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Rose City Realty, Inc.

Mortgage / Real Estate Financing
1055 E Colorado Blvd., Ste. 500
Pasadena, CA 91106-2371
(626) 240-4610

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You are here: Home / Archives for Featured

Featured

January 15, 2013 By howardpr Leave a Comment

Can The Internet Kill Your Loan?

It’s a well known fact that employers, universities, the military, and even potential suitors looking for a love connection on Match.com are now using all forms of online super sleuthing techniques to find out as much as they can about the person that they’re dealing with as quickly as possible. Clearly, no one wants to deal with a bad apple. Whether it be a hostile employee, a student with behavioral issues, a teen with strong hostilities towards figures of authority, or love interests with massive insecurities left unchecked, obtaining priceless data which provides insight on the “real you” can be quite advantageous. Nowadays, in the world of real estate finance, this level of preliminary sniffing and snooping is swiftly becoming the norm.

In general, black box underwriting is still the most efficient way to quickly churn and burn through massive mounds of loan requests. Hiring data entry specialists to field 1-800 calls or having borrowers click on website links to loan applications allows the most technologically savvy lending institutions to make “yes” or “no” decisions at lightning speed.  However, in light of billions of dollars of bank losses from those who have walked away from their properties or have insincerely defaulted on their obligations, the old school underwriting mantra of People, Credit, and Collateral has become sheik once again to use in the process of determining individual worthiness for capital.

Today, it’s not uncommon for a loan officer to log into LinkedIn to determine who is “connected” to you. The website makes it extremely easy to scroll down and see if someone interested in capital is in their chain of “connections.” From this point, if someone within another’s line of connections knows the applicant, the loan officer can easily make a call, draft a quick e-mail, or send a text to see what “dirt” can be obtained on the suitor. Usually, given LinkedIn’s professional slant, one can determine your work related shortcomings, but it’s not uncommon to find out about a suitor’s personal faults with their moral compass as well.

In addition to LinkedIn, Facebook is another online service that is used quite frequently not only by admissions officers at universities to screen for entrants that don’t match its student body profile, but also by banks for whom maintaining customer profiles is important. Facebook postings with pictures of the office party gone wild with way too much alcohol can be damaging when you’re trying to obtain capital to expand your business (especially if you’re “tagged” in the photo). At that point, there is no denying the facts by stating “it’s not me.” For those who don’t make their profiles private, the “about me” section on the website can be the dagger in the heart, as all of the individual’s online factoids matches up line-by-line with their loan application.

LinkedIn and Facebook are two tools to garner professional and personal insights into someone on the other side of the table, but a good ole’ fashioned Google search can be just as deadly. The drunk driving arrest, the lewd conduct citation, the bank fraud indictment, the racketeering charges, the prison records, and an entry in Megan’s Law sex offenders registry are all easily obtainable by plugging in a name and a couple pieces of additional information (i.e. using a city of residence or company name) and pressing “search.” I’ve personally worked on a file where a prospect had been indicted for allegations that made the borrower appear to be a mafia kingpin. In spite of the fact that the borrower was fully exonerated and all charges were dropped, it was too late. Once the lenders pressed, “send,” the innocent were already guilty and no respectable institution would finance the prospect regardless of his legitimate, sufficient income to support the loan request. Accordingly, one can surmise that in many cases you don’t always want to be at the top of a list of search results in a Google query.

Without a doubt, the Internet has revolutionized how we all do business. It has increased our productivity and made us more efficient. Unfortunately, it has also made our lives less private and more exposed to the world’s eyes and purview. The borrower who wants to hide their past may believe that their indiscretions are in secret, but in the end it’s best to be forthcoming. Even if one has nothing to hide, it is a good idea to check what has been written about you in cyberspace. The world is cruel and websites like Yelp, Angie’s list and message boards of all sorts are dealing data on companies daily.  Therefore, do you have any indiscretions that others don’t know about (yet)? Are their compromising photos or stories about you or your business on the World Wide Web? Will a quick query on Google tank your acquisition and development loan? It could be a worthy exercise to see what is written about you in the black hole called the Internet, and you may want to think twice when your loan professional wants to “friend” you on Facebook!

Preston Howard is a mortgage broker and Principal of Rose City Realty, Inc. in Pasadena, CA. Specializing in various facets of real estate finance, he can be reached at howardpr@rosecityrealtyinc.flywheelsites.com.

 

Filed Under: Featured, Mortgage

July 19, 2012 By howardpr

Making The Mortgage Market Work

“When the Mortgage Market is working, loans get approved and closed.”

It’s been a frustrating four years since the mortgage market blew up in our faces.  After two newly instituted compulsory exams, lots of new regulations (both federal and state), and 400 imploded lenders later, we still don’t have a positively charged mortgage market.  Individuals with equity in their properties, provable income on their tax returns, and at least six months of mortgage payments in the bank are the only ones able to get financing.  On the other hand, the self-employed and the commission earners with weak tax returns, and underwater borrowers don’t really have any options available in this market at this time.  (Just to be clear, the underwater borrower who doesn’t have a loan owned by Fannie Mae or Freddie Mac, originated prior to June 1, 2009 has no options). We’ve had HAMP, HARP, Desktop Underwriting (DU) Refi Plus, Open Access, and countless other programs providing a plethora of alphabet soup for the fortunate pre-June 09’ Fannie or Freddie borrowers, but for the Alt-A, subprime, stated income, no-doc, no income, or stated asset borrower who iscurrent on their payments, there is no relief in sight. I believe they deserve relief too. Well, here are a few ideas to make the mortgage market work:

Allow alternative investment entities originate real estate mortgages

There are over 472 investment entities around the world with at least $10 billion in investable capital.  That’s nearly $5 trillion waiting to be deployed into investments.  There are hedge funds, mutual funds, private equity funds, insurance companies, and private individuals looking for investments. Accordingly, they should wholeheartedly participate in our anemic market by underwriting transactions or structuring mortgage pools that would yield investors 4.50% – 6.00%.  This already occurs at the hard money level.

Originate and securitize non-Fannie and Freddie borrowers

Real estate is the most visible, understandable, and historical asset that individuals or entities can invest in. Bought “right” as an investment class, it offers stable cash flows that are predictable and consistent.  It’s not as sexy like Facebook, but there won’t be the post-IPO heartburn that many investors have had during the first two weeks following the first day of trading of the social media mega machine.  As such, many investment houses should consider an origination, securitization, distribution, and servicing platform that is geared and caters to the non-Fannie/Freddie marketplace that is busting at the seams with unserved borrowers.  Those with mortgage investment banking (IB) experience can startfrom scratch with IT and their rolodexes, or can partner with large, small, or mid-sized IB-firms that have the capability to underwrite, market, and distribute the paper to the masses while recycle capital to make new loans.

Consider public-private partnerships

Finally, public-private partnerships should be considered to get the mortgage market working.  As witnessed throughout the Great Recession, the federal government has a propensity to engage in various forms of “partnership” with the private sector when the returns look favorable or it just needs to get a messy situation off of its books (e.g. JP Morgan Chase’s acquisitions of Washington Mutual and Bear Stearns in 2008).  In the Chase example, the government was trying to contain a pure catastrophe with both institutions. After both banks encountered meltdowns and subsequently taken over by the regulators, Chase purchased both wounded entities for cents on the dollar.  The caveat was that the federal government provided a backstop to Chase against potential losses. From thatinstance alone, one can clearly see that when the motivation is there, the government will guarantee private industry against losses in order to avoid an economic tsunami.

In the end, private industry will move from the sidelines and provide real estate capital to interested parties.  There is a whopping $4.72 trillion dying to put its dollars to good use.  Even though the Dow is off and Facebook has lost 25% of its IPO value, tenants still need a place to stay and consistent monthly cash flow is still king.  There are a lot of out-of-work or underutilized finance professionals with the origination, securitization, and distribution experience that can recycle and refresh the mortgage market with more capital to book new loans.  Most importantly, there are millions of ready, willing, and able-bodied borrowers dying for scarce financing.  Redwood Trust is already in the game originating and securitizing non-Fannie/Freddie loans.  So, how many more will follow suit and how long will we have to wait?

Filed Under: Featured

June 27, 2012 By howardpr

Building Relationships

At Rose City Realty Inc., you are more than a client.  We build lasting relationships.  We are committed to understanding each client’s full profile, and how their professional, personal and family goals align with their strategy for real estate acquisitions and financing needs.  Our team will go “the extra mile” to earn your business and meet your expectations.  We have an excellent reputation with our clients, which results in referrals and repeat business.  Allow us to service your needs, and we look forward to building a lasting relationship with you.

Filed Under: Featured

June 27, 2012 By howardpr

Finding Solutions

Rose City Realty

At Rose City Realty Inc., we believe that every borrower’s situation is unique.  Because no two borrowers are alike, a solution is personally tailored to match each client’s desired loan structure and time horizon.  The personal desires and/or business plan of the client is also considered, as they may be the impetus for financing.  Accordingly, we carefully assess each borrower’s goals to determine the best strategy that suits their needs.  Many clients hold properties through a five to seven-year real estate cycle with the intent to buy at a discount, to add value to the asset, building equity, or divesting the property at the appropriate time to reinvest the proceeds into another project.  Therefore, this type of client is not a candidate for a long term fixed rate loan product.  Instead, they may be a perfectly suited for a bridge loan or a 5-year fixed rate product.  As such, it makes sense to assess each client’s business plan as their holding periods may differ.

Filed Under: Featured

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