Joy Olivia Miller

Archive for March, 2011

One of the most contemptuous issues in the commercial mortgage lending industry is; fees. How much are they, what are they for, who’s got to pay them and when. Lenders and brokers want their expenses covered, borrowers don’t want to pay any more than what is absolutely necessary. Disagreements over a deal’s fee structure have killed many loans that otherwise would have closed.

Third Party Report Fees

I can say unequivocally that borrowers are always responsible for third party fees. Appraisals, environmental reports, feasibility studies, legal opinions and other consultant reports are always paid for by the borrower. The third parties preparing these types of reports require payment prior to issuing their findings or conducting their research. Some lenders have third parties pay vendors directly but most collect third party fees from borrowers and make payments through their corporate accounts. The reports that third party professionals create generally remain the property of the lender even though the borrower paid for them. Borrowers get copies but usually can’t use them in future deals.

Unfortunately, in the world of commercial mortgage lending, borrowers have no leeway in the matter of third party fees; they must pay and they must pay before the service is rendered. Asking a lender to cover third party fees is a futile gesture. Not only will they refuse, but they will consider you inexperienced and unserious just for asking.

Borrowers are entitled to know what reports are required and how much they cost. Most lenders will provide an itemized third party expense report and credit any overpayment to the borrower at closing or issue a refund of the unused money if the deal falls apart.

Due Diligence Fees

A lender will devote significant time and effort into underwriting a commercial mortgage loan. This process is referred to as conducting their “due-diligence”. Unlike third party fees, due diligence is an internal expense. Some lenders consider due diligence part of the cost of doing business and they build its value into their overall pricing. Many, however, require the borrower to cover some or all of their due diligence expenses. If an investor has a particularly attractive deal they would do well to shop for lenders with the most advantageous due diligence fee arrangements. It’s also not considered unprofessional to question the price of due diligence and negotiate a due-diligence fee.

Avoid Lenders who require a due-diligence fee just to review a loan or take an application, paying someone simply to look at your loan is wholly unnecessary. But, if they like your deal and issue a letter-of-intent or term sheet, don’t’ be surprised when you see a due-diligence fee requirement before they get down to the serious business of crunching the numbers and checking out you and your project.

Travel Costs

It is common for private lenders to insist on one or more site visits and a face-to-face meeting with principal borrowers. Conventional lenders tend to hire third parties to do their inspections but, especially on large deals, may need to conduct off site meetings with principals. If a representative of a lender needs to fly in to inspect a building or job site or attend a meeting, the borrower may very well be billed for the flight and a hotel room. These costs should be reasonable and stated up-front before the travel takes place.

Not all lenders bill for travel, but if a property owner is dealing with a private firm or a small shop, or if a particular trip is extraordinary, the question of travel costs needs to be addressed.

Broker Fees

If a commercial mortgage borrower uses a broker to source a loan, that broker will need to be compensated. Broker’s fees are in-addition to any lender fees and are usually expressed in “points” or percentages of the gross loan amount. The borrower hires the broker and, it follows that, the borrower pays the broker.

It is very typical for a broker, or any other intermediary, to be paid directly from the proceeds of the loan closing. In-fact investors and developers should be suspicious of any broker who asks to be paid in some other manner. Question any up-front fee or deposit requested by a broker. Payments to brokers are not altogether unheard of but they should only be made if they are to cover an actual, out-of-the-ordinary expense, will be applied to lender fees or is fully refundable if the loan fails to close.

A knowledgeable, professional broker with good connections to the banking world can be indispensable to commercial property investors. They increase the chances of securing approvals and speed up the loan process. I strongly recommend investors use them. You may have to reimburse them for some out-of-pocket expenses but, beware of any loan agent that asks for a deposit or payment just to take you on as a client.

Document Preparation & Administrative Fees

If investors read lender term-sheets carefully they will discover various other fees financial firms call “administrative fees”. These fees are thrown in as nickel & dime fees and can sometimes be eliminated or reduced if a borrower argues about them. They are so inconsequential to the overall deal that they often don’t get noticed until just before the loan closes. They come in the form of document preparation fees, filing fees, logistics fees as-well-as by other names. The practice of tacking on a couple extra bucks in junk fees is pretty common, but in the scheme of things amounts to little more than an annoyance. Smart borrowers use them as little bargaining chips to be given and taken away to advance the bigger cause of getting a deal done. These fees should not total more than around a thousand bucks for most deals and not more than a couple of thousand even for big ones.

Commercial Real Estate Mortgage Loans cost money

The process of underwriting and closing a commercial mortgage loan costs money. The burden of incidental fees falls to the borrower more often than to the lender. But, in-the-end it is the borrower who will reap the huge capital gains and income that commercial property can provide. If a project is successful the fees it took to get into a deal will have been well worth paying.

Personal finance tips can help you plan and budget to where you would wisely spend your monthly income. These tips are also good to consider for you to spare some of your money for emergency expenses.

Imagine this: your wife has on-the-spot visitors on a lazy Sunday afternoon. Eventually, you would need to offer some snacks for them to eat. Dinner is fast approaching but you have insufficient money to buy enough food for both your family and your visitors. Now, how can you handle this situation if you have no money for emergencies on your wallet?

Preparing for a financial emergency is one thing that most people do not mind to consider. This task maybe difficult especially to those who get just the exact amount of money from their monthly incomes. A situation which happens urgently before your eyes with you being caught unprepared will put you into trouble.

These personal finance tips would make you devise an emergency financial plan. Here are some items to ponder upon for you to handle emergency financial situations that would arise sooner or later in your life.

1. Have a list of all your assets for you to liquidate
2. A list of luxuries you can’t live without to plan a separate budget for these items.
3. A list of available resources in case these emergencies occur.
4. Simple jobs you can generate from the raw materials at home to add to your income.

To sum it all up, you need to make a plan of expenses. It is like your armor when a financial storm will strike your home. What good is a good income if you are caught unprepared during emergency situations like death of a family member, divorce, sudden sickness, bankruptcy, floods and many more. These personal finance tips are essential for you to follow so that you can spare yourself some time to devise a plan before the worst financial storm arises within your family.

Save yourself from the nightmare of not being able to handle effectively the emergency situations. These personal finance tips equip you with the knowledge you need to use as a weapon against devastating financial emergencies.

If you refinanced your old mortgage or purchased your home with an Adjustable Rate Mortgage, you might wonder what will happen once the introductory period of your loan ends. Many homeowners that financed their homes with these risky variable interest rate mortgages are in for a shock when the mortgage lender adjusts the interest rate and monthly payment. If you are one of these homeowners, here is what you need to know to protect yourself from a mortgage payment crisis.

Many homeowners purchased homes during the recent housing boom that they simply cannot afford. These homebuyers qualified for the loans using interest only or option mortgages because they could not qualify for a traditional mortgage to purchase their dream home. Buying outside of your means is the first sign of trouble when it comes to personal finance.

Homeowners in this situation that can afford their monthly mortgage payment during the interest only or option period may find they cannot afford the mortgage payment when this period ends. If you have one of these loans you should review your contract to find out when the interest only or option period expires. This timeframe usually lasts for five years; after this time the mortgage will convert your loan to a standard adjustable rate mortgage amortized for the remaining term of your loan.

What does this mean for you? If your mortgage was a thirty year interest only mortgage with a five year interest only period, the mortgage payment will be based on a 25 year payment schedule at the end of the interest only period. Not a big deal right? It means your monthly payment will be much higher, not simply because the interest rate has gone up, but because you now have less time to pay back the full amount of your loan than if you used a traditional mortgage to finance your home.

The bottom line is that you may not be able to afford the payments once your loan is converted. If you are coming up on the end of your introductory period and do not know what your monthly payment will be, you should contact your lender immediately and ask about the change. If you do not qualify to refinance the mortgage and will not be able to afford the payments, you may need to take on a second job or consider selling your home.

You can learn more about your mortgage options, including common homebuyer mistakes to avoid by registering for a free mortgage guidebook.

The population of the world is ageing quickly and there are millions of people aged 85 and over. Senior citizens suffer from increasing number of financial crimes and frauds but they can defend themselves rather easy if they act the right way.

Various age brackets have their own financial problems and can find useful tips how to solve them. Elderly people facing difficulties with finance can do many logical and effective things. Senior people are often at risk from bad advice that is why they must rely on the help of qualified people but not on their friends, neighbors or gardeners.

Nowadays people under thirty usually trust more financial advisors than the elderly people who are over sixty-five. There are many frightening tales about scammed elderly people that have been badly advised.

Our adult children think they know much about everything, but you should not trust blindly their opinion and it is better to go to a financial advisor and take your children with your to ask questions. You should love your children but do not ruin your life because of their financial advice.

Do not be too upset about financial problems you have because everybody gets through it. You can always find some good advice.

Elderly people should be ready to learn – emotionally and intellectually, as some very simple and quick processes like paying your bills through the internet is a kind of a challenging task.

You also should create a will and living will. Know the names and contacts of your insurance agent, broker, lawyer and accountant.

A family member, a family friend or lawyer can be named as an executor or co-executor to order your financial affairs.

All elderly people need to have no problems with their finances is to be logical and find a trustful financial planner.

Four out of five people who make New Year’s resolutions eventually break them. Many people have a hard time getting to the end of January without slacking on the goals they’ve set for themselves. If personal finance budgeting is at the top of your 2011 resolution list, the key to sticking to your goals is to plan early. Follow these simple tips and you’ll be on your way to a better financial future next year:

Personal Finance Budgeting Tips

• Spend Less than you Make – It sounds easy, but for many people it’s harder than it seems. Online money management tools are everywhere, but before you get the tools you have to establish a budget. Track your spending so you understand where you’re currently spending money and make changes if you’re overspending.

• Reduce Your Debt – Once you have established a budget, work on reducing your debt. Start paying off the debts with the highest interest rate first, regardless of the total balance. Make sure to pay the minimum monthly payments on all of your debt, but try to put a bigger chunk of cash toward the debt you’re working to eliminate. Once you’ve completely paid off one debt, move on to the next. Watch your debt dwindle away.

• Be Prepared for the Unexpected – The number one budget killer is an unanticipated event. If your pet needs emergency vet care or if your car breaks down and you don’t have an emergency fund set aside you could completely blow your budget or start racking up your credit cards again. Work on setting aside three to six months worth of your living expenses in an emergency fund. Start small to get used to saving. Set aside $10 a week and bump up the amount you contribute as you feel more comfortable with saving.

• Save for the Future – If you take a “set it & forget it” mentality with your 401K, make actively managing your retirement part of your goal for the New Year. A big part of personal finance budgeting is planning for the future so make sure you increase your 401K contribution by whatever you salary increase is for 2011. An easy way to do this is by setting your contribution as a percent of your pay rather than an exact dollar amount. This way, any shift in pay will also result in a change in your 401K contribution.

Making personal finance budgeting a priority for the New Year is a resolution that, with a little work, should be easy to stick to. Remember to look for ways to save in every aspect of your life. You’ll be pleasantly surprised when the work you’ve been putting toward your budget starts to pay off. In a few months, it won’t even feel like work anymore. Budgeting will become a natural part of your life & you’ll be enjoying a better financial future.

Homeowners facing a financial hardship, even before they begin missing their mortgage payment, seriously worry about the consequences of foreclosure. Their most common concerns are being unexpectedly kicked out of their home by the county sheriff and having nowhere to go, how bad their credit will look with a foreclosure on their record, and the possibility of the bank suing them for a deficiency judgment after the sheriff sale. While all of these can be legitimate concerns for homeowners, they are all ones that the foreclosure victims can exercise a degree of control over. Although a foreclosure situation will have unique effects on the homeowners’ lives, both personally and financially, their individual decisions regarding whether and how to stop foreclosure, and their financial habits before and after the foreclosure situation will largely determine the consequences after the process has been ended.

The first aspect of the foreclosure process that homeowners can influence is the bank’s initial decision to foreclose on the property at all. While many homeowners will avoid the lender’s collection calls and ignore mail sent by the bank, keeping in contact with them is often the best method for obtaining more time to save a home from foreclosure. The homeowners can often persuade the mortgage company to give them more time to recover from their hardship and find a solution and not begin the foreclosure process right away. The bank may decide to wait up to six months or longer after the first missed payment to put the house into foreclosure, as long as the homeowners are working on a seemingly viable solution to save the home. Thus, the more contact the family has with the bank, the more likely they will be given the extra time they need to avoid foreclosure entirely.

The same is true for the sheriff sale: the bank can and often will postpone the auction date if the homeowners are working towards a solution to their problem. If the homeowners are in the process of refinancing or selling the home, for example, the bank may allow them an extra few weeks or months to finalize the process. Especially if the bank knows they will lose a large sum of money on the foreclosure auction, they will be more willing to give the homeowners the benefit of the doubt and allow them extra time to work on a plan to stop foreclosure. All they want is the money that is owed on the loan, and if there is a strong possibility of gaining that, there is no reason for them rigidly to pursue the foreclosure and take the property straight to a sheriff sale that will result in a net loss to the lender.

The homeowners also have a degree of control over the credit consequences of missing numerous mortgage payments and having a foreclosure reflected on their credit report. Obviously, their score will start dropping as soon as they have missed a payment, and it will be at its lowest if the home is sold at the county sheriff sale. This is just one more reason for them to exercise their options in obtaining more time and postponing the foreclosure auction. But the effects of the missed payments on their credit will also depend on their other spending habits and payment history. If they are able to remain on top of credit cards, car loans, and student loans, their credit score will not drop as much as if they are behind on all of their debt payments. Credit scores in the high 400′s are not uncommon for homeowners behind on everything, while homeowners who are just behind on the mortgage may be able to stay above 600.

This makes it important for homeowners to carefully consider how to spend their income during a foreclosure situation. It may be better to keep their credit score higher by paying all of their other bills and try refinancing with a new lender. However, this means their income can not be saved up to qualify for a repayment plan with the mortgage company. But if they save as much money as they can and fall behind on their other bills, they may be able to qualify for a workout solution with the lender but their credit will be severely damaged for years after the foreclosure. Doing neither and just saving the money to move on with their lives, putting all of their mortgages and debt behind them is another option, although rarely recommended for homeowners who have any intention on applying for new credit after losing their homes.

For homeowners who do end up losing their homes to the foreclosure process, they can take control of the process of financial recovery. The negative payment history and foreclosure status of the loan will appear as a negative mark on their credit for 7-10 years, but it is mainly the first two years after they lose the home that are most difficult. During this time, they will only receive new credit with high interest rates, low balances, and high fees, and may be turned down for larger amounts necessary to purchase a new car, for example. However, homeowners can use this time to begin aggressively working on their credit record, by paying off older debts, going through a credit repair program, and establishing a new on-time payment history. The further in time they get from the foreclosure, the less it will affect their scores and, combined with paid off loans and current accounts, they may be able to qualify for a mortgage within a couple years after facing foreclosure.

Also, the possibility of the homeowners being sued after foreclosure is frequently so remote as to be not worth worrying about. Lenders understand that homeowners face foreclosure due to a lack of funds, so it is not in the bank’s interest to sue these foreclosure victims after they have just lost their homes. This does not mean the mortgage company is compassionate, but that it does not see the profit in spending time and money to pursue another lawsuit after the foreclosure and obtaining a deficiency judgment that it will be nearly impossible to collect on. It is also not good business practice for the lender, who does not want to be known as the only bank that aggressively sues its former clients and paying customers due to a financial hardship, just because they can. So homeowners who have lost their homes have little to worry about from the lender in terms of being sued a second time.

There are many concerns that homeowners should have when facing the possible loss of their homes due to foreclosure. Considerations need to made, such as how best to stop the process, who to trust for foreclosure help, and how much time they have to work out a solution. Homeowners, though, also worry to a large extent about aspects of the foreclosure process that they have some control over, such as how long it will take the bank to foreclose on them after missing the first payment, what effect missing mortgage payments will have on their credit, and the possibility of being sued for a deficiency judgment after foreclosure. However, these concerns can be turned into advantages and opportunities by foreclosure victims, who understand how the process works and what the real dangers are to being in foreclosure, instead of worrying about consequences they believe are out of their control but that they influence greatly. This is why homeowners need to seek out foreclosure advice on their own and understand as much as possible, so they do not feel as if the situation is beyond their power to control and they feel left in the dark to lose their homes.