With the economy going every way but up, With Banks getting tougher and tougher on lending, its no surprise that I heard from one lender today, that they may not be lending to any restaurants for a while.
Their logic is that with gas prices going up and the economy side stepping people will not be eating out as much, and as such restaurant loans become a bad risk. Now saying that if you are in the restaurant industry and believe you will be needing capital in the short term, GET IT NOW. Don't wait. The words I shared with you are from one lender, this has no swept across the lending industry yet.
If you are in the industry and can show positive cash flow as well as supporting collateral now is the time to close that loan. To see what we can do for you read What Makes Us Different. Don't delay start your loan process immediately.
Wednesday, June 11, 2008
Tuesday, June 10, 2008
Daily Observation - Private Lender Update
Just a short blog this evening, and the topic is private money lenders. I first have to say that I am still being inundated with propaganda from lenders telling me they can finance this or they can fiance that. But you know what? When you ask them about a specific project their answer is no we don't do that anymore. Or no we are not financing land anymore.
But why do they consistently send out advertising material asking for these loans, if they are not going to fund them. I have no answer to that question, but just be aware that loan programs are changing drastically. Work with someone that you know and trust. Don't follow up with lenders that are mailing you mass material so that they can bait and switch you or your client.
I want to leave you with this point tonight. I received an e-mail from a hard money lender who was always looking for land deals. We followed up with him about three weeks ago and stated that we had a deal that met all his requirements that he posted in his blurb looking for deals. He told us that he could not do the deal for us as it did not match his current lending criteria.
Well today I receive an e-mail from that same lender stating they are now looking for small deals only 25 k to 100K, boy have things changed!
View our recent closings to see the type of quality deals we are consistently closing.
But why do they consistently send out advertising material asking for these loans, if they are not going to fund them. I have no answer to that question, but just be aware that loan programs are changing drastically. Work with someone that you know and trust. Don't follow up with lenders that are mailing you mass material so that they can bait and switch you or your client.
I want to leave you with this point tonight. I received an e-mail from a hard money lender who was always looking for land deals. We followed up with him about three weeks ago and stated that we had a deal that met all his requirements that he posted in his blurb looking for deals. He told us that he could not do the deal for us as it did not match his current lending criteria.
Well today I receive an e-mail from that same lender stating they are now looking for small deals only 25 k to 100K, boy have things changed!
View our recent closings to see the type of quality deals we are consistently closing.
Monday, June 9, 2008
Daily Observation - Tenants Beware
Today’s observation is another one similar to the one regarding equity lines of credit being arbitrarily reduced. Instead tonight we are discussing something that is even more unheard of.
Landlords are at fault in this observation not banks, but I wanted to bring this practice out in the open so you can share it with all of your clients that may be in a rental situation.
Here it is. Landlords are collecting the rent from the tenants but they are not paying their mortgages so the renters are losing their place to live as the lenders are foreclosing on the owners who are in default. This is not as rapid spreading as the equity lines of credit and credit card authorization amounts being reduced. But it is getting press and you need to find ways to protect your tenants. I am not here to suggest any methods of protection as this is out of my field of expertise.
We just want you to be aware of this practice and the more we can help the consumer the better it is for everyone. For additional information find out What Makes Us Different .
Landlords are at fault in this observation not banks, but I wanted to bring this practice out in the open so you can share it with all of your clients that may be in a rental situation.
Here it is. Landlords are collecting the rent from the tenants but they are not paying their mortgages so the renters are losing their place to live as the lenders are foreclosing on the owners who are in default. This is not as rapid spreading as the equity lines of credit and credit card authorization amounts being reduced. But it is getting press and you need to find ways to protect your tenants. I am not here to suggest any methods of protection as this is out of my field of expertise.
We just want you to be aware of this practice and the more we can help the consumer the better it is for everyone. For additional information find out What Makes Us Different .
Thursday, June 5, 2008
WARNING - Equity Line of Credits are being REDUCED
I don't know how much clearer I can make this statement, EQUITY LINE OF CREDITS ARE BEING REDUCED WITHOUT ANY NOTICE
If you have been using a home equity line of credit for any project don't rely on the Loan Amount that you were approved for. Banks are unilaterally reducing lines of credit because they feel that the underlining property values have declined that they are automatically reducing your line of credit.
Without notice they are causing 1000's of people to have projects on hold, causing bounced checks because individuals are relying on their available credit to write a check and then the bank is declining payment.
The public must be made aware of this tactic. Not the banks have done anything illegal, they haven't, but immoral you bet your last nickel. By them reducing lines of credit without any notification, causing people with good credit to bounce checks, and then saying that they are sorry and it is the first time in seven years when the bank had to do this.
The banks position and I quote is that they want to protect the consumer from being too much in debt secured by an asset that is falling in value. If this is not becoming a self fulfilling prophesy I don't know what is. The banks are using property comps for homes that were either foreclosed or sold as short sales, then they are saying that all properties are now lower because of the comps.
Now its not that the consumers are late, its not that the consumers havc problem loans, but arbitrarily without even an appraisal they are lowering lines of credit.
I could go on for hours as to the problems this has caused the 1000's of people who have been affected by this bank policy. Including me today!
PLEASE GET THE WORD OUT TO EVERYONE YOU KNOW ABOUT THIS. DO NOT LET THEM BECOME THE NEXT VICTIM OF THIS PRACTICE.
I am available for comment or to be interviewed about this. Please have any newspaper reporters, television reporters contact me. I can be reached at harlan@loanforbiz.com or858-592-0659 x 101
If you have been using a home equity line of credit for any project don't rely on the Loan Amount that you were approved for. Banks are unilaterally reducing lines of credit because they feel that the underlining property values have declined that they are automatically reducing your line of credit.
Without notice they are causing 1000's of people to have projects on hold, causing bounced checks because individuals are relying on their available credit to write a check and then the bank is declining payment.
The public must be made aware of this tactic. Not the banks have done anything illegal, they haven't, but immoral you bet your last nickel. By them reducing lines of credit without any notification, causing people with good credit to bounce checks, and then saying that they are sorry and it is the first time in seven years when the bank had to do this.
The banks position and I quote is that they want to protect the consumer from being too much in debt secured by an asset that is falling in value. If this is not becoming a self fulfilling prophesy I don't know what is. The banks are using property comps for homes that were either foreclosed or sold as short sales, then they are saying that all properties are now lower because of the comps.
Now its not that the consumers are late, its not that the consumers havc problem loans, but arbitrarily without even an appraisal they are lowering lines of credit.
I could go on for hours as to the problems this has caused the 1000's of people who have been affected by this bank policy. Including me today!
PLEASE GET THE WORD OUT TO EVERYONE YOU KNOW ABOUT THIS. DO NOT LET THEM BECOME THE NEXT VICTIM OF THIS PRACTICE.
I am available for comment or to be interviewed about this. Please have any newspaper reporters, television reporters contact me. I can be reached at harlan@loanforbiz.com or858-592-0659 x 101
Wednesday, June 4, 2008
Daily Observations - Loan to Value
If anything that has changed to complicate the underwriting process it is Loan to Value. Today the LTV's as they are affectionately known are all over the board. LTV's used to be as high as 90 to even 95% but with the advent of the sub prime debacle, loan to values have been reduced precipitously.
Where a land loan used to be at a 75% loan to value which means if the property appraised at $1,000,000 the bank would lend you $650,000 today we would be lucky to find a bank lending $550,000 for a straight land deal. Also the loan to value that many lenders are quoting will affected by the CAP Rate of the property as well as the net income. If the net income cannot support the needed debt service coverage ratio, the lender will lower his loan amount to meet the DSCR, and thus LTV will also fall accordingly.
I cannot blame these lenders from lowering the amount they loan, but what I fault them for is allowing the current foreclosure market to dictate what a property is really worth. by using comps from foreclosed and short sale properties, which is bringing down the amount of value that borrowers without credit problems have for their homes that they want to use as collateral. More about this issue another day.
To understand collateral you must understand What CAP Rates
Where a land loan used to be at a 75% loan to value which means if the property appraised at $1,000,000 the bank would lend you $650,000 today we would be lucky to find a bank lending $550,000 for a straight land deal. Also the loan to value that many lenders are quoting will affected by the CAP Rate of the property as well as the net income. If the net income cannot support the needed debt service coverage ratio, the lender will lower his loan amount to meet the DSCR, and thus LTV will also fall accordingly.
I cannot blame these lenders from lowering the amount they loan, but what I fault them for is allowing the current foreclosure market to dictate what a property is really worth. by using comps from foreclosed and short sale properties, which is bringing down the amount of value that borrowers without credit problems have for their homes that they want to use as collateral. More about this issue another day.
To understand collateral you must understand What CAP Rates
Tuesday, June 3, 2008
Daily Observation - Neighborhood Banks
Best Friend or Worst Enemy?
Just got off the phone today with a few of the neighborhood banks looking for financing. to sum up all the conversation's in a nut shell this is what we were told.
If a client or a prospective client does not have a current banking relationship with the bank or if they are not willing to establish a significant one we are not going to even waste our time looking at a loan request.
Get this the neighborhood banks where the property is ten feet from the banks door is not even interested in talking unless you can become a "serious" bank depositor.
This is really scary from a lending perspective. If the neighborhood banks don't want the "local" deals who does? Just a thought to ponder.
The neighborhood banks used to be the lenders you would to go to when all other lenders were not interested in your "special circumstance", the local banks would always step up to the plate. Today we're hearing they are not interested. For more of the role of the banker, Business Development Officer and Broker request a copy of my article by sending an email to harlan@loanfrobiz.com.
Just got off the phone today with a few of the neighborhood banks looking for financing. to sum up all the conversation's in a nut shell this is what we were told.
If a client or a prospective client does not have a current banking relationship with the bank or if they are not willing to establish a significant one we are not going to even waste our time looking at a loan request.
Get this the neighborhood banks where the property is ten feet from the banks door is not even interested in talking unless you can become a "serious" bank depositor.
This is really scary from a lending perspective. If the neighborhood banks don't want the "local" deals who does? Just a thought to ponder.
The neighborhood banks used to be the lenders you would to go to when all other lenders were not interested in your "special circumstance", the local banks would always step up to the plate. Today we're hearing they are not interested. For more of the role of the banker, Business Development Officer and Broker request a copy of my article by sending an email to harlan@loanfrobiz.com.
Sunday, June 1, 2008
Daily Observations - Down Payments
Just because a lender states they offer a 75% LTV or loan to value does not mean that you will get a 75% loan to value loan.
The reason is quite simple. All lenders look not only at the LTV for a project but more importantly look to the cash value that is generated from the project. If there is not enough cash flow to support the required debt service coverage ratio that the lender needs for approval, they will lower the loan amount they are willing to lend therefore also lowering the loan to value that they are offering you.
Remember loan components cannot be viewed in a vacuum, but must be looked at together. CAP rates dictate purchase price and Return on Investment determine if the project makes economic sense when you determine how much of a down payment you REALLY have to come up with.
The reason is quite simple. All lenders look not only at the LTV for a project but more importantly look to the cash value that is generated from the project. If there is not enough cash flow to support the required debt service coverage ratio that the lender needs for approval, they will lower the loan amount they are willing to lend therefore also lowering the loan to value that they are offering you.
Remember loan components cannot be viewed in a vacuum, but must be looked at together. CAP rates dictate purchase price and Return on Investment determine if the project makes economic sense when you determine how much of a down payment you REALLY have to come up with.
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