Originate Report – September 2020

SEPTEMBER 2020

THE OFFICIAL MAGAZINE OF GERACI

INSIDE:

CULTURE CORNER TEMPLE VIEW CAPITAL

Eddie Wilson AMERICAN ASSOCIATION OF PRIVATE LENDERS

COVID-19:

The Effects from COVID on Reverse Mortgages Assessing the COMMERCIAL REAL ESTATE COVID-19 Recovery

THE ONE TOOL to Increase Customer Loyalty and Advocacy

MYTHBUSTING:

Common Myths Regarding Mortgage REITs for Private Lenders September 2020 Originate Report 1

2

CONTENTS SEPTEMBER 2020

Who To Know 6

Eddie Wilson, American Association of Private Lenders

By Charles Peckman, Contributing Writer

6

12 Wisdom From The CEO

By Dewey Burke, Founder & CEO of Luxury Asset Capital

20 Assessing the Commercial Real Estate COVID-19 Recovery

By Darlene Hernandez, Esq., Geraci LLP

Features

12

16 Culture Corner: Temple View Capital

By Originate Report Staff

24 Making Rental Loans in the New Normal

By Nema Daghbandan Esq. and Daniel Park of Geraci LLP

28 The ONE Tool to Increase Customer Loyalty and Advocacy

16

By Abhi Golhar, Abhi Speaks, LLC

32 Mythbusting: Common Myths Regarding Mortgage

REITs for Private Lenders

By Kevin Kim, Esq., Geraci LLP

20

34 The Effects from COVID on Reverse Mortgages

By Edward Brown of Pacific Private Money and

Mary Jo LaFaye of Mutual of Omaha Reverse Mortgage

In Every Issue 38 Lender Directory

28 September 2020 Originate Report 3

SAVE THE DATE

K

I

NG

&

ED

U C AT

ION

ET

W

OR

KIN

G & E D U C AT I O

N

•N E

T

2020

N

W

O

U C AT I O N • N & ED G ET N I W RK O

R

September 29, 2020

WE’RE GOING VIRTUAL! We hear YOU. We understand your needs in this ever-changing industry. We asked, pivoted, and are now ready to provide you connections, education, and fun – VIRTUALLY. Stay tuned for more details!

For More Information: Alicia Carter • (949) 379-2600 • a.carter@geracillp.com • https://geracicon.com/ 4

Letter

from the

CEO ANTHONY GERACI, ESQ. a.geraci@geracillp.com Senior Vice President, Marketing and Media LESLEY BOYD l.boyd@geracillp.com Lead Graphic Designer LYNDA HIGHT l.hight@geracillp.com CONTRIBUTORS Eddie Wilson • Dewey Burke Abhi Golhar • Nema Daghbandan Esq. Daniel Park • Kevin Kim, Esq. Edward Brown • Darlene Hernandez, Esq. Mary Jo LaFaye

FOUNDING UNDERWRITERS

MARK HANF President, Pacific Private Money ORIGINATE WEBSITE https://originate.report GERACI LAW FIRM https://geracilawfirm.com MEDIA WEBSITE https://geracimediagroup.com CONFERENCE WEBSITE https://geracicon.com

Editor

According to Confucius, “If you are positive, you’ll see opportunities instead of obstacles.”

Welcome to the September Issue of Originate Report! As the economic impacts of Covid continue to wreak havoc across the nation, many companies are focusing inward to boost the morale of their employees and tap into their creativity to meet changing demands in the marketplace. Company heads who are willing and able to cultivate a positive environment despite what’s going on in the world around them are the ones who will be able to capitalize on the opportunities that could present themselves down the road.

From philanthropic endeavors to leading not only a multi-faceted realty corporation, but also the original private lending trade organization, Eddie Wilson is a well-respected industry insider. The CEO of the American Association of Private Lenders and ThinkRealty, our September Cover story, Eddie Wilson, has dedicated his life to causes dear to his heart, creating a sense of positivity in his wake.

Drawing on lessons learned from our last recession, Eddie recognized that both AAPL and ThinkRealty are uniquely poised “to position themselves to be ready to help those who are going to take advantage of the opportunities that present themselves”. His innate, positive desire to help further the goals of the private lending industry as a whole is shown through his actions in both of his posts. Focusing inward, he has not only set up a sustainable culture for remote employees to continue to engage them during months away from the office, but also through consistent check-ins with members in the private lending industry at large to determine how best to support them. Drawing parallels between the 2008 recession and the current economic climate, Eddie is choosing to focus on the ultimate goal of future opportunities for the private lending industry.

Consistently searching ways to add value to the private lending industry, Originate Report and Geraci Media as a whole are always working hard to create innovative ways to advance your causes.

Because of this, we have designed an upcoming networking and educational event called Evolve: The State of the Market. Our goal is, as always, to maximize your time, new industry connections, and access to new information. Check out www.geracicon.com for more information.

Till next month…

Lesley Lesley Boyd Senior Vice President, Marketing & Media

September 2020 www.originate.report Originate Report 5

PROFILE

Eddie Wilson, CEO American Association of Private Lenders

Eddie Wilson

Preserving positivity in the age of COVID-19

By Charles Peckman, Contributing Writer

E

ddie Wilson, CEO of the

sity, Eddie served as the president

The American Association of Private

American

of

of Affinity Worldwide and contin-

Private Lenders, describes

Lenders, or AAPL, was formed in

ues to head Think Reality as the

2009 as the first national organiza-

himself as a serial entrepreneur.

group’s CEO in addition to several

tion that represents private real es-

After completing a degree in busi-

philanthropic efforts with his wife,

tate and peer-to-peer lending. Since

ness management at Emory Univer-

Misty Wilson.

its inception, the organization has

6

Association

One of my main missions is trying to keep our team engaged and keep them positive. I believe that a leader should always be the positive voice of the organization.”

This positivity, he said, remains crucial during a global health crisis such as the coronavirus. Whether this means checking in with team members during Zoom calls to make sure everyone is adapting to new realities and new work environments, or determining areas of opportunity for the association, Wilson said that as CEO he takes a measured, holistic approach to internal and external areas of concern. Ultimately, he said that his focus is “keeping everyone positive and moving forward.”

During a period of collective concern, Wilson said it can be difficult to find a silver lining among the seemingly never-ending stream of nationwide angst. He added that little things, such as checking in with employees, make a world of difference. As important as these individual measures, he added, is looking served as a touchstone for private

sure members are on the same page

back at how private lending survived

money lenders, hard money lenders,

with the organization’s best practic-

– and thrived – after previous periods

mortgage managers, and brokers

es. This relative normalcy, however,

from across the U.S.

quickly dissipated at the onset of the 2019 novel coronavirus.

lenders’ association, Wilson said his

“When

day-to-day operations can be broken

spreading across the country, my

down into three distinct categories:

focus went more towards our in-

the culture, or keeping a keen eye on

ternal team, creating a culture that

the attributes of the company that

was sustainable internally, because

matter the most; advocacy, which

everybody went to a remote work-

includes time spent in Washington

space,” Wilson said. “For the most

D.C. fighting for private lenders; and

part, everybody worked from home

ethics, which encapsulates making

for the better part of two months.

coronavirus

“Private lending found an extreme opportunity on the other side of the

As the chief executive of a national the

of economic downturn.

began

last recession, so I say to myself and my team ‘let’s position ourselves to be ready to help those who are going to take advantage of the opportunities that present themselves,’” he said. “I also believe that it’s important to turn outward and focus on philanthropy as well. I own orEddie Wilson: Continues on pg. 8

September 2020 Originate Report 7

Eddie Wilson: Continued from pg. 7

phanages and feeding centers all around the world; they are part of my outreach, and I have a great passion for them. I think that in tough times, you have to take the focus off of yourself and begin to help others.

Once you do that, your outlook and perspective changes."

Speaking to this mindset, Wilson said that at the core of AAPL is a desire to help private lenders from across the country through every possible scenario, whether those situations are positive or incredibly difficult.

"Yes, we have to look towards the future and the opportunities that are coming down the road, but even more so we are focusing on our constituents. We have hundreds and hundreds of private lenders across the country who rely on us for data, rely on us for information, and news and networking," he said. "We get on the phone with our members and see if there is anything they need,

try. Because of this positioning, he

and now. There are certainly bet-

added that it is important to perpet-

ter days ahead, and going back to

ually be at the cutting edge of the

AAPL as an industry leader, there is

lending field.

a huge onus on us to not paint the current situation in a negative light.

"One thing we have to stay focused

If we were to do that, there would be

on is that one lender doesn't repre-

implications throughout the broad

sent the entire industry," he said.

spectrum of private lending.”

"We have to look at the collective whole. Even though many lenders

When thinking about how times of

are struggling, there are many more

stress – or times of opportunity –

lenders who are still finding oppor-

impact lending professionals, Wilson

tunities – we have to make sure that

said it is important to extrapolate

our messaging is broad enough so

upon the ethics component of the

it doesn't highlight a singular per-

association. When new members

son's plight, we have to function as

of AAPL are brought on board, they

the universal voice of reason that

agree to follow the association’s code

says 'look, the industry as a whole

of ethics, which was created and

is struggling to a degree, and some

is updated as needed by an elected

have lost secondary market capital

board. In addition to lessening some

that allowed us to thrive and survive

of the stigma surrounding private

in the time before the coronavirus.’

lending that endures today, the eth-

More important than this, howev-

ics pledge ensures that every mem-

er, is serving as a beacon towards

ber is on the same page in terms of

the future.”

the association’s goals.

Wilson, who has been in real estate

"We have a member database that

in various forms for nearly two de-

many people use to look for pri-

cades, said he remembers all too

vate lenders," he said. "The AAPL

if there is anywhere they are strug-

well the tumultuous period of the

member emblem does hold clout in

gling and we could offer support. At

2008 housing crash. Even though

the industry, and the first thing we

the end of the day, we are going to

that series of events had disastrous

do when borrowers call us to vet a

move forward healthy and strong,

consequences on some areas of fi-

particular lender is to check to see

looking towards the future and pur-

nance, he added that private lending

if that individual has ever received

suing opportunities as they come our

thrived in its aftermath as investors

an ethics violation. Part of the rea-

way. An association should function

shied away from institutional capital.

son we do this is because when we

like this, and an association should serve as the backbone of an industry.”

go to Washington and advocate for “There were many people who suf-

less governmental regulation on

fered [during that time], but that

private lending – in order for us to

When thinking about the role that

downturn was the single greatest

keep strong and nimble – we need to

AAPL plays in the private lending

catalyst for growth in the private

be able to show the legislators that

sphere, Wilson said that there is a

lending industry. For those who sur-

there is a code of ethics our members

large onus on the association be-

vived and then saw their strongest

abide by. This helps show lawmakers

cause of its position as the largest

days after, I think there are import-

that we take the ethics of the industry

group of private lenders in the coun-

ant parallels to draw between 2008

very seriously.”

8

Returning to the aftermath of the 2008 crash, Wilson said that some people were skeptical of the blossoming private lending sphere. Intermittently referred to as hard money lending, the institutional failure of the housing market left some borrowers with a bad taste in their mouths. Even though Wilson said he is the first to admit that there is no easy “remedy” for a negative perception of private lending, he added that time – paired with the ethics component and dissemination of information about private lending – helps even the toughest skeptics see the many positive attributes of private lending.

“In the aftermath of 2008-2009, the government was overreaching in its regulation and was really restricting potential growth for real estate investors,” he said. “That curtailed progress led to a vacuum, a vacuum that allowed private lending to really step up and fill a void in the market. If there are great deals, the money will always follow, and money always finds opportunity – that’s how we got to where we are today.”

Wilson said that private lenders were able to offer capital at only a percent or two higher than tradi-

Eddie Wilson, CEO American Association of Private Lenders

tional bank lending; this opportunity helped bolster the economy after 2008, and in his eyes assisted in the

poised and ready," he said. "There

that capital. There is massive growth

pre-coronavirus

is ample capital moving out of other

right now in the private lending in-

discretionary funds and moving to-

dustry; yes, there are traditional

economic

boom.

When thinking about the aftermath of the pandemic, Wilson said that he believes private lending will step up to the plate again.

wards the single-family rental market right now. To some degree, banks are regulating to take advantage of

"I think that our sphere will play a

amazing developments, and private

major role again, and I think we're

lending is becoming the conduit for

hard money lenders, maybe someone who has raised discretionary capital and they’re lending it, but there are also many people who are Eddie Wilson: Continues on pg. 10

September 2020 Originate Report 9

ErEddie Wilson: Continued from pg. 9

becoming involved with wholesaling and fix and flip properties. There is more self-directed IRA money today than ever before in history, and that capital is waiting to be injected into the marketplace.”

One area of private lending Wilson said he is keeping a close eye on, however, is governmental regulation of the space. Over the next five years, he said that varying degrees of regulation will either assist or hinder private lending.

“As a whole, regulation will either help us deploy capital, or it will create a roadblock or bottleneck for capital re-entering the marketplace.

The way we look at this, at least

government scrutiny has made it

– if you can tie causes to capitalism,

more difficult for these people to

it really puts life into perspective in

inject capital into an otherwise

a number of ways.”

thriving marketplace.

Putting life into perspective, Wilson "Many residents in Florida, who of-

said, may seem difficult during the

ten skew older, have high amounts

current period of collective strain.

of wealth and are trying to find yield

Although this may be the case, he

for their retirement dollars, and

added that focusing on the future,

the regulation is to a degree that

his family, and the state of private

they cannot deploy that capital in

lending helps alleviate anxiety about

a meaningful way into investment

the 2019 novel coronavirus.

opportunities," he said. "As any industry grows there is naturally go-

“We don’t know for sure when the

ing to be a certain amount of scru-

economy will clearly open back up,”

tiny, but what we want to prevent

he said. “Economists make differ-

is overzealous regulation masked as

ent forecasts about reopening, but

consumer protection.”

there are so many contributing fac-

When Wilson is not fighting these battles on behalf of AAPL’s nationwide network, he said that he takes

from AAPL’s perspective, is that re-

great pride in the philanthropic work

ducing regulations allows for the

he engages in with his wife. Togeth-

better flow of capital getting from

er they have founded over a dozen

the source to the intended user,” he

orphanages

said. “Because we’re not servicing the consumer market, we should be released from even some of the current regulation that is on us. Of course, from a legislative perspective, risk has to be managed, but we are going to continue to fight to reduce regulations that sit over the top of the market.”

These battles, Wilson said, are being

and

feeding

centers

around the world and have found a passion for what Wilson calls ‘cause capitalism.’

tors. There are many variables, but I think in a short time we will begin to see a correction to what the market is experiencing. The reality of our current situation is that I believe private lending will play an expansive role in our nation’s recovery, and the degree to which we can deploy capital through private lending will potentially make that recovery quicker.”

"I am a capitalistic person and believe that a business should have a

As for Wilson's work-from-home

purpose and make money for every-

routine, he said that it has been

one involved," he said. "But in addition to this component, I am a firm believer that the cause side remains important, especially today. I believe that capital should advance humani-

amusing to watch parents flood social media feeds with questions like "how on Earth do I solve this geometry question?" On a more serious

fought in Washington – but as in-

ty as a whole, and all of the business-

note, he added that he commends his

dividual states review and regulate

es I have been involved with have

team for their ability to adapt to new

the private lending space, he added

a cause component embedded in

workplace realities.

that more concentrated lobbying ef-

them. I have a coffee roastery called

forts are needed in order to curtail

Because Coffee that brews great cof-

“I know and fully realize the level of

stringent regulation. In Florida, for

fee and supports great causes. In the

stress that my staff is under by try-

example, where there is a litany of

end, what I want to do with my fam-

ing to maintain productivity levels

self-directed IRA lenders, recent

ily is create change in people's lives

while also homeschooling their chil-

10

dren. With both parents working at

bership bolstered with the best and

“I’m proud of what the association

home and e-learning happening at

brightest private lenders in the

has become, and I know we will get

the same time, there are bound to

country. Although the rest of 2020’s

through this situation together and

events, such as the association’s an-

emerge stronger than before.”

be some humorous moments but I can’t wait for all of this to end and for us to return to some sort of normalcy. With that said, however, I don’t think we will ever return to the ‘workplace’ as we know it, and the functionality of in-person office space will change.”

nual conference, are likely to look different than past years, he added

For more information about the

that the ‘small but mighty’ team at

American

AAPL is working diligently to stay on

Lenders, or information on how to

top of not only the coronavirus, but

join, visit aaplonline.com

trends in private lending.

Looking forward, Wilson said he

“We strive to offer the best for our

hopes to see the association’s mem-

hundreds of members,” he said.

Association

of

Private

Eddie Wilson CEO American Association of Private Lenders https://aaplonline.com/

INDUSTRY JOB WATCH

LOOK WHO’S HIRING! Looking to fill a position? Advertise it here in Originate Report’s Industry Jobs to get it in front of thousands of qualified candidates. Contact us at (949) 629-3961.

Fidelity Mortgage Lenders, Inc. has been funding real estate loans in Southern California since 1971.

Founded as Fidelity Home Loan Co. Inc., we originally specialized in residential equity loans, and later expanded in to commercial lending. We make loans on both commercial and residential properties in the state of California, providing first trust deeds, refinances, and/or purchases.

Now in our fifth decade, Fidelity Mortgage provides loans to borrowers which larger institutions are unable to fund. We grew by responding to the needs of a changing real estate marketplace while serving a growing community of property owners and investors.

Our reputation for fairness and reliability brings us referrals from our borrowers and other professionals. As a result, we service a network of real estate brokers, attorneys, accountants and business managers who seek our professional help for their clients. All of our combined departments work together to completely service loans. From loan advisers to escrow officers to loan servicing, there is only one goal… our clients’ total satisfaction.

The Role: We are seeking a candidate with knowledge of commercial lending to be part of our loan servicing team.

Responsibilities: • Service Loans - Monthly payments processed and scanned - Monthly check to investors • Collections - Track and file late notices - Read fees and statements, and conduct appropriate follow-ups - Use judgement to escalate concerns to immediate Manager or to the Company’s Chief Operating Officer • Insurance - Read and understand Property Fire Insurance - Track insurance notifications - Monitor requisite insurance on properties - Communicate to investors and property owners • Customer Service with Investors and Borrowers - Answer general questions, and display problem-solving skills • Knowledge “The Mortgage Office*” loan servicing software system Qualifications: • ~3 years Real Estate Loan Service Specialist • Knowledge “The Mortgage Office” loan servicing software system • Familiarity with foreclosures • People skills and rapport with borrowers, customers • Computer skills: proficient in Word, Outlook and excel • Able to manage multiple projects, deliverables, milestones, and schedule

September 2020 Originate Report 11

WISDOM FROM THE CEO

Dewey Burke Founder & CEO of Luxury Asset Capital

12

Dewey Burke, Founder & CEO Luxury Asset Capital

How did your past experiences mold

tain treatment and that was part of

of that is guaranteed. You have no-

and shape you into the leader they

his gift.

where to look but in the mirror. The

are today?

I think my time as an athlete shaped me as a leader the most. When you are part of a team, playing a college sport at the highest level, the way you come together around a common goal is where leaders are born -- but I am not saying that is where I became a leader. I learned and watched how to lead during that time of my life, and there has been no better leader in my life than my college coach, Roy Williams. His ability to treat all

lows are so, so low, but the lesson What did you do in the beginning

is this: if you are tough enough to

of starting your business? What

stomach those lowest lows, the highs

risks did you have to take and how

– the best days as an entrepreneur –

did you have the courage to contin-

are so much better than any best day

ue to push forward?

I must say that the biggest lesson I’ve learned from starting businesses is this: Your worst days as an entrepreneur are so much worse than your worst days as an employee. When you are an employee, at the end of the day you will get paid every other Friday,

of us fairly – not equally – but fair-

your benefits are there, and unless

ly, was astounding to me. He knew

you really, really screw up your job

who he could push, who needed cer-

is safe. As an entrepreneur, none

as an employee. By far.

What habits, mindset, or perspective have helped you succeed as a business owner?

It’s easy to just say you need to work extremely hard and put in long hours, and for a long time I definitely did that, but now for me it is about efficiency. I have two young daughDewey Burke: Cont. on pg. 14

September 2020 Originate Report 13

Dewey Burke: Cont. from pg. 13

ters and I want to be with them. I don’t want to work 15-hour days every day, because I don’t want to miss things, so efficiency drives almost all my decisions. We do not rush, but we are very thoughtful about time management, using technology to assist our daily processes, and training enough so that we can save time.

I don’t believe in the 40-hour workweek or counting hours for my team.

We don’t do any of that. We believe in efficiently servicing our clients, getting our work done right, and then enjoying life. We have a terrific balance at our company, and I feel that is born from efficiency.

What excites you about your role as CEO currently today?

as collateral. We have also broad-

ness because you never know where

ened our product line by introducing

it may lead.

a luxury line of credit and an inventory loan product in addition to our

How do you make sure your com-

standard collateral loan product. Fi-

pany stays ahead in this industry?

nally, earlier this year we complet-

Technology. We are constantly eval-

ed the acquisition and integration of

uating our platform, our CRM, mar-

Borro, our most significant competi-

keting automation, the customer

tor in this space. We have introduced

journey, how our repeat clients are

to their client base a much richer

treated, and how my team can work

product offering with better rates

more efficiently. We are a sales or-

and more flexible terms. In these

ganization, but certainly tech-en-

cases, as with our core business, we

abled and the reality is almost every

help people by providing loans from

time we do dev work, or update any

$2,500 to over $5,000,000 within a

of our software, by the time that

few days, discreetly, with no credit

project is done it's already time to

requirements, no tax implications,

consider another one.

and virtually no paperwork.

Is there anything that you wish What piece of advice do you have to

you could go back and tell yourself

share with other entrepreneurs and

at the inception of your company?

CEO’s that are in the early stages of

We are excited to be expanding the

I would say to be prepared to spend

building their company?

business in several ways. For exam-

a lot more on legal that I would have

That’s quite a question. Being able

guessed. Not because we have dealt

ple, we are increasing the range of

to convince those you are closest to

with a bunch of litigation or anything

market segments we serve by accept-

that your idea is worthwhile, and

like that, but more because financial

ing a broader range of asset classes

that they should trust you with their

transactions get complex and you

accepted as collateral, including Fine

money, takes a ton of guts and be-

rely on your regulatory and general

Art, which launched this month. We

lief. You really must believe in your

corporate counsel quite a bit. What-

are always looking for ways we can

vision to ask your personal network

ever I have budgeted for has always

help our clients tap the equity in as-

for money. I’ll also add a third cat-

been exceeded, which can be frus-

sets that are high in value but low

egory of advice here from personal

trating, but I also never try to pre-

in liquidity.

We have a dedicated

experience, which I’ll call “be out

tend I’m an attorney. You don’t know

focus on the community of profes-

there ready to talk enthusiastical-

what you don’t know.

sional athletes and entertainers. We

ly about your business at all times

have made it easier for our high-

because you never know who you’ll

net-worth clients to obtain 7-figure

meet.” Never turn down an opportu-

loans by accepting luxury real estate

nity to tell someone about your busi-

14

Dewey Burke Founder & CEO Luxury Asset Capital https://luxuryassetcapital.com/

PRESS RELEASE

ABS Appoints Jasen Portero as Chief Operations Officer LONG BEACH, Calif., May 5, 2020 - Applied Business Software, Inc., (“ABS”), leader in loan servicing and origination software in the private lending space, announced today that Jasen Portero, its current Vice President of Development for the last 12 years, has been appointed Chief Operations Officer.

As a Full Stack Developer, Jasen oversees the Development Department, manages all online services, and spearheads all new projects. As VP of Development he has created a multitude of Front-End Service capabilities: iPad app, electronic signature, online loan application and borrower portal, text notifications, loan geo-mapping, API, and the first fully browser based version of The Loan Office® servicing software. As a Chief Operations Officer he will be extending the online services and will oversee development of both products, The Mortgage Office® and the Loan Office®. Prior to joining ABS, Jasen spent 18 years working for Universal Music Group, WellPoint, Warner Bros., and Evite where he took part in developing some of the technology people around the world have come to use and love.

“I am honored and humbled to take on this new role and take ABS to a new level. Our software is a testament to hard work, excellence in coding, and continuous innovation. ABS as a trusted brand is experiencing incredible growth, and I am excited to be a part of it and take the company to the next phase.”, said Jasen Portero.

“Since joining in 2008, Jasen has been instrumental in our growth. He is an excellent addition to our senior management team and will play a critical role in ABS’ future product development strategy. His proven track record and ability to build a winning team are a great combination for what lies ahead”, said Carlos Nodarse, ABS’ CEO. About Applied Business Software Applied Business Software is a market leader and global provider of software systems and solutions to the lending industry. ABS offers a complete suite of software products designed from the ground up to specifically address the needs of those who originate and service loans. All our products are consistently rated superior in design, system interface, expandability, and ease of use. ABS is based in Long Beach, California. For additional information about ABS’s products and services, visit https://themortgageoffice.com or call (800) 833-3343.

Elizabeth Morales, Chief Marketing Officer https://themortgageoffice.com | (800) 833-3343 | elizabeth@absnetwork.com September 2020 Originate Report 15

CULTURE CORNER

Temple View Capital: Social

TEMPLE VIEW CAPITAL

By Originate Report Staff

What are your company’s core val-

Integrity: We value our reputation

esty and transparency. We value

ues and what do they mean to you?

for honesty, transparency, fair deal-

open communication, constructive

In short, it’s all about C-A-P-I-T-A-L

ing, and ethical conduct above all

criticism, suggestions for process

else. We will not compromise ethical

improvement or reaching out for

Clients: Our foremost duty is to our

standards. We say what we do, and

clients; by focusing on their needs

do what we say.

and accomplishing their goals, our

Teamwork: We treat each other with

success will follow.

respect, and we put the interests of

Attitude: Our people push beyond

the firm, clients and our investors

conventional thinking, apply what-

before our own every time.

ever effort is required to do the

Accountability: We hold each other

job well and take responsibility for

to high professional standards. We

achieving results.

do not hide from our mistakes but

People: Our key assets are our peo-

embrace them as lessons to learn.

ple. Individual initiative, creativ-

Leadership: We manage our busi-

ity and entrepreneurship are en-

ness for the long-term. We do not

couraged and rewarded. We create

wait and react to market conditions.

opportunities for growth and de-

We anticipate our clients’ needs and

velopment, recognize personal considerations, and invest in training

prepare for them in advance. We lead.

support and assistance. Our team is always given a platform, an opportunity to weigh in, to make suggestions, question logic and leadership without reservation. Our employees are extensions of our brand and core values. We have an all-for-one and one-for-all attitude! This is an approach and a foundation that we encourage, support, and demand.

We believe in the power of utilizing all resources, especially the people around you. Jumping in to assist an employee in their project for a second opinion, or with an answer to a

and mentoring. We each bring a dai-

What sets your company culture

question pertaining to another de-

ly responsibility to make the Compa-

apart from others?

partment, or offering perspective

ny stronger than when we joined it.

Our culture is founded around hon-

and suggestions is extremely common.

16

What are some fun/unique office

ever the marketplace brings us, strong

What tools do you use to incorpo-

perks that you offer to continue

core executive management makes

rate communication freely be-

your culture?

our company nimble and effective.

tween all employees? What about remote employees? (ex. Slack,

We appreciate YOU culture. We celebrate us. Whether it is a catered

Why do you think that building

ring central, etc.)

lunch for our company-wide meet-

and maintaining a strong compa-

We use technology like Microsoft

ings, a holiday potluck, or an em-

ny culture is important?

Teams and Zoom for daily interac-

ployee celebrating a personal life

We are in the service business. Our

event, TVC makes a conscious effort

customers choose us not only be-

to celebrate YOU Culture.

cause of the products we offer, but because of the people they deal

tion and of course email. However, we are very focused on in-person communications. Our senior leadership hosts frequent all-hands town hall meetings, which are particularly

How are you maintaining your

with. Having a strong culture helps

company culture in this remote

us nurture and retain our best team

environment?

members and develop new ones. We

Since COVID, we have expanded our

want to be more than just a build-

footprint to "offices" from New York

ing or an investment opportunity –

to DC to California and virtually all

we want to be part of each others’

team, what do you do to get them

points in-between as our employees

and our customers’ lives. All of that

bought in to your company culture?

made a seamless transition to remote

comes from working hard to create and

working. That focus on communica-

Like most companies, we immerse

maintain a consistently strong culture.

new employees in our culture right

tion and information has not stopped Does your company create goals

partmental and company schedule

that align with your culture? If so,

of meetings, had a remote ‘Top Chef’

what are they?

contest, a Meme Roast Vote, and sent

Our goals tend to be more focused on

funny personalized cards to employees

our company mission. Our team of

at home, celebrating our culture of

experienced real estate investors is

communication and togetherness.

dedicated to helping other real es-

work to create and reinforce a positive company culture?

Our Executives all have an 'open door' policy and our partners meet every new hire to ensure that each department is as interconnected as the loan process itself. We also strive to eliminate red tape, bureaucracy and other barriers that keep our staff from getting things done for our customers.

What are the key aspects of your company culture? How have these changed or shifted over the years?

ty and in a remote office environment.

When new employees join your

away. We introduce them and have

since. We maintained an active de-

What ways does your company

effective during this time of uncertain-

tate investors achieve their dreams by being flexible and innovative.

However, without a strong culture, we cannot achieve the growth we seek

them shadow other team members, get them involved in meetings, and introduce them to everyone during our monthly CEO all-hands meetings. The biggest thing we do is that each new employee has lunch with a member of our C-Suite. In fact, during the pandemic, we've still been doing that - although now it's virtual instead of physical. This was

for our clients and for our company.

too important to our culture to be ig-

What activities have you held or

same table. And it's worked!

nored, even if we can't be across the

participated in as a company?

How do you continue to keep your

How do your employees engage?

We enrich our broader community with team-oriented events. For instance, we participate in Back to School donations and Winter Coat Drives to support those in need around our neighborhoods. We also have fun events, physical and virtu-

While change is part of what we do,

al, to connect our team with one an-

our core culture never does. Success

other. The more we do together, the

is a series of planned events. What-

better we will work together.

employees bought in to the culture that has been created?

By simply doing what we do!

What are 3-5 words that you would use to describe your company culture?

Teamwork, Integrity, Adaptability, Nimble, Focused Temple View Capital: Continues on pg. 18

September 2020 Originate Report 17

Temple View Capital: Continued from pg. 17

Temple View Capital Social Temple View Capital Laura Gives Back

Temple View Capital Pies

Temple View Capital Tod Dress Code

18

Temple View Capital Celebration

Temple View Capital Pie Face

Temple View Capital Tim Gives Back

Temple View Capital Holiday Party

Connect With Us: https://www.templeviewcap.com/

September 2020 Originate Report 19

FEATURED

Assessing the Commercial Real Estate COVID-19 Recovery

By Darlene Hernandez, Esq., Geraci LLP

W

eco-

has produced a prompt, widespread

facilities begin reopening in major

stimuli—both

effect on the CRE industry. The coro-

metropolitan areas following an ex-

negative and positive—

navirus epidemic’s comprehensive

tended period of mass lockdowns.

took some time to register a signifi-

economic toll on the approximate-

cant impact on the global commercial

ly $16 trillion U.S. CRE market has

Short-Term Considerations

real estate (CRE) sector, COVID-19

started to become more apparent as

The unprecedented nature of the

20

hereas nomic

previous

COVID-19 pandemic and the subse-

to cooperate with their landlords

key aspect of the overall CRE recov-

quent drastic effects on commercial

in an attempt to work around rent-

ery phase, and could help facilitate

tenants resulted in a sharp rise in

al payment difficulties. For exam-

a smoother transition to normality

force majeure litigation with finan-

ple, the Beverly Hills City Council

as business operations and the re-

cially troubled renters looking to es-

enacted Section 2 of Ordinance No.

cape their contractual obligations.

20-O-2815, which requires commer-

sultant income start to return to

Despite the California judiciary’s

cial tenants to meet and confer with

somewhat lenient interpretation of

their landlords within 45 days of no-

what events qualify in order to in-

tice to discuss payment strategy for

voke the defense of force majeure

repayment, and, if the tenant refus-

for purposes of excusing non-per-

es to do so, the landlord would then

formance, some local governments

be entitled to all unpaid rent due on

have passed legislation mandating

October 1, 2020. These type of man-

that commercial tenants attempt

dated mediation measures will be a

pre-pandemic levels.

Historical CRE Recovery Data The personnel and corporate effects of COVID-19 continues to present a dynamic challenge around the world.

The exponential rate at which the viCommercial Real Estate: Cont. on pg. 26

September 2020 Originate Report 21

Commercial Real Estate: Cont. from pg. 29

rus continues to spread, and the mitigation measures different jurisdictions are implementing to stem the tide are having a subsequently seri-

clared a pandemic, financial markets

cause the majority of them operate

have taken a collective nosedive on a

on long-term lease agreements.

global scale. The S&P 500 and Russel 2000 dropped by 13 and 29 percent

Builders

year to date respectively over the

Real estate developers’ project itin-

course of less than a month. Like-

eraries and balance sheets are im-

ous and never-before-seen impact

wise, the US 10-year treasury yields

pacted as a consequence of sluggish

on the manner in which business is

fell by 127 basis points to 0.6 over

activity and the closure of certain

conducted. Although the full effect

the same timeframe. Rather than the

categories of construction, to in-

usual six-month lag behind the over-

clude new residential developments.

all economy, the CRE sector exhibit-

An April survey indicated that over

ed immediate effects because trade

half of US construction firms that

activities and occupiers’ operations

responded had stopped or delayed

were effectively shuttered altogether.

projects and over two-thirds ran into

of these occurrences cannot yet be fully measured, a quick look to the past can offer a valuable insight as we prepare for the post-COVID-19 recovery phase.

Over the last 100 years, external factors including epidemics followed by an economic freefall have had an instant effect on asset prices in the CRE space, but a much more muted impact on transaction activity. Still, the CRE sector recovery in each of these

instances

varied—although

event-oriented negative trends exhibited a faster recovery, longer lasting events, for example, the 2008 economic crisis, led to a more elongated recovery. Generally speaking, the CRE market has historically been six months behind the overall economy in terms of recovering from systemic external factors. However, the tremendous scope, depth and reach of COVID-19 has produced CRE impacts much faster than in the past.

Whereas the CRE industry was struggling during the onset of the 2008 market crash, it was in a very healthy state prior to the outbreak of the coronavirus. Balance sheets, capital availability, and liquidity all pointed to continued growth and businesses could control their debt maturities to longer positions. Ever since the middle of March, however, when COVID-19 was officially de-

22

CRE Subsector Impact Analysis The fluid nature of the coronavirus economy has produced a strong influence on landlords, real estate professions, builders and proptechs.

Here’s a quick breakdown by CRE subsector to take a close look at the

delays caused by material shortages.

Proptechs The effect on proptechs is variable based on the product category and associated services they offer. Coworking, coliving and holiday rental properties have experienced a neg-

impact the virus has had.

ative result—potentially due to the

REITs

return to a short-term lease mod-

Regarding real estate investment trusts (REITs), the subsector has shown a varying impact across property categories based on the virus’ effect on the profit margin of tenant business operations. To exhibit, in mid-April, the data center REITs index had jumped 34% year on year, whereas retail and hotel REIT indices had gone into a freefall of 48

fact that customers are not likely to el in the post-COVID 19 market. On the other hand, proptechs that offer digital solutions catered towards property and building management services might experience more positive results, as CRE businesses could use technology to manage operations and interact with tenants while maintaining social distancing.

percent and 53 percent respectively.

If you have any questions about how

From a broad perspective, the imme-

COVID-19 is affecting your business,

diate vacancy risk is mitigated be-

reach out to Geraci Law Firm.

ABOUT THE AUTHOR: Darlene Hernandez is a Sr. Litigation Associate Attorney at Geraci Law Firm. She has represented various institutional clients in the consumer financial services industry for national and regional foreclosure/real estate and bankruptcy firms since 2008. Her practice covers a broad range of mortgage lending and banking litigation, including litigation relating to loan servicing, title, loan origination, post-foreclosure and REO, nuisance abatement, and foreclosure trustee and predatory lending defense, RESPA/TILA issues, title defects/ claims, judicial foreclosure, deficiency judgments, and receivership.

CONTACT: d.hernandez@geracillp.com | https://geracilawfirm.com

Private Money Loan Servicing Software Powerful, Flexible and Easy to Use! Multi-Lender Loans

Online Investor Access

Mortgage Pools

RESPA Compliant Escrow Analysis

Enhanced Reporting and Forecasting

Rehab, Commercial, Construction, HELOC, ARM

Integration Borrower and Investor Text Alerts

Online and Over The Phone Payments

The ® Your Ultimate Lending Platform

(800) 833-3343

www.TheMortgageOffice.com

Applied Business Software, Inc. 2847 Gundry Avenue, Long Beach, CA 90755 sales@absnetwork.com

September 2020 Originate Report 23

FEATURED

Making Rental Loans in the New Normal

By Nema Daghbandan Esq. and Daniel Park of Geraci LLP

R

and its effects on the market, lenders have transformed terms and requirements for rental loans.

This article will go through the new expectations and practices lenders should incorporate to accommodate to the new market. These lessons

ental loan programs were

can be made. Wall Street took heavy

becoming a staple product

hits in February and March of this

in the private lending in-

year when COVID-19 hit, causing

dustry, due in part to the variety of

investor appetite for rental loans to

borrower expectations are for rental

available terms and options and a

dissipate. As the economy reopens,

loans; 3) how to market rental loans

multitude of institutional investors

rental loan products are making a

to different borrower bases; 4) how

through which the loan programs

comeback. But, in response to COVID

to expand your loan portfolio; 5)

24

include: 1) what rental products institutional investors are currently interested in; 2) what the minimum

tial pricing based on the prepayment option the borrower selected.

New Rental Loan Programs Rental loans have transformed after the effects of COVID and in a newly reopening economy. Rental loans were some of the first products to disappear from the market. Once COVID froze the capital markets, 30year rental loans had no place to be traded. After the markets began to thaw and the economy reopened, the rental market performed surprisingly well. Delinquency rates stayed low during the past few months and investors’ interest in purchasing rental loans has been reignited.

Post-COVID loans now tend to be 30-year fixed with full-term amortization. Typical loan amounts for private lender originated rental loans still usually hover around $200,000.

Lenders now make purchase loans and rate & term loans with loan-tovalue (LTV) ratios of up to 75% on purchase loans and rate & term loans, and cash-out refinances with LTVs of up to 70%. Our clients typically aim how to underwrite a rental loan; 6)

Before COVID, rental loans typically

how to document a rental loan and

had 30-year terms and up to 10 years

understand

expectations

of interest-only, but could also have

through these documents; and 7)

full thirty-year amortization. The

how to understand the capital mar-

typical Adjustable Rate Mortgage

kets behind rental loans, including

(ARM) product was usually limit-

loan sales, correspondent programs,

ed to 5/7/10 year locks with annual

and origination programs.

changes thereafter. The typical in-

investor

dustry maximum approved loan-toRental Loan Programs Before COVID

value (LTV) ratio was 80%, though

Unlike some other loans, rental loans

many prominent lenders were more

are almost always securitized, mean-

conservative trending closer to 70%.

ing that the lender looks not only at

Note rates tended to range from 5.5%

the value of the property, but also

to 7% and prepayment penalties var-

the

ied on a sliding scale with preferen-

borrower’s

creditworthiness.

for a maximum LTV of 65% for postCOVID loans. Lenders have adjusted their FICO requirements and now require a minimum FICO score of 680, but prefer scores of 720 or higher.

For added security, lenders typically require 9 months verifiable reserves.

ARM products are now limited to 5or 7-year adjustable rates, but with relaxed lease requirements. Unlike the new 30-year fixed mortgages, these new ARMs typically require only 6 months of verifiable reserves.

Making Rental Loans: Cont. on pg. 26

September 2020 Originate Report 25

Making Rental Loans: Cont. from pg. 25

Sourcing Rental Loans One of the reasons private lenders have been able to quickly adapt to rental loan products is that their current existing pipeline of fix and flip borrowers often maintained portfolios of rental properties as well.

Ultimately, the borrowing base consists of real estate investing professionals. Additionally, lenders tend to use other traditional marketing means such as search engine optimization, search engine marketing, and buying leads from exchanges that are tailored towards real estate investors. Lastly, many larger lenders have created correspondent lending programs and utilize the ground loan originators in each market to be the primary source of origination.

Underwriting Rental Loans Unlike other loans, lenders of rental products move away from a property-only mindset and instead consider both property and borrower credit.

Additionally, many lenders require the borrower to form an entity and refuse to lend to individual borrowers. The primary underwriting criterion for most lenders is looking at the borrower’s debt service coverage ratio (DSCR) to determine repayment ability. Lenders weigh the DSCR heavily for determining

ments for documentation compared

rate may spring up by 100-200 basis

to fix & flip loans. Rental loans with

points if the property remains vacant

consistent documentation are more

for an extended period.

marketable on the secondary market and allow lenders to more easily originate, sell, rinse, and repeat.

Most loans require the use of impounds for taxes and insurance.

Many investors and end purchasers of these loans also prefer the borrowing entity to pledge an interest in the underlying entity as additional collateral for the loan. This is even

loan eligibility.

more relevant for larger loan trans-

Most lenders look to DSCR and also

The DSCR requirements should be

underwrite to FICO, credit events,

actions and blanket loan portfolios. documented with specificity, and

Expectations of Parties When it comes to rental loans, there tend to be three major parties. Often, a party may wear one or more “hats� in any given transaction. There is a loan originator, a loan funder, and an end purchaser. Each party has different expectations.

Loan originators prefer to control as much of the transaction as possible and will need to work

insurance requirements are usually

with a correspondent/loan funder

fairly specific with additional man-

to determine who manages most

into investor track record.

datory requirements such as business

borrower communications.

Documenting Rental Loans

Finally, many documents require in-

The funding source will require

To facilitate free trading, rental

terest rate step-up triggers based on

agreements between the loan origi-

loans have some heightened require-

occupancy. For example, the interest

nator and end purchaser. Said agree-

and cash reserves, and prudent lenders typically place significant weight

26

interruption/rental loss insurance.

ments will require some form of

documentation, and credit. Since

are heightened compared to other

line of credit or other funding vehi-

rental loans are almost always secu-

loans, these expectations serve to

cle to permit the loan originator to

ritized, assessments in the risk of the

mitigate and disperse risk between

ideally white-label loan origination.

loan, the borrower’s creditworthi-

the parties and improve the market-

ness, and the records documenting

ability of these loans. Each party to

and attesting to those assessments

a rental loan should keep in mind

Once these expectations are met, the funding source can sell the loan off to the end purchaser.

In order to mitigate risk, the end purchaser will want extensive due diligence from the funding source/seller of the loan. Thus, the end purchas-

should be consistent and communicated clearly among all parties.

the expectations placed upon them and the market forces that drive those expectations.

Conclusion Although COVID slowed the initial

Despite the effects of COVID, rental loans have adapted to the new

er will want consistent documenta-

growth of rental loan programs, the

tion and significant representations

market is now seeing the appeal and

and warranties from the funding

potential for rental loans. Although

source to offload some of the risk in

some of the borrower requirements

purchasing a rental loan. Funding

advantage of the growth of this new-

and lender practices of rental loans

ly-burgeoning market.

sources should expect audits on underwriting and other practices from the end purchaser.

There is an expectation among all

market and lenders, investors, and originators should recognize the evolution of rental products to take

ABOUT THE AUTHOR: Nema Daghbandan, Esq. is a Partner in the Banking and Finance Practice. His practice encompasses all facets of real estate transactions representing mortgage companies and professionals throughout the country.

CONTACT: n.daghbandan@geracillp.com | https://geracillp.com/

parties to ensure consistency in risk, September 2020 Originate Report 27

FEATURE

The ONE Tool to Increase Customer Loyalty and Advocacy

By Abhi Golhar, Abhi Speaks, LLC

M

arketing for your lending

ing business and reach exponential

sition process in the form of a mar-

business needs to trans-

levels of growth, the approach to-

keting funnel that is wider at the top

form with the changing

wards the marketing funnel needs

and narrows down towards the bot-

to transform.

tom, culminating in a small outlet.

customer expectations. The concept of a marketing funnel that ends with

The top part is the awareness stage,

lead conversion and customer ac-

The New Age Marketing Funnel

the middle denotes the consideration

quisition is already outdated today.

Most of us are familiar with dia-

stage and the bottom portion is the

If you want to skyrocket your lend-

grams that show the customer acqui-

decision stage.

28

the cost of acquiring new customers is 7X the cost of retaining an existing one, so focusing on building customer loyalty makes total sense from the business point of view.

It is also easier to sell to customers who you have had a previous relationship

with.

Focusing

pri-

marily on acquisition may bring new customers to your lending business, but without a focus on boosting customer loyalty and advocacy, you risk to disappoint your existing customer base which may prove counterproductive.

The bad news is that lending businesses rank among the lowest in terms of customer retention. Most lending businesses fail to retain a whopping 93 percent of their customers who choose to go for a new mortgage. The coronavirus pandemic has already heralded that a transformation is required in the lending businesses. The good news is that technology can act as a savior and all

A marketing funnel is simply a tool

marketing funnel needs to be com-

to help you visualize your buyer’s

posed of the following stages:

journey from the stage of gather-

1. Awareness stage

high on customer satisfaction and

ing the initial knowledge about your

2. Consideration stage

boost retention.

lending business to the stage when they finally convert and sign up for availing financial services.

However, there is a snag in this model. The marketing interaction does not cease at conversion, it extends beyond that. Renewed efforts need to be made after the conversion to

you need is one tool to help you rank

3. Decision stage 4. Loyalty stage

CRM For Customer Retention

5. Advocacy stage

and Advocacy Focus on maintaining and enhancing

Why Lending Businesses Need To

relationships with borrowers needs

Focus On Customer Retention Acquiring new customers may form the business baseline for private lenders but customer retention is the key to excellence. It keeps the money

build customer loyalty and result in

flowing in the form of repeat busi-

advocacy. Thus a high performing

ness. According to Bain & Company,

to be an organization-wide change but technology can definitely provide the necessary tools to accomplish it. The mortgage industry is now focused on using digital tools and Customer Loyalty and Advocacy: Cont. on pg. 30

September 2020 Originate Report 29

Customer Loyalty and Advocacy: Cont. from pg. 29

data to their advantage for growing their business.

Customer relationship management (CRM) software like Benchpoint or Active Campaign can help lenders stay on the top of their game and better manage customer interactions through all stages of the marketing funnel, right from awareness to advocacy and optimize the customer lifetime value.

What is a CRM? A CRM is a software that can help sales and marketing professionals record and manage their customer interactions. It provides a comprehensive overview of the customer interactions in each stage of the customer acquisition and retention process.

Not only can you access and track historical deals that have occurred with the customers, but you can also plan for future leads and nurture the existing relationships, all from within the software itself. A CRM gives you data-backed insights about the historic customer interactions, allowing you to discern what’s working and what isn’t. It also allows you to identify any bottlenecks in the process and helps optimize your lending business for maximum profitability.

Advantages of CRM in Private Lending 1. Personalization at scale: Technology allows businesses to treat every customer who applies for a

30

mortgage or loan to be treated on an

selling

and

cross-selling

which

individual level. The products and

can take your lending business to

services offered can be customized

newer heights.

to individual needs.

6.

2.

Easy tracking of past conver-

cess improvement: CRM data and

sations: The interaction with each

insights derived from the reports

borrower can be logged into the CRM

compiled from it can help in identi-

and this data can be leveraged at the

fying successful campaigns that can

time of future needs. For example,

be replicated and areas of improve-

if a certain borrower has previous-

ment to be worked upon for bring-

ly enquired about a certain type of

ing in better opportunities for your

loan or mortgage, the marketing

lending business.

Data-driven insights for pro-

team can send them supplemental information needed to take the

Closing Words

process further.

The face of lending may look quite dif-

3. Customer satisfaction as a re-

ferent in the next few years as loans

sult of quicker processing of loans:

are delivered in new and innovative

Since the lenders don’t have to jug-

ways. The applicants might avail

gle between tons of different soft-

your services and fill out loan appli-

ware and have the access to all the

cations remotely. With 24x7 avail-

data and documentation they need

ability and query resolutions through

within the CRM, the processing of

chatbots, data will prove to be the

loans takes place faster and results

means of rising over your competi-

in greater customer satisfaction.

tion and boosting the profitability of

4.

your business.

Smoother customer interac-

tions: All customer interactions being logged into the CRM ensures that

While data management through a

a customer doesn’t have to have the

CRM software may seem like a futur-

same conversation over and over

istic idea, the tech-savvy borrowers

again. The customer support repre-

of today expect no less. Having ac-

sentatives can simply check out the

cess to data and drawing actionable

customer profile in the CRM and they

insights from the same will essen-

will be brought up to speed.

tially be the key to ensuring custom-

5. Leveraging data for new business opportunities: Data within the CRM can help pinpoint potential leads for up-

er loyalty and bringing in new business lending opportunities through customer advocacy.

ABOUT THE AUTHOR: Abhi Golhar helps companies grow faster.

Learn more at https://abhigolhar.com/

THE IMPORTANCE OF

results. This global reach creates networking opportunities for building relationships and partnerships. Your audi ence has invested time in registering and listening to the information you plan to share. They’re expecting valuable takeaways from the webinar, even some thing they can put into place at their own company. This positions you and your brand as an industry lead er, or expert. Webinars can give your audience the chance to ask questions and provide feedback. This how well it performed. These metrics include the is valuable because you can address concerns, reser number of attendees, number of those registered, vations, or any lingering questions they may have and total views. The webinar can and should be recorded about your training or product in real-time. You can Webinars have grown in popularity in recent years for you, the audience, and affiliates to share with customize your presentation to your audience based on and have become an important marketing tool. others, growing the results even more. Each time a their questions and feedback to keep them engaged.

These live web-based seminars can connect you with person completes your webinar’s registration form Ask them to take an action, such as completing a task leads from all over the world. They encourage interacti they should be considered a new potential lead, or answering a question. This will increase audience by allowing the audience to ask questions orJust how whether it be for a sale or a potential partnership. participation and interest. Include guest speakers, beneficial can a webinar be to your business? Here Webinars adds a personal interaction that videos and such as industry leaders or affiliates, to speak during are 7 reasons why webinars are a fantastic marketing commercials don’t. Webinars put a face and name your webinar. These individuals should be familiar strategy. Webinars are a cost-effective way to extend with your product making you approachable, human, with your industry and value of your product. They your reach globally. Rather than pay for flights and and someone they can trust. Educating them on how will be able to educate the audience on the benefits hotels to meet with individual leads, you can engage your product can benefit their company is the first or impact, validating information you have or will with a larger group over their computer screens. step in opening the door to future discussions and be sharing. By inviting a guest speaker, you can also People from all over the world can attend, providing partnerships. It is essential to show both new and increase the webinar’s attendance by including your your brand or product with the potential to see huge established leads how your product or service can guest’s audience and following. This can grow the results. This global reach creates networking opporimprove or enhance their workplace. Depending on number of leads you may gain substantially. Results tunities for building relationships and partnerships. the prospect, the sales process can be slow. Businesscan be seen quickly from webinars. After hosting a our audience has invested time in registering and lises want to convert a lead into a cusWhile it’s cerwebinar you’ll have metrics to measure how well it tening to the information you plan to share. They’re tainly important to provide useful information and performed. These metrics include the number of at expecting valuable takeaways from the webinar, tips to your audience, it’s equally important to share tendees, number of those registered, and total views. even something they can put into place at their own how your brand or business can help them achieve The webinar can and should be recorded for you, the company. This positions you and your brand as an this. How can your product be a solution to their audience, and affiliates to share with others, grow industry leader, or expert. problems? Your webinar should show the audience ing the results even more. Each time a person com the value of your brand. Garnering interest in the pletes your webinar’s registration form they should Webinars can give your audience the chance to ask product and its potential impact is the first step in be considered a new potential lead, whether it be for questions and provide feedback. This is valuable becompleting a sale. a sale or a potential partnership. Webinars adds a cause you can address concerns, reservations, or any personal interaction that videos and commercials lingering questions they may have about your trainThere are numerous benefits to hosting a webinar. don’t. Webinars put a face and name with your prod ing or product in real-time.

Though this article only touches on a handful of uct making you approachable, human, and someone them, it should be clear that webinars are an effecthey can trust. Educating them on how your product You can customize your presentation to your auditive tool for engagement and growth. As you take can benefit their company is the first step in opening ence based on their questions and feedback to keep these benefits into account, you should begin to the door to future discussions and partnerships. It them engaged. Ask them to take an action, such as think how you can use a webinar for lead generation is essential to show both new and established leads completing a task or answering a question. This will and to increase traffic, which will yield great results how your product or service can improve or enhance increase audience participation and interest. for your business. Webinars have grown in populartheir workplace.Depending on the prospect, the ity in recent years and have become an important sales formation and tips to your audience, it’s equalInclude guest speakers, such as industry leaders or marketing tool. These live web-based seminars can ly important to share how your brand or business affiliates, to speak during your webinar. These inconnect you with leads from all over the world. They can help them achieve this. How can your product be dividuals should be familiar with your industry and encourage interaction by allowing the audience to a solution to their problems? Your webinar should value of your product. They will be able to educate ask questions or provide feedback in real-time. show the audience the value of your brand. Garnerthe audience on the benefits or impact, validating inJust how beneficial can a webinar be to your busiing interest in the product and its potential impact is formation you have or will be sharing. ness? Here are 7 reasons why webinars are a fantasthe first step in completing a sale.There are numertic marketing strategy. ous benefits to hosting a webinar. Though this article By inviting a guest speaker, you can also increase the only touches on a handful of them, it should be clear Business Development • Fintech/Newest Loan Programs • Automation in Today’s Evolving Society • Upcoming webinar’s attendance by including your guest’s auWebinars are a cost-effective way to extend your that webinars are an effective tool for engagement dience and & following.

This can grow the number of reach globally.

Rather than pay for ights and hotels Trends Changes • Marketing & Outreach • Essential Tools & flTechnologies •and New Legal Issues and Regulations growth.

As you take these benefi ts into account, leads you may gain substantially. to meet with individual leads, you can engage with a you should begin to think how you can use a webilarger group over their computer screens. nar for lead generation and to increase traffic, which 5. Results: will yield great results for your business. WebiResults can be seen quickly from webinars. After People from all over the world can attend, providnars have grown in popularity in recent years and hosting a webinar you’ll have metrics to measure ing your brand or product with the potential to see huge have become an important marketing tool. These

CONTENT L E T U S H E L P YO U !

CURRENTLY ACCEPTING ARTICLES

Share your ideas! Email submissions@originate.report for more information.

September 2020 Originate Report 31

FEATURE

Mythbusting: Common Myths Regarding Mortgage REITs for Private Lenders

By Kevin Kim, Esq., Geraci LLP

S

ince 2018, mortgage REITs

late to the private lending industry

rules for REITs: the “Closely Held” Rule

have become an immense-

and the commonly used mortgage

and the “100 Investor” Rule.

ly popular strategy for funds

fund model. We’re here to put those

in the private lending space. The

myths to the test.

primary reason for this is the 20% Qualified Business Income deduction

MYTH #1: A fund must have hun-

granted to REIT dividends.

dreds of investors to even consider

There are a lot of myths floating

becoming a REIT.

around regarding REITs as they re-

FALSE. There are two key “ownership”

32

The 100 Investor Rule The 100 Investor Rule does require a REIT to have over 100 investors.

However, this rule only applies in the following tax year after electing as a REIT, for at least 335 days. What does that mean?

If an existing mortgage fund con-

quirement during the last 6 months

to get the same tax benefits of be-

verts to a REIT or installs a Subsidi-

of the following taxable year. Mean-

ing in the REIT, while allowing the

ary REIT, the REIT must onboard 100

ing, after a REIT elects REIT status,

fund manager to earn its desired

it must ensure it meets the 5/50 test

income stream.

investors by the following tax year.

So, if a REIT elects to be a REIT on January 1, 2020, and it uses a calendar tax year, then it must have onboarded 100 or more REIT investors by the end of January 2021, to ensure that it will have 100 or more investors for 335 days in the following

in the following tax year.

MYTH #3: New funds cannot start As you can see, the IRS installed

as a REIT

these buffers to allow REIT time to

FALSE. This is like Myth #1, which

qualify. So, this REIT myth is busted.

we busted above. We’ve run into this misconception with many cli-

MYTH #2: Mortgage REITs can’t

ents who want to start a fund with a

have carried interest splits with

SUBREIT or a REIT itself. We advise

the fund manager

clients that it is often easier to start

TRUE. A REIT is required to distrib-

this process with a new fund be-

fund if the fund were to install a

ute at least 90% of its taxable in-

cause we don’t have to conduct any

REIT Subsidiary, or “SUBREIT.” It

come to its investors annually. The

diligence on the fund’s existing port-

only applies to the SUBREIT. Nota-

tricky part with this is that the re-

folio, upcoming foreclosures, and in-

bly, many REITs utilize shareholder

maining undistributed 10% would

accommodation services for this re-

vestor pool. With the time buffers we

be taxable. This contradicts a REIT’s

discussed above, it is totally possible

mandate of being a tax-efficient in-

for funds to start as a REIT or have a

vestment vehicle, which makes it

SUBREIT upon formation.

tax year.

It’s important to note that this 100 Investor rule does not apply to the

quirement, so it is not challenging to conform with this rule.

The Closely Held Rule

challenging for a REIT to offer any real carried interest.

In Conclusion

The Closely Held rule is a bit more

These were some commonly held

complicated. The Closely Held rule

However, in the private lending

prohibits 50% or more of a REIT to

space, the commonly used SUBREIT

be owned by 5 or less people. Also

strategy allows funds to maintain

referred to as the “5/50 Test”, this

their carried interest, profit splits,

rule calculates REIT ownership on

or distributing excess cash after the

a fully diluted basis. So, for mort-

preferred return. How? The SUBRE-

gage funds in the private lending in-

IT is the entity that needs to conform

dustry, the use of REIT Subsidiaries

with the REIT rules. It will inevi-

will require an analysis of the parent

tably dividend 100% of its taxable

fund to evaluate compliance with the

income to the parent. That is then

REIT strategy is a very attractive

5/50 test.

pushed through the fund’s pre-ex-

solution for mortgage funds in to-

isting waterfall, allowing investors

day’s competitive market.

However, this does not require the fund to have hundreds of investors.

It simply requires that the fund have enough investors such that no 5 or fewer investors own 50% or more of the fund’s equity.

Also, from a timing standpoint, a REIT must conform with this re-

misconceptions about REITs and SUBREITs for mortgage funds. There are a ton of other misunderstandings about REITs in today’s market, and we here at Geraci’s Corporate & Securities team are happy to help you through the confusion. One thing we can tell you for certain is that the

ABOUT THE AUTHOR: Kevin Kim is an experienced corporate and securities attorney with Geraci Law Firm, dedicated to providing reliable and innovative legal solutions. Kevin focuses his practice on private placements and other alternative investments for private lenders, real estate developers, and other real estate entrepreneurs. Kevin has advised and prepared hundreds of securities offerings including mortgage funds, structured debt offerings, real estate syndications, crowdfunding offerings, EB-5 projects, and Qualified Opportunity Funds.

CONTACT: k.kim@geracillp.com | https://geracilawfirm.com

September 2020 Originate Report 33

FEATURED

The Effects from COVID on Reverse Mortgages

By Edward Brown of Pacific Private Money and Mary Jo LaFaye of Mutual of Omaha Reverse Mortgage

W

ith the Covid crisis still

quired for reverse mortgages; thus,

as interest accrues over time and is

looming, much atten-

there is no risk for a foreclosure for

only required to be paid back upon

tion has been focused

non-payment of a mortgage. How-

on conventional loans where month-

ever, one needs to go deeper to un-

the death of the last remaining bor-

ly mortgage payments are required.

derstand that there could be a poten-

Recently, laws have been passed on

tial risk to the homeowner of losing

both local and national levels to en-

their house in certain circumstances

sure homeowners are not evicted for

but for the foreclosure moratorium.

non-payment on FHA loans.

Under normal circumstances, the

rower, move out by the borrower, or death of the non-borrowing spouse if the borrowing spouse predeceased them. The borrower’s only requirement for yearly payments are real estate taxes and insurance, HOA dues if applicable, plus maintenance

Relatively little attention has been

borrower on a reverse mortgage

geared toward reverse mortgages

does not have to worry about fore-

during the Covid virus. Why is that?

closure by the lender because no

pay these, technically, they are in

At first glance, the simple answer is

monthly payments are required; the

default and the loan may be called.

that no monthly payments are re-

loan balance just keeps increasing

This could lead to a foreclosure. In

34

and utilities. If the borrower fails to

the homeowner and, consequently, the less risk for the mortgage company.

In addition, many older homeowners have lost their job during the virus, and their largest retirement asset, by far, is their home equity from which they can draw upon. These same homeowners not only may not qualify for a HELOC [Home Equity Line of Credit], they may not want them after considering the benefits of a reverse mortgage (HECM) vs. a HELOC. For one, HELOCs require monthly mortgage payments. In addition, unlike a reverse mortgage (HECM), the bank can freeze [or reduce] the HELOC line and not allow access to it. This puts the homeowner in a precarious position of having debt against their property [as the HELOC is recorded against the propaddition, the house may not be left

tents and purposes, would not typ-

vacant or abandoned.

ically face foreclosure during their

For those borrowers who take a lump sum reverse mortgage and whose income is estimated to be too low to maintain the real estate taxes and insurance, they may be required to have a Life Expectancy Set Aside [LESA]. LESA is similar to an escrow account that is set aside for future real estate taxes and insurance and is based on the life expectancy of the borrower. These future expenses are deducted from the lump sum provid-

erty for the maximum potential draw of the line] without any benefit. Such

expected lifetime.

was the case during The Great Re-

Many conventional borrowers have

$6 billion of HELOC credit was fro-

cession in the mid-late 2000s when

requested deferments from their lending institution as they fell on hard times with the loss of income during Covid. The need for deferment requests are all but eliminated for reverse mortgages.

zen in June of 2008, and the freezing continued for some time. Why? The answer lies in the fact that the fastest way for a bank to shore up its balance sheet is to freeze HELOCs, so they do not have to set aside reserves. During The Great Recession,

There has been a tremendous push toward applying for reverse mortgages by homeowners. There are many reasons for this; historically

ed by the reverse mortgage compa-

low interest rates mean that a bor-

ny and held by them. The funds in

rower can obtain a much larger re-

the LESA become part of the loan

verse mortgage, as the interest that

balance once the lender disburses

gets added to the mortgage every

them to pay the property charges on

year is less than in a high interest

behalf of the borrower. Thus, those

rate environment. Thus, the lower

borrowers who have LESA, for all in-

the interest rate, the better it is for

banks were facing write downs and write offs of loans as the loans that they had previously written took a downturn when borrowers, during the credit crisis, were unable to pay their mortgage. When a bank makes loans, they use depositors’ funds.

The government requires reserves [loan loss reserves] be set aside to ensure the return of those deposiEffects from COVID: Cont. on pg. 36

September 2020 Originate Report 35

Effects from COVID: Cont. from pg. 35

tors’ funds. If a bank has existing loans outstanding, they cannot just call in those loans [unless borrowers default]; however, a HELOC is a “potential loan” as the loan technically only exists as the borrower draws upon it. In this situation, if they freeze [or reduce] the line, the bank has not lent the money yet and can stop it before the borrower accesses the money that was available to them.

Most major banks have seriously curtailed the issuance of HELOCs during the current Covid crisis, and those that continue to offer HELOC’s have imposed stringent qualifications to borrowers.

reduced, and, since there are no

has tremendously rebounded since

monthly mortgage payments, the

The Great Recession, to allow them

risk of foreclosure [even after the

a large enough reverse mortgage to

moratorium] is slim.

afford the costs associated with inhome care.

A new situation has arisen due to Covid and that has to do with nursing homes. Once considered an alternative to in-home care [which is usually two to three times the cost of a nursing home], many stories have been published about the increase in deaths surrounding Covid and older Americans in care facilities. Most people would like to be in their own home instead of a care facility given the choice, but, unfortunately, many people cannot afford the [around the clock] care required to stay home and be cared for. Loved ones, especially during the virus, are looking for a

The

National

Reverse

Mortgage

Lenders Association [NRMLA] reports that there have been significant increases in draws [on the HECM reverse mortgage line of credit]. Those retirees who lost their part time jobs and need to make ends meet, helping family affected by Covid, and those who are just generally concerned about their future finances. NRMLA states there has been a 55% increase in the number of draws and 14% in the size of the draws. In fact, they notice that some borrowers who had never previously drawn on their line of credit are fully drawing the line now.

Many borrowers are realizing re-

way to keep their elders in the safe-

verse mortgages offer advantages

ty of their own home and receiving

As Covid gets more impactful on the

over HELOCs in this regard. There

the quality and quantity of care they

economy and on peoples’ lives in gen-

are limited income and credit qual-

needed. Many are looking toward a

eral, we should expect reverse mort-

ifications to obtain a reverse mort-

reverse mortgage to fill this need.

gages to grow, and now seems to be

gage. Reverse mortgage (HECM)

Many people have enough equity in

the most opportune time to obtain one

lines of credit cannot be frozen or

their homes, especially as real estate

– before interest rates increase.

ABOUT THE AUTHOR: Edward Brown is in the Investor Relations department at Pacific Private Money in Novato, Calif.

CONTACT: edward@pacificprivatemoney.com https://pacificprivatemoney.com

ABOUT THE AUTHOR: Mary Jo Lafaye is a Home Equity Retirement Specialist with Mutual of Omaha Reverse Mortgage. Since 2003, Mary Jo has assisted financial and legal professionals, and the retirees they serve, to incorporate housing wealth into their retirement income stream as a tool to manage cash-flow and liquidity, and to improve financial outcomes throughout retirement.

Mary Jo is a well-known educator in her field – she offers Continuing Education (CE) credits to Certified Financial Planners (CFP’s), Realtors, Fiduciaries, CPA’s, Attorneys, and other professional groups. She is a noted speaker, having delivered seminars and webinars to professional groups nationally, ranging from NAPFA, NAIFA, CalCPA, FPA, CSEA, MAR, PFAC, and many more. Her talks highlight current academic and scholarly research on enhancing portfolio longevity and living one’s best life in retirement.

CONTACT: https://www.mutualmortgage.com/

36

Get the Originate Report Magazine in Your Inbox Every Month

FREE OF CHARGE! June 2018

L MAGAZINE

THE OFFICIA

THE OFFIC

OF GERACI

IAL MAGA

ZINE OF GE NOVEMBER RACI 2018

Industry Spotlight: Adam Child

to Marketing LS MILLENNIA

Cities to Watch:

Phoenix

N

MORE THA

a Numbers

ZINE

IAL MAGA

THE OFFIC

: Inside June

MAR CH 2020

RISING Bond YIELDS

MAY 2019

Appraisal

SPECIAL EDITION

FEATURING

s to ieom CitW : in tchen W Reaal Esta

te

rk New Yoit C y

l BiCoaslta Capita nt On

an Cou al You C

Capit

) with alkoon (R n Briana M ndra Yelli ers Alexa Co-Found ey dl oo St and Ben

Industry t: Spotligh

rtgage Offi ce

Also Insid

IA L M AG AZ

e

November: Sam Kadd ah

of LIQUID

y Don’t Be Sh Be SPECIFIC inat e.re www.orig

THE O FF IC

IN E O F G ER AC

LOGICS

port 1

Banks & Marijuan INDUS a TRY SP OTLIG DENVER,A lle HT: CO n epor t 1

Shayan

fekr

Shares

e Also Insid

May:

ED ENHANC nt e Retirem TS ACCOUN

Kareye oGe f dd es is

eR ThNO VIA VA pitalITA e CaCAP Privat

L

A Voice of Experience S

LENDER

the

RY

INDUST www.o rig

rt 1 ina te.r epo

I

FIX & FLIP Lending

www.ori gina te.r

Learning

Michaeal cher Schum

of The Mo

Fintech

desco

Michael Te

JU LY 20 19

THE OFFI CIAL MAG AZIN E OF GER ACI

GAMNEation’s

CI OF GERA

Celebratin

JERRY & gE DELGADODDY

tates

IN SI DE :

MONEY

BETH O’BRIEN, COREVEST FINANC E

R E AT IN Advice fromCthe Lady G C R E D IB IL IT on the Leaderboard Y

360

IN PRIV To the Young ATE CA P ITAL Professionals

Lig ht You r Ow n Fire, Kid

W E B IN

E:

ARS

A FA S

P R IVAT E L E N D IN G ST OR A GE , B A BY ! www. or

Lin da Hyd e AA PL

www.origi nate. repor

INSID

t1

ig in at

e. re po

rt 1

SUBSCRIBE NOW ORIGINATE.REPORT/SUBSCRIBE September 2020 Originate Report 37

Redwood Mortgage Corp. www.redwoodmortgage.com RMC@redwoodmartgage.com (800) 659-6593 San Mateo, CA 94402

Direct Lender

Zinc Financial Inc. www.zincdinancial.com office@zinc.net Tom Valentino

Direct Lender

7M500K 2M

200K 50K

5M

Direct Lender

150K Pacific Private Money www.pacificprivatemoney.com loans@pacificprivatemoney.com (415) 883-2150

55/33

*AZ, CA, NV

*CA

*65% For commercial and mixed-use and 70% for multi-family and residential investment. 5 years (custom terms are available)

AZ, CA, CO, IN, MI, NM, OH, TN, TX, WA

LET LENDERS KNOW YOU FOUND THEM IN ORIGINATE REPORT! 38

*CA

REV. 06.25.19 2019

Direct Lender

* = STATES LENDING IN

Fidelity Mortgage Lenders, Inc. www.fidelityca.com psteigleder@fidelityca.com Peter Steigleder (818) 422-8879

70/30

50K

LENDER

65-5*/70/5*

H O M E

TYPES OF PROPERTIES

90/2

L O A N

15M

2020

TYPES OF LOANS

MI NI MU M LO MA AN XIM $ UM Co LO mm AN er $ Co ns cial um Br e r idg Co e rp o A c rat i o qu ns i /T No sitio ru s ns te s a n ts/ L Pu eg dD rc h a ev e l o l Ent Re ased itie pm ha s en b ts Bla / Re mo nk S e e t Lo d e l e co d/ nd ans Re Jo no int Mor va tg te d ag F o Ve n t e re i g n u re s s Ot h e N at i r on als MA XL OA NCh TO ur -VA ch LU es La E( /T nd % em (B )/M Au ar p AX les to m e / / TE C S o ot RM Re mm yn ag t a i i ve (YR e og l( r c S) ial Sh En ue / o s te r p L s o t ai / t ) Ga S nm tri sS en pM all Le t at i o t isu s) ns re Ho (G sp olf i Co Mi t alit ur y( xe se d H R e - u s e o te s / M ls) sid ar Pr ina In e o n p Ra d ) n c t i a l I e r t i e u st r he nv s ial sa Se es tm lfnd s en Fa R e to ra tP ge rms st a ro pe rti O f u ra n fic es t s e

LENDER DIRECTORY

YOU’RE

INVITED Join us for the 11th year at the largest national private lender event from the industry’s oldest and largest association. 2020 will bring you 2 days of packed sessions, 50+ exhibitors and 500+ attendees with whom to network and learn.

2020 CONFERENCE ACTIVITIES AAPL Certification Courses • VIP Nightclub Reception Catered Networking Breakfasts • 15+ Sessions & Panels Busy Vendor Hall • Networking Reception AAPL Official After Party

NOVEMBER 15 - 16, 2020

LAS VEGAS AAPLCONFERENCE.COM

September 2020 Originate Report 39

WE PROVIDE PEACE OF MIND Geraci LLP is a law firm, media,

and consulting company that caters to the non-conventional lending

space. We are the “go-to” provider

for all lending-related matters and

are your resource to help you grow your business.

OUR SERVICES: CORPORATE & SECURITIES • Securities Offerings & Compliance • Entity Formation

• Corporate (Governance, M&A, Capital Marketing) • Mortgage Licensing

LITIGATION & BANKRUPTCY • Foreclosure Related Litigation

• General Business Litigation (partnership, investor, and vendor disputes) • Creditor Representation in Bankruptcy • Other Mortgage Loan Litigation

BANKING & FINANCE • Foreclosure/Loss Mitigation

• Nationwide Loan Documents

• Nationwide Lending Compliance

LIGHTNING DOCS • SFR, Multi-family, and Commercial Real Estate Loans

• Construction, Rental, Bridge, Fix and Flip, Perm and Mini-Perm Loans

• ARM, Interest-Only, Partial Amortization, and All Other Types of Amortization

SEPTEMBER 29, 2020

REGISTER TODAY: http://geracicon.com

• And many other product types

GERACI MEDIA • Evolve: The State of the Market • Lender Connect • Innovate

• Captivate

• Originate Report Connect With Us! 90 Discovery Irvine, CA 92618 | 949.379.2600 https://geracilawfirm.com/ | https://geracicon.com/ | https://originate.report/ | https://lightningdocs.com/

40