Friday, September 10, 2010

Oh, the irony of it all.................

The Ohio Realtor newsletter arrived in the mail this week.  One of
the main articles is titled "Seven reasons banks are denying home
loans".  It is a sign of the times that this is news, but here are the
reasons banks are saying "no":

     1.  Poor credit 
     2.  Insufficient liquidity (as in no cash for a downpayment)
     3.  Lack of income 
     4.  Lying on the application
     5.  Debt (as in too much)
     6.  Unemployment
     7.  Self-employment

That applying these standards constitutes a problem tells
you how far off track our industry was in the mid-2000's.

The article then concludes:

     "Once the traditional lending route has been exhausted, both
Realtors and potential buyers are often times at a loss of what
to do as a back-up plan.  Private lending has been around for
many years, but most borrowers and brokers have no idea
that it's even an option.

     " 'With the strict underwriting guidelines banks are governed
by these days, private lending is the wave of the future for
getting real estate loans funded,' explains Eric Wohl, president
of Noteflo, an online private lending marketplace launching
today.

     "NoteFlo's unique service allows borrowers to post loan
funding requests for free, which will be broadcast out to
thousands of private lenders that will bid for the opportunity
to fund their loan.

     " 'Our goal is to make sure borrowers know that they
have plenty of other options if their loan application is
denied by a traditional bank.' says Wohl.

     "For more information, visit www.noteflo.com."

All I can say is WOW.  I wonder if the editors of the Ohio Realtor
have visited the noteflo web site.

Maybe I'm reading it wrong, but their web site sure makes it look
like their featured loans include 60% loan to value ratios and
interest  rates higher than 11%.   I know some private lenders. 
They have always asked a premium of at least 6% over what
was available from a bank.  So the indicated rates on NoteFlo's
site are not a surprise. 

What is a surprise is that someone thinks this lending avenue
will be helping the person turned down by the bank.

Somehow I doubt that "private lenders" are much of a threat to
traditional banker or much of a help to the typical borrower.

I'm just curious what the editors of the Ohio Realtor were
thinking when they included this article in the September
newsletter.

2 comments:

  1. Anderson,
    I am a private lender and have made 20+ loans ranging from 7%-11% over the years, all to people who could not achieve bank loans due to poor credit/liquidity. Each borrower has their own unique story about why they need the money, whether it be health, business, or family related but the bottom line is that they needed the money asap. If a bank feels like these individuals are too risky to lend to at all, private lending is definitely playing a positive roll in helping these people get back to their feet and these private lenders should probably be able to achieve an interest rate that is higher than a bank loan for the simple fact that these borrowers are higher risk. The website www.NoteFlo.com is simply a place for people to put in loan requests to private lenders. They are free to request any interest rate they choose, depending on how good their credit is, the LTV, and how quickly they need the money. This is an option that most people dont even know they have and for many, it can make a big difference in their personal lives or help them get back to their feet financially.

    ReplyDelete
  2. Dear Noteflo team,
    Thanks for your response. As I mentioned, I know private lenders. They do provide a service. The ones I know are better at pricing risk than most banks or the government. They judge character the way old country bankers used to. Private lenders deserve the higher rates, no question. Your comment about borrowers having a "unique story" is absolutely correct.

    I think what I reacted to most strongly was the line, "private lending is the wave of the future for getting real estate loans funded". If the Ohio Realtor had posted an article about private lenders and Noteflo providing a service for a niche market, I would have thought the Ohio Realtor was providing its memebership with good usable information.

    Placing it as the lengthy conclusion to an article about why banks were denying loans and framing your service as the "wave of the future" just struck me as ironic.

    Sorry.

    Having said all that, I hope Noteflo's business model is a success, that your lenders make money, and that your borrowers repay it.

    Best wishes,

    Steve

    ReplyDelete