LOAN ORIGINATION ON SMALL APARTMENT BUILDINGS

July 27th, 2016

On occasion we are asked to make a new loan on a small apartment building.  Usually 10 units or less, small buildings are ones many times overlooked by the big banks.  Banks these days like to make loans of over $500,000, when it comes to loans of a smaller range, they either charge too much or have an ‘add-on’ for the interest rate.  The occasional new loan has it place here at DMC.  Recently we made a $275,000 loan to a customer who owned 2 units on a lot in San Diego.  She inherited the property recently and didn’t have the reserves to show, nor the high credit score that typically a bank would look for.  The units were rented and there was plenty of cash flow to make the loan and have the fixed expenses with reserves covered.  We are happy to accommodate this type of loan on a regular basis.  Call, click or fax over your loan request, we will get right back to you.

SLOW START TO A NEW YEAR

February 12th, 2016

With gyrations in the stock market, uncertain economic conditions in Europe, China and the rest of the world, although the USA economy is not doing too bad, we live in a global village.  Southern California real estate values seemed to have peaked out and although interest rates are very low, prices are out of reach for many buyers, thus creating a slow down in sales volume.  We are experiencing the same slow down.  Only buyers that are seeking value added situations are doing deals these days.  An opportunity to expand large 1br. apartments into a 2br. apartment and charge more rent, an opportunity to build additional homes on a vacant lot adjacent to an existing home, an opportunity to reinforce a ‘tuck under’ parking building that is selling under market is what we have been seeing lately over the last 3 months or so.  Gone are the days of fast deals with seller-carryback loans, gone are the days of banks selling off scratch-and-dent loans are substantial discounts.  We have not closed a loan in 2016 yet, but hope to have a closing by the end of the month.  If you have a loan to sell, or need a quote on a new loan, please contact Larry at the office by e-mail, phone or fax.

ADVERSE CONDITIONS FOR OUR FIRM

October 22nd, 2015

Many forces, internal and external have affected our business in 2015.  This year has been full of hardships and challenges, heartbreak and sorrow.  Unfortunately Maxwell Newfield had left our firm to pursue other ventures out of state early in the year.  Maxwell was our candidate to assume control of the company in the coming years, however his decision to rejoin his college classmates and other ventures in Oregon has taken him away from DMC and Southern California.   Maxwell has left on the best of terms and I wish him all the happiness in the world with his pursuits.  Maxwell is a hard worker, well skilled in the mortgage business with high ethics and attention to detail.  He is an asset to his new Oregon employer, a major credit union where he stands out and shines.   It is my hope that Maxwell will come back some day to take over DMC, but for the foreseeable future it is likely he will stay in Oregon.  The other major change is that Janice Newfield has decided to move on in her life after 34 years of togetherness and pursue another for herself.  While Janice was not a part of the business per se, you can say behind every good man there is a good woman and that woman is behind us no longer.  Some say change is for the best, all say change is inevitable.  Change has come quick and hard for DMC.  We who remain will try to do our best under the circumstances for our clients and customers.  We have experienced a downturn in the business from the changes taking place and from the marketplace in general that has slowed down quite a bit from last year.  We are still open and hoping to receive your call or inquiry regarding selling a Note or arranging a mortgage on an income property in Southern California.

Seller Carryback Note, Seller Passes Away and Estate wants to sell the Note

March 17th, 2015

It is always tragic to lose a close relative.  It has been 20 years since my grandmother who I grew up with passed away and I still think about her often.  The reason I mention this is because we are buying a Seller-Carryback loan that was created in 2014 whereby the seller was elderly, lost his wife just a few years prior and was approached by a Realtor to sell his long time home he lived in.  The seller decided to be swayed by the Realtor and did not receive the most money he could have selling his home to a friend or relative of the Realtor and paying a 6% commission.  To add to the elderly sellers woes, the Realtor convinced the Seller to carry back a Trust Deed for a substantial portion of the purchase price.  The seller being over 90 years old, did not argue much and trusted the Realtor’s advice.  The seller needed assisted living care and moved into a facility nearby his old home.

Looking back the seller would have been better served if he had just rented out his old home for the market rental rate of apx. $2,000/mo. (or more) and then let his heirs inherit the house to fix up or remodel, then sell it for top dollar.  But that’s not what happened.  The seller did receive the monthly interest-only payments at a very low rate of only 3.25%, as negotiated by the Realtor and after only 4 months, the seller fell more ill and passed away.

The seller was close with his brother, back on the east coast, also his sister-in-law, his brother’s wife.  The seller a couple of years ago drew a will with an attorney naming his brother as executor of his estate, or in the event his brother was unable to fulfill the duties of executor, his sister-in-law would be appointed.  Now in 2015, when the seller passed away, unfortunately his brother was killed while crossing the street and being struck by a car.  This poor family had one tragedy and then had another.  Now the sister-in-law has the responsibility as the Executor (Executrix) of the estate.

The family wanted to sell the seller-carryback Note and contacted another firm to get a quote.  The other firm offered a very low-ball offer because of the low interest rate on the Note.  When we were contacted, I took the call and offered the most money we could, even though the face rate on the note was so low and originally we were told it was a bit higher, but when the Note was reviewed the 3.25% true rate was reveled.

Keep in mind that the face interest rate and duration of the loan are the 2 most important factors that will govern the discount if you chose to sell the loan you carry.  The third factor is the amortization of the payments.  Interest only is the minimum amount required on a loan payment in order to have it not go negative, I always advise people to make some kind of amortization on a Note, even if it was a 30 or 40 year schedule, it will make the note worth more in case you want to sell it, also improve the security as time goes on.

We obtained the Will and original documents in order to complete the transaction, however it is required that an estate be probated by the court system if a Will only exists without a Family Trust.  We tried to convince the title company since there is essentially only one heir named in the will and that heir was the same as the Executor that it wasn’t necessary to have a court probate the estate, but the title company would not insure the Assignment of Deed of Trust without it.  The Probate Statutes on the books force an estate to go through the court system, even if there is only 1 heir and even if there is only 1 asset in the estate.  Seems unfair or unnecessary, but deal with it, because it’s the law.  We assisted in finding a local attorney to make a court order happen fairly quickly granting estate powers to the Executor and we should be able to proceed very shortly to finalize our purchase.

The quick take away here is that if it is possible to consider making a trust in order to avoid probate, you should make one.  With a Trust in place, you name a successor Trustee and when you pass away or become unable to manage your financial affairs, the successor Trustee just transitions in to take care of business.  Having a Trust to avoid probate would have saved over $10,000 in costs and many months of time.  What’s the saying “Live and Learn”, well certainly the best of intentions were made here in this case by the Seller who obviously loved his family and his heirs and thought he was taking care of them by making a will through an attorneys office, but would have been better served by that same attorney had he asked for a family trust.

If you have an estate Note that you want to sell, feel free to call, click or fax over the information for a free price quote.

2015 Bound to Be Slow for Note Buyers

December 31st, 2014

As we enter 2015 it is worthy to note that the economy has recovered (while somewhat slowly) from the 2008 disaster we were in.  Real Estate values have revisited or exceeded the 2005-2006 peak prices in many areas of the country.  Here in Southern California, real estate values are at all time highs in most Cities.  Back in the day during the 1980′s and up to the mid 1990′s there were an abundance of seller-carryback loans.  Often ‘creative financing’ would take place upon the sale of a property.  In the mid 1990′s through 2005, it was so easy to obtain a bank loan that those seller-carryback loans all but disappeared.  Then from 2006 up until earlier this year there were many banks that wanted to sell their loans which were made between 2003-2007 or so and the market was flush with those bank loans to buy.  All during these times there were occasions whereby we and other mortgage companies would originate loans.  Borrowers that couldn’t or didn’t wish to obtain a loan through a bank would apply to an independent mortgage company for a loan and often we made those loans after underwriting them.

Now, on the last day of 2014, I can see that pretty much all of the bank loans that were being sold have done so and I don’t see the banks selling loans made in 2008, 09, 10, and on.  Those loans were made after the financial crisis and new banking regulations were in place.  Any of those loans today should be looking good for the banks and performing well.  Recently FNMA and FHA guidelines loosened and will allow borrowers to place just 3% cash down payment on a purchase of a home and the agencies will lend 97% of the valuation.  Also other guidelines have loosened recently making it easier to obtain bank financing.

There will always be some seller-carried loans, also there will always be some bank loan resales for one reason or another, however I don’t see a large amount of them in the future.  I do see loan originations to be active in the future, as well as loan brokerage, whereby we are a correspondent lender for institutional financing.   Happily, we will celebrate 36 years in this business in February and plan to roll with the changes taking place.  Being Diversified in the business isn’t just in our name, it is our business to be Diversified when the market shifts or changes with the times and conditions.

Happy New Year, may 2015 be prosperous, healthy and peaceful for all.

Know your Borrower, Know your Paperwork

November 6th, 2014

Often rental property owners setup their ownership of their property in an LLC or a corporation.  That way if there is a tenant who sues or if there is a claim against the landlord that insurance doesn’t cover, or exceeds the insurance coverage amount, there are certain protections having ownership in an LLC (Limited Liability Company).  From time to time we receive loan requests for a refinance or an acquisition loan.  Recently a borrower who owns their income property in their LLC made a request of us to make him a loan.  Upon review of the income and expenses of the property we made a valuation and site inspection, then determined that we would be able to lend about 62% of the value of the property.  The borrower was happy with our numbers, terms and conditions and asked us to proceed.  But wait!  The borrower’s LLC operating agreement conflicted with itself!  The operating agreement sited the “Manager” of the LLC to be a Trust, well fair enough, a Trust can act as a Managing Member of an LLC, however you have to have your Trust agreement also in order.  The conflict came where we saw one of the papers signed by the individual himself in the LLC, not as Trustee of the Trust that was the Managing Member.  A signature by an individual who is not the Managing Member will not bind the LLC to the agreement!  Necessary items when you transact on behalf of your LLC is your Operating Agreement, LLC-1 filing and if there are any amendments you need a LLC-2 or LLC-12 filing as well.\, in addition the correct signature of the Managing Member, then if a Trust is involved, it is necessary to produce a copy of that trust, also any amendments and then sign a sworn, notarized statement certifying who is the person with authority to sign for that entity (the Trustee), also who where the Settlors of the Trust.

Another issue that came up is that an old lien that was paid in full still showed on the preliminary title report.  Certainly you as the owner/borrower on a property know what you owe and who you owe it to.  If you tell us there are no other loans on the property, we know that you have first hand knowledge of that information because you are the owner/borrower.  When old liens show up, we are forced to deal with them.  In this case a loan from nearly 20 years ago with a private mortgage company that went out of business 7 years ago was difficult to track down and try to obtain a release from!  The lesson here is to make sure when you payoff your loan to get a Reconveyance and record it!  The only way to make sure a loan is gone from title is to record a Reconveyance (or get a court order I suppose), but I digress.  Luckily in our borrower’s case I was able to contact the daughter of the private mortgage company that went out of business and the reason why is because the owner passed away after a long 30 year run.  The daughter had been appointed executrix of the estate of the owner and she was also appointed as an officer to the Trustee that was on title concerning the Deed of Trust in question.  What a big job and extra work for us!  But we got things done.

Having your paperwork in order and having copies of the pertaining documentation regarding your entities is essential.  Title companies will not insure new loans without proper documentation and certifications.  Being up front about liens, old loans, delinquent taxes, etc. with us is just plain good business.  We are going to find out anyway, its not like your rate will change or be renegotiated because you have some extra work for us to complete, just tell us and we can better prepare so we can avoid delays on your new loan request.  Having over 35 years experience makes a difference!  If we can assist you with your apartment building or commercial loan request, please feel free to call anytime.

LOW INTEREST RATE ENVIROMENT CHANGING FINALLY

September 19th, 2014

After 6 long years of extraordinarily low interest rates, the outlook for 2015 is that the Federal Reserve will finally start to allow rates to rise.  We see that at the 2 day Fed meeting this week that the Fed is ending its program of buying bonds and leaving the market to its own natural forces.  That is the 1st step prior to a progression to let rates rise.  Afterall the rate of 0% – 1/4% fed funds rate is historically low and has been that way for many years now.  Be ready real estate owners, when rates rise, it will put the brakes on the red-hot real estate market we have going on.  Of course rates need to rise to normalize the economy, the low rate environment is bad for retired persons on a fixed income who rely on investing their money safely for a supplement to their retirement pension or Social Security check.  We watch the markets as all in the mortgage business do and take the signals from the Fed and plan our futures for the coming year accordingly.  If you were thinking about selling your Note, sooner than later would net you more money because when rates rise, your note will have to take a greater discount to make up for the higher yield requirement.  If you would like to know how much your note is worth, please call or click to get a no obligation quote.

RECENT NOTES WE ARE BUYING

July 20th, 2014

Recently we purchased several loans from various sources, but all had something in common.  Income property we feel is the best security for a trust deed to be against.  Having rents to rely on to pay for the mortgage payment makes it very unlikely for any default.  We of course consider loans that are on Single Family Properties (SFR’s), but more and more we are shifting to commercial and multi-residential properties.  Whichever you have a Note on, please feel free to contact us by phone, fax or e-mail.

NOTE SELLERS; TODAY v. THE PAST

May 25th, 2014

Lately we find ourselves buying Notes from Banks and Private Equity funds more so than private parties. Our website and blog pages are addressed more to the private party who carried back a loan via a sale of a piece of Real Estate. The main business we have conducted for 35 years is the Note purchase business. Sourcing Notes from private parties, Banks or Private Equity firms, our goal remains the same, to give Note seller the best price, as well as smooth and quick a transaction as possible.

Sellers, epically Private Equity Funds and Banks are looking for particularly top dollar for loans they sell. After all Banks who fund those loans did not expect to take any type of discount on them, only certain circumstances causes a Bank to sell a loan they have on the books, usually the borrower has an issue, not necessarily a problem paying, but perhaps an unwillingness to provide annual financial information that the bank requires due to regulations. Perhaps a borrower doesn’t provide annual income and expense information on an apartment building that the banks’ loan is secured by. The bank may wish to just sell the loan instead of forcing a borrower to comply, we have bought many loans with that situation. Our reputation to pay top dollar and pass the vetting process by major banks ensures us a steady stream of quality Bank Notes to buy.

Currently we are in the process of funding 3 seasoned bank loans, as well as bidding top dollar on a 4th one we expect to be the winning bidder on. We also heard from 2 private party sellers this week, however the quality of the loans did not allow us to make offers on them.

Whether you are a private party, or an Equity Fund manager, or a Vice-President of a Bank, you will be treated with the same respect and professionalism from us. Often we buy loans in 48 hours, certainly most loan purchases take 3-5 days to complete, but not due to our end. If you are looking for a top dollar price with quick closing and professional, experienced expertise give us a chance to give you a price quote on your Note.

BUYING NOTES AT A RECORD PACE

April 5th, 2014

Our main business is buying promissory Notes secured by 1st T.D. positions on income property in Southern California.  Being at this since 1979 makes us one of the oldest companies in the business.  Having 35 years of real world experience doing something you are good at makes you an expert.  Our expertise comes after many thousands of Note purchases and right now we are at a record pace.

With our ability to buy loans quickly and efficiently it has made us a sought after firm in the business.  When speaking to other note buying firms, make sure you distinguish that you are dealing directly with the source of funds.  We hear from brokers all the time that want to refer us deals and in turn the broker wants a fee or commission.  Cutting out fees and commissions by contacting us directly is highly recommended.  We prefer to deal directly with the Note seller.  Not to say that brokers are not welcome, to the contrary, we do welcome brokers to contact us and obtain a top dollar quote on buying their clients Note, we will honor any commission agreement you may have with your note seller.  We collateralize or buy partial interests in loans as well.

Our other expertise is arranging financing on apartment buildings and multi-tenant commercial properties in Southern California.  We are connected with the wholesale departments of many major lenders and have a long standing relationship and knowhow to get the refinance closed.  Recently we closed a FNMA $3,000,000.00 refinance loan with a very low fixed 10 year rate of only 4.2% and just charged 1/2 point as a brokerage fee.

We also on occasion fund apartment loans ourselves.  In February we made a 1st Trust Deed loan on 11 units in Cudahy, CA, we only took 7 business days from start to finish at a competitive rate of only 7% interest and charged only 3 points.  Buildings in certain areas are restricted by the large lenders, as well as less than favorable credit borrowers, however we consider each loan on a case by case basis and make our own decisions without outside influence.

We would love to hear from you if we can be of service.