back in!
2008-11-13 19:58:50