SB 1137 - How It Effects NextGEN Lenders

The provisions of SB 1137 although are somewhat burdensome are
manageable for beneficiaries, loan servicers and trustees.

Why was this such an emergency for legislators?
1. unprecendented number of foreclosures affecting CA economy
2. adverse affect on housing prices which leads to lower property tax revenues
3. feel lenders are contacting problematic borrowers

What is covered? All loans made from Jan 1, 2003 to Dec 31, 2007,
where loans are secured by residential real property and are
owner-occupied.

Preconditions to recording notice of default:
- contact is made as required by SB 1137 or
- 30 days after satisfying the due diligence requirements

Contact with the borrower:
- contact the borrower in person or by telephone
- assess the borrower financial situation
- explore options

If you tried contact on 3 separate times in 3 separate days with no
response within 2 weeks, you must send a certified letter.

On Website:
- toll-free number on website
- toll-free number made available by HUD to find a HUD certified
housing counseling agency
- options that may be available to borrowers who can't afford their mortgage
- list of financial documents borrowers should collect and be prepared
to present to the beneficiary or authorized agent

When an NOD recorded on or after 9/8/08, must contain a declaration of
compliance with civil code š 2923.5

At the end of the day this new bill will affect those only who run a
loose ship and not servicing correctly. Those NextGEN lenders who are
lending for the right reasons, who really want to see the borrower
perform on their loan and is willing to workout arrangements with the
borrower, will not be all that impacted. Hopefully, they may even see
their delinquencies decrease due implementing SB 1137.

Lenders/Servicers have 60 days to implement this.

New Home Valuation Code of Conduct

The New Home Valuation Code of Conduct that has been proposed by FNMA
& FHLMC and scheduled to become effective Jan 1, 2009 really misses
the boat for NextGEN Lenders.

Under this code, the requirements look to establish the appraisal
selection process, compensation, conflicts of interest between the
appraiser, broker and lender while providing appraiser independence.

Impact to the consumer:
1. Higher appraisal costs
2. Inability to shop their loan for better rates and fees
3 Can't see the appraisal since the appraisal belongs to the lender.

Impac to the broker:
1. Unable to order an appraisal which I personally agree with due to
conflicts of interest
2. Unable to shop loans which isn't a bad thing for the lenders.
3 Unsatisfied borrower with the broker if the lender denies the loan.
4. Slower new lender submissions and approvals since transfering the
appraisal to a new lender needs approval by lender prior to release.
Impac to the Lender:
1. Responsible for ordering, retaining and paying for the appraisal.
2. Those personnel ordering the appraisal need to be independent of
the lenders loan production staff.
3. Prohibited from bullying the appraisers, but the only time we need
to bully is due to fraudulent appraisal submissions and not because we
want higher value. That usually is done by brokers and borrowers, not
the lenders.
4. Randomly QC at least 10% of appraisals. Being a NextGEN Lender, I
can understand why so many Subprime and Alt-A firms failed taking
appraisals at face value.
5. Provide a toll-free hotline
6. Provide a copy of any appraisal report free of charge within 3
days of closing the loan.

Impac to the appraiser:
1. None since they can charge for each transfer.

Our lending industry missed the boat by not making appraiser more
accountible for their actions and why should an appraisal be different
for a Prime lender vs. Alt-A Lender vs. Subprime Lender vs. NextGEN
(aka Hard Money) Lender? It shouldn't and feel the borrower should be
the one responsible to compensate the appraisal company and be
provided a copy of the appraisal at the same time the lender who
ordered the appraisal receives a copy. If appraisers are immediately
accountable for their appraisal at the time of the appraisal
regardless of who the lender is, it will be at this time fraud
appraisals will stop entering into the mortgage marketplace.

Lenders are accountable for their money at risk and feel that
accountability needs to be even with appraisers and brokers
participating in some of the risk. We all need to work together to
improve our industry and remove those who are dishonest.

Difference In Commercial Submission - NextGEN Lenders vs. Conventional Lenders

For those of you new to the commercial industry, don't let the lack of knowledge or larger set of paperwork required for commercial submissions. Incorporating NextGEN Lenders (aka Hard Money) can help streamline your learning process and obtain quicker commissions since funding typically occur within 10-15 days vs. 60+ days for conventional lenders.

In Order to expedite your submission from origination to funding should include a well organized Executive summary. An Executive Summary is a concise, but thorough overview that would include the following (shouldn't exceed two pages):

• Property Description - subject property address and APN, general overview about the property type, tenants or if it is owner-user, appraised value/estimated value, number of units, number of parking spaces, square footage and lot size
• Income & Expenses - current monthly income, current monthly expense, current monthly net operating income and a general explanation of value if valuation needs to be focused on potential (future) gross income or recent sales.
• Loan Amount Requested
• Loan Purpose/Story - you should come clean on this and bring all of the "skeletons from within the closet out of the closet" since the majority of the hard money lenders invest their own money and typically will personally walk the property prior to funding. Most undisclosed issues usually have a way of exposing themselves so come clean upfront to help build more trust and confidence with the lender
• Exit Strategy - loan term requested and how does the borrower intend to get out of the short-term loan (i.e. refinance? selling?)
• Any additional information to be considered for underwriting purposes - NextGEN lenders (aka. Hard Money) have the ability to be flexible with their underwriting as well as having the creativety crossing multiple properties into a single loan.

You will also want to include these other items with your detailed Executive Summary:

• 1003 or Commercial Application - fully completed
• Color photos of the subject property or an appraisal if you have one. Many NextGEN lenders are able to quickly determine valuation and have the ability to fund transactions without an appraisal.
• Operating Income/Rent roll

NextGEN Lenders should be able to get a letter of intent (LOI) within 48 hours and fund within 10 days or less. Although the pricing may be higher, if your borrower has a weak balance sheet, needs additional capital to help strenghten the financials to better position themselves for better conventional financing, then short-term bridge financing may be the best option for your borrower.

Client For Life Strategy for Lenders

Announcing a whole new “Client for Life” strategy for lenders
For years great businesses have seen increased profits with a “Client for Life” commitment and quickly identifying that 20% of the customers create 80% of the revenue. Focusing on those core client for life customers, allows you to build a solid bottom line. Over the last few years, with many lending businesses, the bottom line started coming before the relationship with the client. If you are a lender and want to continue to grow and be in the market as it changes, get a hold of the strategies below and understand the Pareto Principle for building a solid business and more importantly solid relationships.

In order to survive in today’s mortgage climate, brokers need to adopt a true “Client for Life” philosophy. No longer can a broker simply view each customer or lender as a simple transaction, but must conduct a new way of thinking that has been true in the most successful businesses for generations. It’s no wonder that the majority of lenders are getting out of the wholesale business and marketing directly to the retail customer. Over the past decade the excess flow of capital, loose underwriting guidelines, and pressures to meet investors funding demands created a culture within the broker community to focus on solely obtaining new transactions and not repeat business. This eventually led to the collapse of the securitization market and the downfall of the Alt-A and Subprime market.

The credit crunch, following the collapse of the Subprime and Alt-A markets, has created challenges and uncertainty for many mortgage brokers and lenders. Only those brokers that can adapt to a new paradigm that strategically aligns their interest with the interest of lenders and customers, will survive the NextGEN way of conducting business within the mortgage space. It’s the times of greatest uncertainty that offer some of the biggest opportunities for professionals. For brokers to ensure their survival, they need to be more focused and implement a strategic “Client for Life” code of conduct.

The following ten strategies are needed to help you transform a world of chaos and negativity into a field of opportunity.
1. Forget your complaints and focus on new strategies to keep you in business. Complaints only bring your attention to all of the negativity and block your ability to strategically come up with a new and improved business model. You will need 100% dedication to formulating this new business strategy and you just don’t have time to waste on negative thoughts. Make a conscious effort to look for and listen for what is going right daily.
2. Forget about the way it was in the past and focus on how the environment is today and tomorrow. Yes the past can teach us valuable lessons, but what we do know today is that the way business was conducted yesterday didn’t work. You need to focus on what is needed today which will lead to your ultimate survival. Get a hold of what is working in other businesses. Too many times we focus on what others do wrong instead of looking for their competitive advantage.
3. Forget about the difficulties and focus on the solutions. Inventors didn’t create new gadgets, philosophers didn’t create new ways of thinking, and adventurers didn’t discover that the world was round because others told them their way was impossible. You need to get yourself away from the herd mentality to find solutions for today’s climate. The herd will continue to support their limited belief. Remember that newspapers would not print the original success of the Wright Brothers because man had proved he could not fly. Fly!
4. Forget about the losses and focus on the opportunities. Negativity creates further negativity. By simply focusing on all of the opportunity life has to bring us, we will create more opportunity. Don’t let this business pass by you. Be among those that survive. Look for survivors and find out what they are doing.
5. Forget about the sales and focus on how you create value. A salesman needs to sell others on your idea, but creating value brings customers who will refer other customers needing your services. Value creates word of mouth marketing that no television ad could ever create. According to the Nielson Agency we are bombarded with over 3000 advertising messages daily. Only those people we trust get their recommendations and referrals through to us.
6. Forget about yourself and focus on helping others obtain their goals. By putting others first, you will show others that you care for their well-being. Customers deserve to be held with the utmost respect and you will be nicely rewarded for it.
7. Forget about the transaction and focus on strengthening your relationship. Establishing relationships helps close the sale without even selling a product or service. Become the expert amongst your peers and you will see your business prosper. When people know that you are a resource of knowledge, they turn to you. They see the value that you bring to the table. Delivering value to your relationships helps strengthen them and therefore transactions no longer exist.
8. Forget about being reactionary and focus on time management. Customers want to deal with professionals in high demand. Use your time wisely by having set times to check voicemails, return calls, schedule meetings with your clients so you may interview your client without being interrupted, and schedule set marketing programs so you are consistently in the mind of your customers. The best leaders and business builders always respond and responsiveness requires good time management.
9. Forget about how your lender can help you and focus on how you may become a partner with your lender. In today’s volatile marketplace, lenders feel more comfortable when their interest is aligned with their clients (i.e. the mortgage broker). Let the lender know that your philosophy is alongside with their philosophy and you will remain in constant contact with the client throughout the life of the loan to ensure that the loan performs. This requires stepping away from the old turn and burn mentality of the industry. It requires a complete overhaul of your values, beliefs and most of all it requires your commitment to become your lenders partner.
10. Forget about simply being a mortgage broker and focus on how you can make a lifetime change in your client’s life by being a professional mortgage planner. Clients’ financial situations continuously change from job losses, inheritance, marital status, or even a death in the family. Becoming their life planner will ensure a lifetime of business. While everyone else is going out of business or trying to revitalize files, separate yourself by being your client’s true asset, their professional mortgage planner.

By adhering to these ten simple strategies it will lead to lifelong relationships thus creating business opportunities and thus surviving these turbulent times, most importantly allowing you to maintain good quality of life standards. It is important to bring more professionalism within the mortgage business and customers are counting on you.

As most great business owners, sales people and leaders know: people work with people they like. We are attracted to people like ourselves and people that care about our welfare. Take the time to listen to your clients, build trust and allow them to see that you are in it for the long-term. When you get a feel for all that is necessary to live life to the fullest you will build great relationships which will harvest new opportunities rewarding you with repeat business and an abundance of referrals. Creating “Clients For Life” is not a business philosophy but is a way of life. Enjoy your new beginning.

NextGEN Lenders Can Help Keep Credit Scores Up by 300 Points

It's no wonder that due to the recent Subprime and Alt-A implosion, credit is drying up and borrowers are falling behind on thier mortgage payments. By integrating NextGEN (aka Hard Money) lenders into your product mix can not only provide liquidity to the mortgage industry, but can help strengthen your borrower's credit. Below is a recent article published by the MBA discussion how foreclosures damages credit scores by up to 300 points.


Foreclosures Damage Credit Scores Up to 300 Points
MBA (6/27/2008 ) Murray, Michael
Some borrowers facing foreclosure—who decide to drop a property rather than attempt to work out mortgage repayments—could face credit issues that prevent them from purchasing a home within the next five years, industry experts said."I do believe that people, unfortunately, are making the very poor decision to simply walk from a home thinking that perhaps—maybe too soon—they would simply be able to buy a new home when that is absolutely not correct," said William DiPaolo, managing partner at Cogent Road, San Diego.

Industry experts said foreclosures could drop credit scores from 100-300 points, making it nearly impossible to obtain a mortgage from Fannie Mae, Freddie Mac or FHA anytime soon.
"It's kind of surprising, but it depends on the individual case as to how many points your score will actually drop," said Ron Litt, principal of Ron Litt Consulting, Houston.
Litt said, for example, a borrower with strong credit who was unable to sell an investment property purchased before home values fell, could decide to foreclose on the home rather than rent it out. That borrower could possibly purchase a home in two years, assuming other credit was not damaged during that time.

"There are very high standards for credit these days. As long as a [borrower's] credit is in decent shape, it is good enough to get the loan. The foreclosure is going to have an impact on the score, but as long as the rest of the credit is good enough, the borrower should be okay," Litt said. "Within a year or two, you could probably get a loan for a house depending on your credit. However, you can forget about an FHA loan for about five years."

Litt, however, also said the most damage on the score is not necessarily the foreclosure but the consistency of late payments. After a foreclosure, Litt said a former homeowner could take one to two years to fix up the credit report but, during that time, other losses impacting scores can include liens from second mortgages, unpaid homeowners association dues or unpaid property taxes placed on the credit report."The foreclosure itself, although it's a big thing, it's not an isolated action," Litt said. "It carries alot of subsequent consequences with it that can affect your credit."

DiPaolo said that in today's credit environment, a 60-day late borrower on a home "may as well forget" about receiving a Fannie Mae loan.

"The foreclosure of debt in someone's life is the greatest single indicator of risk a bank can ever have and because of the headlines, it's also now working on the banks—especially Fannie Mae—to look much, much more closely at that foreclosure event," DiPaolo said. "A foreclosure event in someone's life will affect their credit score 200-300 points, in effect blasting anybody—no matter how good your score was before that—out of the ability to qualify for a mortgage. Even at excessive rates, you're just going to have to rent."

DiPaolo said San Diego County represented the third or fourth highest region as an overall percentage of foreclosures, but the percentage of foreclosures compared to loans in the pool was under 1 percent.

"Let's always keep in mind that the vast majority of people are still paying their mortgages on time," DiPaolo said."If it is at all possible to avoid foreclosure, you want to do that," Litt said. "There are other ways to do [avoid it], and it will have an even lesser impact on the credit score than taking the foreclosure route."

As a mortgage broker bringing you this transaction, how do I get paid?

NextGEN financing (aka Hard Money) is no different than conventional financing. It is simple. You bring the company a borrower. They price the loan to you. (Think of yourself as a wholesale buyer.) You price the loan to your client, adding your fees as appropriate. You stay involved in the loan (or not) as you choose and prior to closing, you submit a fee demand to them and they include this in their lender documents for you to be paid directly from escrow. NextGEN (Real Estate Hard Money, Hard Money Lender) lending is on demand and is a great source for you to tap into as a broker.

How fast can private money loans (hard money loans) close?

NextGEN Loans (aka Hard Money) can be closed in as quickly as 3 days, but more typically, you should figure on 10 days. (Keep in mind that it is only with a complete loan submission.) Remember a NextGEN hard money lender will want to take the time to build a relationship with you, so that you can do repeat business and get to know how you work together. Take the time to build this relationship with your NextGEN Lender and you will see the benefits, which can include faster turn around time.