Originate Report - February 2020

FEBRUARY 2020

THE OFFICIAL MAGAZINE OF GERACI

WISDOM FROM THE CEO:

Jadon Newman Noble Capital

INSIDE: CULTURE CORNER

Josh Youngblood

WHAT CAN ALFRED DO FOR YOU?

JCAP

CFPB ISSUES

HMDA Requirements

Wisdom From The CEO Millennials Reshaping the Rental Market WHERE MOST PRIVATE LENDERS GO WRONG www.originate.report 1

2 Originate Report February 2020

CONTENTS FEBRUARY 2020

Features 16 How Millennials are Reshaping the Rental Market - Some Plan to Rent Forever

By Robert Greenberg, Patch of Land

24 Culture Corner: Jcap

6

Originate Report Staff

30 CFPB Issues Final Rule Loosening HMDA Requirements

By Melissa C. Martorella, Esq., Geraci LLP

32 Where Most Private Lenders Go Wrong Scaling Their Business

16

By Abhi Golhar

Who To Know 6

Josh Youngblood - What Can Alfred Do For You? Originate Report Staff

21

12 Wisdom From The Ceo Jadon Newman, Founder & CEO – Noble Capital

21 Industry Spotlight Mark Hanf - Pacific Private Money

In Every Issue

30

26 Cities To Watch: New York, New York Originate Report Staff

36 Upcoming Events 38 Lender Directory

32 www.originate.report 3

Revenue diversification

Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial

TODAY’S MARKET OPPORTUNITY: •

•

•

100 billion dollar non owner-occupied investment space SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial Diversify product offering and add new revenue opportunities you may be missing out on Legally compensate your most prized relationships (Realtors) for referrals

WHAT TO LOOK FOR IN A BROKER + CAPITAL PARTNER RELATIONSHIP: • • •

Concierge across product offering with underwriting, training, service and support Dedicated call center for loan origination support and fund control Marketing materials provided including product tear sheets, pitch decks and web banners

In today’s market, refinancings have limited availability and there’s not much new housing inventory to lend against. For mortgage Brokers, this means the obvious; there are a lack of transactions in the market to profit from.

For shops that are only doing refinance or traditional mortgages, opportunities only come around every 5-7 years. You’ve got to have a big client base to have volume. With financial products across SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial, the sales cycle is faster, there is significantly higher recurring business, and a few lenders have teams dedicated to helping you succeed.

BROKERS, PARTNER TODAY

4 Originate Report February 2020

Think of it as a new product offering which results in the diversification of your potential revenue. All of this is well within reach, and much easier than you may think.

The NON-O/O investment space is a 100 billion dollar industry that has come full circle since the last market downturn. Over the last decade private lending has been growing, and the comeback of property investors is at an all-time high.

Here’s what it takes to do these types of loans and a good private lender will handle these things for your Brokerage…

• • • • • • •

Review and process loan applications Document collection Facilitate Appraisal Coordinate Title & Escrow Complete underwriting Facilitate Funding Pay you

Traditional Realtors and Mortgage Brokers have the misconception they need an NMLS license to be a lender in this product space. The main point in dealing with a private lender is while they primarily fund SFR’s, these loans are governed under commercial guidelines.

Thus we are not governed under RESPA, TRID or TIlLA. These loans are funded only into business entities allowing 7-10 business day closings and can pay anyone under a Brokerage license a referral fee or commission on the HUD at closing.

There are two avenues a Brokerage launching this type of product to Real Estate professionals can expect to see. You can be a Correspondent Partner (the lender would fund in your name)

http://triumph.capital/brokers

or an Origination Partner (the client would see the lender’s name on the HUD). Most deals are funded under a single set of product guidelines allowing training, underwriting and servicing to be easily understood.

CORRESPONDENT PARTNER (CP): You look and feel like the lender, a complete white-label product.

ORIGINATION PARTNER (OP): Traditional Broker + lender relationship, lender shows on HUD. A full concierge service for Broker partners handling everything from A-Z is an entirely new model for private lending and Mortgage Brokers / Real Estate professionals. Working with a direct lender enables Mortgage Brokers to keep the lion’s share of the profit and have the potential to earn from the yield spread as well, all while monetizing on much more frequent lending transactions, instead of the normal 5-7 year customer lifecycle.

There many private lenders chasing this strategy and it’s safe to be wary of who to work with.

While choosing a partner, look for someone who understands the business and has a strong reputation for closing transactions. You’ll also need support with marketing materials. Having the right documents and product tear sheets (one-pagers) for conversations, trade shows, etc. is helpful in positioning the opportunity with your existing book of referral business from Realtors.

For more information call

877-450-9741

ROB JENNINGS robert@triumph.capital

GEORGE O. FLINT goflint@triumph.capital

CEO Geraci LLP ANTHONY GERACI Anthony@Originate.Report

Letter

from the

Vice President Geraci Media RUBY KEYS Ruby@Originate.Report

Editor

Editorial Director MAX BERGER Max@Originate.Report

“Excitement must lead to immediate action or you will lose the power of momentum. More dreams die because we fail to seize the moment. Do it now!”

-Tony Robbins

Art Director LYNDA HIGHT L.Hight@Geracillp.com CONTRIBUTORS Robert Greenberg • Abhi Golhar Jadon Newmanz • Josh Youngblood Mark Hanf • Melissa C. Martorella, Esq FOUNDING UNDERWRITERS

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

Welcome to the February Edition of Originate Report! We’re continuing the momentum of the new year with another packed edition, full of both new and familiar faces. First we’d like to introduce you to Josh Youngblood from Alfred Tech, an innovative, end-to-end technology platform for the private lending business. You’ll also learn more about Mark Hanf, the founder of Pacific Private Money, and gain some entrepreneurial wisdom from the founder and CEO of Noble Capital, Jadon Newman. Lastly, you’ll go behind-the-scenes with JCAP Private lending to find out how their winning culture has been instrumental to their success in the space.

What do these companies and individuals have in common?

You’ll have the chance to meet most of them at the 4th annual Innovate Conference this month! At Innovate, you will receive first-hand knowledge from industry executives and professionals on how to stay ahead of the curve in the new year. This event will focus on education, the changes happening in the lending space, the new trends in business, and more. Join us in Newport Beach, CA on February 20-21 to keep your momentum going and take your business to the next level. Visit www.geracicon.com to learn more.

To staying ahead of the curve,

Max Max Berger Originate Report Editorial Director www.originate.report 5

PROFILE

Josh Youngblood, the co-founder and CEO of Kumo Technology and Alfred Tech

Josh Youngblood WHAT CAN ALFRED DO FOR YOU?

W

By Originate Report Staff of

than ever before to conduct business.

specialized technology

No one knows the importance of

ith

the

role

cemented in the private

emerging, lender-based technologies

and Alfred Tech.

Despite

his

Youngblood’s

company’s background

success, is

not

entirely conventional for a technology CEO – after receiving a degree in industrial engineering from USC, he

held

NBCUniversal

a

position where

he

at led

mission-critical operations driving $1 billion in distribution revenue.

Youngblood’s most recent venture, Kumo Technology, was founded in

lending industry, new platforms are

better than Josh Youngblood, the co-

2012 and began as a custom software

giving private lenders more tools

founder and CEO of Kumo Technology

development firm – while in its

6 Originate Report February 2020

not only to help build tech-related

material, “Alfred came to prominence

infrastructure but also streamline

through King Alfred the Great of

departments within their operations.

Wessex, in the 9th century. Alfred was as much scholar as warrior,

One lender Youngblood said Kumo

an

has worked with since the company’s

whom the notion of ‘counsel’ was

inception has seen its portfolio grow

a perfect fit. The name persisted

from $300 million in annual funded

through centuries, and ‘Alfred’ found

loans to $1.2 billion while also

itself beside famous surnames like

reducing headcount – to Youngblood,

Tennyson, Nobel, and Hitchcock.

the expansion of technology has been

And then, yes, Alfred was a butler –

instrumental in the streamlining

perhaps a Superhero’s most famous

process.

one. And certainly, that anticipatory

early

renaissance

man

for

service is one aspect of what we do.

“I think at the core of what we do, we

But ‘Alfred’ has taken on a cultural

listen to users,” he said. “We knew

significance all its own, an identity

going into this venture that in order to have good design, software, and usability, we have to be close to the people who are clicking the buttons and doing the work every day; we’ve taken that feedback to heart while we design and modify our software.

As a development company, we own the technology we are creating, so about four years ago we decided to take to market a strong, scalable infancy, he said the new venture worked with private lenders in the Los Angeles area, a pattern that continues to this day.

particular space because, in order to build software, we really became in

[private

has become the Alfred platform we’re selling today.”

lenders’]

operations and became acquainted

images

of

a

loyal,

observant,

and responsive (not to mention impeccably dressed) butler from a certain comic book franchise come to mind – Youngblood said this is by design, as the Alfred platform he

with a couple of large lenders in the

helped develop serves as the lender’s

L.A. area,” he said.

butler, an end-to-end technology platform for the private lending

While working with these lenders,

business.

According

At the core of Alfred are three deceivingly simple goals: building relationships, closing deals faster, and growing business at a consistent rate. Youngblood said he knows all too well the complexities of the private lending sphere, including the

headaches

associated

with

the underwriting, loan document generation, and investor distribution pitfalls faced by blossoming and seasoned

professionals

alike,

Youngblood said at the end of the day, a company will not miss out on potential deals with Alfred in its toolkit.

The platform’s tailored approach to loan and investor management situates the platform in a unique position, Youngblood said, but its functionality is ever-changing. As

Youngblood said he acted as ‘a consulting CTO and trusted advisor;’

even if they can’t express it.”

processes. Despite these potential

When thinking of the name Alfred,

“We built a very strong niche in that

embedded

platform for lenders. That mindset

that most everyone understands,

to

Alfred’s

branding

Josh Youngblood: Continues on pg. 8

www.originate.report 7

Josh Youngblood: Continued from pg. 7

lenders old and new begin to use technology on a more consistent basis, apprehension about what those platforms offer can be common.

Although that may be the case, Youngblood said Alfred’s mindset towards user qualms is unique as

we will continue to do, because when

piece that integrate in a seamless

someone thinks an aspect of Alfred

fashion. This concept, also known

would be better a different way

as API (application programming

it’s the people who are clicking the

interface) is an often overlooked –

buttons and doing the work every

yet incredibly important – function

day who are using [our platform] to

in lending-related software.

make their jobs easier.”

“In our early days we recognized This user-first mentality extends

the power of a true API, so we

outside the confines of company

spent extra effort and investment in

partnerships, however. Youngblood

developing a robust API at the core

said many existing platforms are

of our system,” he said. “We built

designed as one “monolithic”,” piece

everything around that – there is

pillars to our company and the fourth

of software which discounts the

competition within the space, but a

pillar in that series is partnership –

ways in which different functions

question we often ask ourselves is

that stems from a humble approach

can work with each other (and

‘are they building platforms that can

that we take with every customer,”

even

programs

integrate and deliver true business

Josh said. “That is exactly what we

entirely.) Instead, Alfred focused

automation?’ We took this approach

have done from the beginning, and

on

from the beginning because with the

well.

“I think you have to take any apprehension in stride, but then listen and adjust. We have four

with building

different functions

piece

by

Left: Safa Roohi, VP of Customer Success Right: Josh Youngblood, the co-founder and CEO of Kumo Technology and Alfred Tech

8 Originate Report February 2020

way cloud computing is moving, the API served as the foundation of the platform. Now, we’re in a position to easily add integrations to expand what it offers.”

In addition to internal integration with

new

features,

Youngblood

also said an API has upstream and downstream external applications.

“Alfred has the ability to integrate with

anything

QuickBooks

to

from

CRMs

other

to

systems

that push or pull data,” he said.

“I think that’s going to be a huge competitive advantage in the future.

As we onboard more customers and people request different types of integrations, automation – both data and data entry – will be driving more of that functionality.”

A prevalent desire amongst lenders is for automation in borrower flow “as

much

as

possible.”

Dealing

with loan applications can often be

a

cumbersome

process,

Safa Roohi, VP of Customer Success

and

Youngblood said one of Alfred’s goals

is

to

make

be daunting sometimes.”

process

“As we add new features, we always

structured, intuitive, and automated.

find it important to keep in mind

This, he added, will not only save

that there is a mix of technology

potential

the

expertise amongst our customer

initial intake, but will also assist in

base. Some professionals know what

collecting bank statements, personal

an API is, but a lot of people don’t,”

financial statements, and the other

he said. They may have heard about

components of the loan process.

it, but they don’t necessarily know

headaches

that

during

the power of it. What we’re coming These features will be tentatively

up with is samples and demos for

released in March 2020. Youngblood

many integrations so that customers

said Alfred is looking forward to

can see how APIs work. One of the

implementing these attributes with

best things we can do is focus on our

new and existing clients alike.

use of technical language, which can

When tasked with designing an engaging, yet simple to use interface, Youngblood said his engineering education has played a large role in a user-first mentality.

“At its core, my engineering degree talked about human interaction with technology. That core made a large impression on me, especially the ergonomic design of technology,” he Josh Youngblood: Continues on pg. 10

www.originate.report 9

Josh Youngblood: Continued from pg. 9

said. “That gave me a lot of tools, I think, in the beginning, to set up my mind in the right way – at the end of the day, though, I’ve always been technically inclined and interested in helping people in their jobs.”

Similar to how factory equipment was once designed from the top down – that is, without the factory employees in mind – Youngblood said early software platforms were designed in a similar light. In the absence of APIs and other integration tools, he added that a lack of user input has left gaps in lender-related technology.

When designing Alfred, Youngblood implemented what he calls a ‘FisherPrice mindset.’ Although much of the platform’s internal functionality is incredibly complex, a deceivingly simple user interface leads to more straightforward usability, he added.

“When it comes down to living up to and delivering on the promises we’ve made, it means that we have

Josh Youngblood, the co-founder and CEO of Kumo Technology and Alfred Tech

to stay close to our customers and maintain the trusted advisor role,”

customers.”

Alfred’s (the Batman character) loyal

he said. “We’ve done so well up until

and ever-present characteristics to

now, and we will continue to scale

Alfred was officially launched in

heart, Josh said he is even looking

the company and grow the platform

August 2019, but has already worked

to incorporate clips from the Dark

making sure that our people are

with lenders such as the Lone Oak

Knight

supporting our customers. The team

Fund, Archway Fund, and Freedom

material.

we have has an in-depth knowledge

Private Money. Moving forward,

of how this industry works and

Youngblood said he hopes to expand

“Part of our story is that we hired a

how lenders work; they spend time

the platform’s portfolio while also

branding firm to specifically work

learning the specific nuances of our

cementing

on our company name, website, and

10 Originate Report February 2020

its

branding.

Taking

movies

into

promotional

design.”

“At the core of Alfred are three deceivingly

on a website to blindly procure new business – he said they are qualities

This branding, he said, does not

that team members bring to the

only help with a cohesive physical

office every day.

appearance

simple goals: building

will

relationships, closing

easily

but

moving

inform

forward

prospective

“Our customers need someone who

clients about Alfred’s competitive

really listens, someone who cares

advantages.

and takes the time,” Youngblood said.

“We have found that people are very

deals faster, and

“As I’ve said, I value the relationships

willing to talk about what they do,

with people and companies I have

how they do it, and what aspects of

growing business at a

managed to build with Kumo and

a product or service they don’t like.”

consistent rate.”

and ,we want to share that knowledge

When all is said and done, Youngblood

with others,” he said.

stated that Alfred sets its clients

Alfred. We know our services best

free to handle the aspects of private other attributes. We went through

Even though Youngblood said it is a

lending that a computer can never do.

exercises

company

cliché to extol the virtues of a well-

After all, isn’t that what automation

culture and how we wanted to

rounded, passionate team, it is true

is supposed to accomplish? For more

embody the tonality of the brand,”

nonetheless. Alfred’s four pillars,

he said. “They did an excellent job,

information on the Alfred platform,

trust,

and I can’t reiterate enough the

visit alfred.tech

partnership, are not simply words

to

form

the

innovation,

service,

importance of good branding and

and

CONTACT: https://www.alfred.tech/

CAPITAL DIRECTORY THE MARKETPLACE FOR PRIVATE LENDING & INVESTING PrivateLenderLink.com is a robust website which connects all players in the private/hard money mortgage industry: • Brokers & Borrowers

Search for Lenders

• Lenders

Connect with Capital Providers

• Lenders

Find Service Providers

• Investors

Discover Investment Opportunities

• Everyone

Learn About Industry Events

Use our platform as a resource to grow your business.

NOTE BUYERS CORRESPONDENTS TABLE FUNDING CAPITAL ADVISORS privatelenderlink.com/capital

Private Lender Link, Inc. | 200 Main Street, Suite 200D, Redwood City, CA 94063 | 650-226-4277 | CA DRE Lic. #02057741

www.originate.report 11

WISDOM FROM THE CEO

Jadon Newman Founder & CEO – Noble Capital

12 Originate Report February 2020

your business. They need autonomy and authority to do their jobs, but one of my failures early on was not maintaining a level of transparency and accountability from those people. You need to hand off the baton while maintaining visibility.

It’s a delicate balance.

J

Jadon Newman, Founder & CEO – Noble Capital

adon is the founder and CEO of Noble Capital, a financial firm focused on private lending and private equity investments based in Austin, Texas. With more than 18 years of experience in the financial services industry, Jadon specializes in private investment, wealth management and real estate.

Looking back to when you started your first business – how did you know when you had the right idea?

I knew I was on to something good when I could see that the business venture was creating the opportunity for my partners, employees and clients to be successful also. The measure of a successful business isn’t only defined by how much money you make, but for how much opportunity for growth you’re able to create. I’ve learned that if I can help others achieve their goals, we’ll all be successful.

What was the best (and worst)

piece of advice you ever received?

The best piece of advice I’ve received is that “pigs get fat and hogs get slaughtered”. You can’t be too greedy in business because it can be detrimental to your business, your clients and your colleagues in the long run.

The worst piece of advice I’ve received is that “more is more”.

Throughout my career, I’ve come to believe that less is more. While we all want to grow and be the best in our industry, you should avoid spreading yourself too thin. Focus on mastering your business, not being a jack of all trades. Double down on your expertise if you want to be the best.

What was one of your greatest failures, and what did it teach you?

Part of leading a growing enterprise is that you have to pass the baton and delegate responsibility to those whom you trust and who are capable of achieving the goals you’ve set for

What habits and/or mindsets have helped you succeed as a business owner?

It’s crucial to maintain the mindset that we’re on a mission, and that we have a common goal. It’s the leader’s responsibility to define the mission, and the tactical objectives should get passed down to the leadership to execute their part of that mission. If you can define the mission for your organization, an ordinary group can accomplish and extraordinary goal.

You need to be able to articulate that mission and sell it to the group.

What advice would you offer someone who is starting their first business?

When you start a business, you have a rare opportunity to approach the venture from the starting line. Your mentality should be “work to live, instead of living to work”. You are the architect, and you should build your business around your goals and your dreams, so you can maintain that passion for what you are doing.

Don’t create a monster that will consume you down the road. You’ll only have the chance to start at the beginning once. Life is short. We don’t get too many shots at this, so think about what is important to you at the outset.

Jadon Newman Founder & CEO Noble Capital www.noblecapital.com

www.originate.report 13

EXECUTIONDESIGNEFFICIENCY Geraci media is a national marketing and design agency specializing in brand development and growth strategy for private lenders and real estate professionals, nationwide.

COMPANY FLYER PR PRESS MATERIAL

LOGO DESIGN PITCH DECK

WEBSITE DESIGN WEBSITE DEVELOPMENT

CONNECT WITH US! HTTPS://GERACIMEDIAGROUP.COM/

Ruby Keys | r.keys@geracillp.com | 949.379.2600 Geraci Media is part of the Geraci LLP family of companies encompassing legal, media and consulting.

For more information, see https://geracillp.com/

14 Originate Report February 2020

PRESS RELEASE

ABS appoints Carlos Nodarse Chief Executive Officer and names Jerry Delgado Executive Chairman, Effective January 1, 2020 LONG BEACH, Calif., December 20, 2019 - Applied Business Software (“ABS”) today announced that Carlos Nodarse has been appointed Chief Executive Officer. Jerry Delgado, currently Chief Executive Officer, has been appointed Executive Chairman. These changes are effective January 1, 2020.

Carlos is currently Chief Operating Officer of ABS, and as a member of the senior management team for over 30 years, has played an integral role in the company’s business and growth strategy.

“Carlos is a proven leader with hard-core software development skills, product vision and the ability to bring people together. There is no better person to lead ABS into the next chapter of product innovation and growth,” said Jerry Delgado, ABS’ co-founder and current CEO. “It is an honor to succeed Jerry, who has had an extraordinary tenure with ABS,” Carlos said. “I am proud and delighted to serve as ABS’ next CEO. The opportunities ahead for ABS are vast and varied, but to seize them we must have clear focus, and continue to bring innovative products to our customers.”

ABS also announced that Jerry Delgado, ABS’ co-founder and current CEO, will assume a new role as Executive Chairman, and will devote his time to supporting Nodarse in his new role, and helping with product design and direction.

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 www.themortgageoffice.com or call (800) 833-3343.

Elizabeth Morales, Director of Business Development www.themortgageoffice.com | (800) 833-3343 | elizabeth@absnetwork.com www.originate.report 15

FEATURE

How Millennials are Reshaping the Rental Market Some Plan to Rent Forever

By Robert Greenberg, Patch of Land

T

he

community

too. Professionals representing all

financial crisis and the subsequent

has much to learn about

aspects of the housing economy

run-up

Millennials

their

will have plenty of opportunities

the economic recovery. With that

versus

to invest in this generation in 2020

experience as a sobering backdrop,

and well beyond.

this massive generation has forged

approach

lending

to

and

renting

homeownership — and whether their current preferences will change

home

prices

during

its own path when it comes to

as they age. Even though I am the

The oldest Millennials, who will

father of two Millennials myself, I

turn 40 this year, came into prime

admit that I still have much to learn

homebuying age amid the nation’s

16 Originate Report February 2020

of

renting versus homeownership.

Certainly,

an

entire

generation

to

the

National

Association

of

home purchase, if the buyer is using

Realtors (NAR). While the amount

a mortgage, should be considered as

of student loan debt has risen, the

well, especially if the buyer doesn’t

homeownership rate has fallen, and

plan to stay in the house for more

it has fallen more steeply among

than a couple years.

younger generations.

• The single-family rental (SFR) • Millennials will continue to move

market gained significant traction

into homeownership, but at a more

during

modest

generations

real estate investors bought up

before them due to affordability

distressed housing to renovate and

constraints. The time it takes to

use as rental properties. SFR in a

save for a down payment will keep a

short timespan has become a new,

significant portion of millennials on

burgeoning asset class where both

the homeownership sidelines even

institutional investors and regular,

as this generation accounts for the

small

largest percentage of homebuyers

continue to be active participants.

pace

than

(38%), according to NAR. It’s going to remain challenging for firsttime homebuyers to qualify for a mortgage when you have loads of student loan debt.

• As the stigma surrounding renting fades, more people are choosing renting as a lifestyle choice due to doesn’t move in lock step, but there are some really interesting trends emerging:

its positive attributes such as the flexibility of making a short-term commitment and the freedom from maintenance and repair costs. Real

• In a November 2019 national

estate investors have responded

survey by Apartment List, 12.3%

to this lifestyle choice with a wide

of Millennial renters said they plan

variety of options in rental products

to “always rent,” up from 10.7%

from single-family homes in the

just one year ago.

suburbs to luxury high rises in urban centers.

• High student-loan debt remains a

major

to

the

factor

• Fast-rising home prices make it

young-adult

cheaper to rent than buy in some

contributing

decline

in

a

metropolitan areas. Rent can be

2019 Federal Reserve study. The

less costly once the actual cost of

U.S. currently has a student debt

homeownership is factored in such

load of $1.4 trillion, which accounts

as the down payment, upkeep and

for 10% of all outstanding debt and

property taxes. The thousands of

35% of non-housing debt, according

dollars in fees associated with a

homeownership,

according

to

•

The

the

to

housing

crisis

mid-sized

multifamily

as

investors

market

has

been on fire for several years, and developers will remain active in 2020 although new construction starts and permits are expected to fall, according to CBRE Research.

Apartment demand is projected at 240,000 units in 2020, roughly 20% less than 2019’s estimated 300,000 units, according to CBRE. Here are a few things to watch for in 2020: • Rent control initiatives: Several states and cities (New York City, Oregon and California) instituted rent controls in 2019 in an effort to address the housing affordability crisis. Real estate investors and lenders will want to keep close tabs on city and state regulatory initiatives and how it they will impact investments and real estate lending activity going forward.

Millennials Rental Market: Cont. on pg. 18

www.originate.report 17

Millennials Rental Market: Cont. from pg. 17

• Suburban strength: For multifamily investors and lenders, the suburbs will be the place to be in 2020, according to CBRE Research, which predicts the suburbs will outperform urban locations with lower vacancy and stronger rent growth.

•

Opportunities

metros:

Cities

in with

midsized less

than

exceptional multifamily investment opportunities, especially in cities where local government entities have committed to upgrading their urban cores and investing in quality of life initiatives, according to CBRE Research, but investors and lenders will need to remain cognizant that liquidity and overbuilding risks are higher in smaller metros.

Housing models like “co-living” are taking cues from the co-working trend that has exploded over the past decade. Real estate investors and developers are eyeing shared housing as an option to address affordability. Co-living is a form of shared housing in which communal an

shared

alternative

to

and

provides

conventional

apartments.

• Accessory dwelling units (ADUs) are also growing in popularity as a way to address the nation’s housing affordability In

California,

and the

supply

news for the housing market.

of

affordable

housing.

Investors (and lenders) should stay informed about the latest legislation

Conclusions

involving unconventional housing

Young people have always made up

plays as new opportunities for

a significant portion of the nation’s

investment and financing present

residential rental market and will

themselves.

continue to put their mark on the rental industry in 2020 and beyond.

salaries, but living and working

Lenders in the private money and

in high-cost housing markets, are

alternative

putting their money to work by

want to stay up to date on the latest

investing in residential real estate

trends surrounding the residential

in more affordable cities around the

rental market in order to reach

country. Turnkey online real estate

millennials who rent, buy or are

platforms which include assistance

otherwise investing in the housing

with

economy.

property

management,

supply

crisis.

state

passed

several new laws in 2019 to reduce restrictions on building ADUs with

18 Originate Report February 2020

financing

space

will

have made residential real estate investing relatively easy, even for

Patch of Land

those with no experience. These real

Patch

estate platforms enable investors to diversify their financial portfolios with the opportunity to get cash-

• Unconventional housing plays:

are

that should result in generally good

• Young professionals making high

2 million people could provide

areas

the goal of encouraging a greater

flow with an appreciating asset.

•

The

economy:

Lenders

and

estate is sensitive to the labor market. As 2019 drew to a close, employment and hiring were steady, sentiment

Land

is

an

industry-

leading alternative lender providing professional real estate developers and entrepreneurs with fast and reliable access to capital for single-

investors already know that real

consumer

of

remained

family, multifamily and commercial projects. The company also operates an online real estate crowdfunding portal providing accredited investors the opportunity to diversify their portfolios with fractional ownership

strong and the Federal Reserve hit

of high-yield, short-term investments

the pause button on further interest

across

rate

information about Patch of Land, visit

cuts.

The

experts

expect

moderate GDP growth this year and

the

country.

For

more

www.PatchofLand.com

ABOUT THE AUTHOR: Robert is the Chief Marketing Officer at Patch of Land overseeing the company’s sales and market efforts; including loan originations, branding, lead generation, as well as the company’s sales and marketing automation. He has more than three decades of consumer and B2B experience working with leading companies in retail, technology, finance, and real estate. Prior to Patch of Land, he led the marketing efforts for the B2R Finance where he helped originate over $1B of real estate investor loans that led to the industry’s first-ever multi-borrower single-family rental securitization. Contact: rgreenberg@patchofland.com

PRESS RELEASE

Jcap Private Lending Announces New President, Jason Harris Jason Harris Joined the Jcap Team in January and is Focused on Growing the Business Jason Harris has joined Jcap Private Lending after a 20-year career in real estate finance, development and brokerage. He most recently served as a member of the leadership team for five years at Peerstreet, a leading Fintech company. During his tenure at PeerStreet he built and led multiple teams that were instrumental in recruiting and onboarding over 250 lender partners that generated over $3 billion of volume. He feels it was a privilege to have been involved in the astronomical growth at PeerStreet and is excited to build and grow Jcap Private Lending.

The opportunity to join Bob Eakin, CEO of Jcap Private Lending, and his team was an opportunity that he could not pass up. Bob has had an impressive 30-year career in the mortgage industry creating an impeccable reputation within the industry. He has built a tremendous brand that is supported by a team of exceptional professionals. He is thankful to Bob and the Jcap team for the opportunity to join them and continue to build on what they have started.

A driving force behind his decision to join Jcap is the high level of ethical standards and customer service that Jcap maintains and provides to its partners and investors on a daily basis. Jason’s immediate goals at Jcap are to recruit top industry talent to join the origination team, nurture them and provide these individuals with the resources they need to realize their full potential. He finds the opportunity before him and the potential for growth in all facets of the business very exciting.

Jcap is a National Direct Private Lender based in Newport Beach, California. They offer Bridge Loans (including Construction Loans for Fix & Flip, Spec Residential, and Multi-Family), Commercial Loans and Stated Income 2nd’s. Their loans range from $100K to $5MM+. Jcap Private Lending is committed to solving short-term needs through Real Estate financing.

Laurie Medina, Marketing Manager | www.jcap.net | (888) 321-7334 | laurie@jcap.net www.originate.report 19

SPOTLIGHT SPOTLIGHT

INDUSTRY SPOTLIGHT Mark Hanf

Pacific Private Money

20 Originate Report February 2020

loans, and I was hooked. When that Mark Hanf Pacific Private Money

company went out of business in 2008, I launched my own private lending practice.

So, I’ve been

involved in the real estate industry my entire life.

Q: How have you seen Pacific Private Money grow and expand over the years?

We’ve

grown

by

double-digits

every year since inception. We’ve gone from a home office to a small office to our own “bank” building in downtown Novato, California.

We’ve grown from just my wife and I writing loans and selling trust deeds to having a team of 20 and counting.

We went from

making primarily fix & flip loans to

expanding

include

our

offering

consumer-purpose

to and

owner-occ bridge loans. Now we’ve added ground-up construction and are opening a Non-QM lending division. We’re currently working toward opening a branch office in Los Angeles.

We’ve also seen

the demand explode for buying

M

alternative, higher interest rate ark’s real estate career

Q: How did you first get involved

spans

in real estate?

over

35

years,

including 25 years in

commercial

development

My dad was a builder, and I grew

and

up working alongside his crew

property management and 12 years

every summer. When I graduated

in private lending. He founded

from college in 1982, he had by

Pacific Private Money in 2008,

then a sizable company, and I went

and he and his team have grown

to work for him doing accounting,

the company to over $150 million

capital raising, applying for credit,

in annual volume, 350 investor

and basically helping to execute his

clients and three mortgage funds. A

vision. Like many small developers,

recognized authority in the private

the business didn’t survive the turn

lending space, he is an author and

of the market in 2007.

radio

thereafter I ended up working for

personality,

and

frequent

guest speaker at industry events.

Shortly

someone who made hard money

real estate loans, and we’re now selling loans to several institutional investors. This has allowed us to grow even faster, without having to raise more equity or debt.

Q: How has your company vision evolved from Day 1 to Today?

Success

in

any

endeavor

is

oftentimes a combination of hard work, luck and timing. When I started doing this in 2008, it was just a way for me to make money during a rough time using my Mark Hanf: Continues on pg. 22

www.originate.report 21

Mark Hanf: Continued from pg. 21

experience and skills. A lot changed along the way.

We had no idea

that Dodd-Frank would come along and

essentially

money

through

legitimize

hard

regulation.

The

bad actors left, and companies like ours emerged to fill the growing need for non-bank financing. Then came

legalized

crowdfunding

in 2013 which created greater opportunities for raising capital.

Today the alternative finance space is the fastest growing segment of mortgage lending. As our company has grown along the way, we’ve expanded our goals and broadened our outlook. A few years ago, if someone had suggested that we should have a goal to reach $1 billion in annual fundings, I would have said they’re crazy. Now that’s part of our 5-year vision.

Q: What are some of your goals for 2020?

In addition to launching a Non-QM division and opening more branch offices, we’re seeking to grow our team with strong regional talent.

We want to have local coverage throughout California. Next, we’re seeking to increase operational excellence through new software

company?

fact, our three promises are “fast,

We have a tremendous amount of

friendly and reliable”. While some

fun on a daily basis. We’ve hired

of our borrowers might only care

some real characters through the

about getting their money fast, we

years, and we like to let off steam

know that our referral partners

with jokes and by poking fun at

and vendors definitely care, and

each other.

they like working with us.

It’s all good-natured

and we’re careful about boundaries.

Culture fit is our first priority

Q: What is a recent trend in the

when hiring. We spend more time

private

together than we do with our own

excites you?

families, and if it’s not enjoyable,

I’m

what’s the point?

companies finally paying attention

lending

excited

to

industry see

more

that tech

to the private money lending space.

Q: What does success look like for

For years there were only a few

you?

technology options developed for

At our company, we encourage

this industry. Now there are many,

our team members to be students

and they are competing for our

of personal development. We’ve

business. The growing number of

invested a lot in team coaching.

technology vendors showing up

Along the way we have learned

at the AAPL conference these last

that

couple of years is a great sign for

should

any be

successful in

the

company

business

of

our industry.

improving people’s futures. This goes for improving the futures of

Q: What do you see in the future

our investors, our borrowers, our

for private lending?

referral partners, and absolutely

I’m bullish on the prospects for

of our team members. Success for us is doing good work, having fun and providing opportunities for everyone to thrive.

our industry in the years ahead.

Notwithstanding

the

upcoming

recession (whenever that might be), I expect demand for capital

Q: What mistakes have you seen others make in this industry?

will continue to remain strong. If banks and conventional lenders pull back in the next cycle, where will

and other efficiencies. There are

When I was first in this business,

finally a strong number of quality

I couldn’t help but notice a certain

LOS and CRM options built for our

degree of arrogance among some

industry, and we’re pretty excited

originators. It was like they were

about that.

saying to their clients, “We don’t

conservative right now? You bet.

need you; you need us!”

We

But are we shying away from good

Q: What is something that most

decided that friendliness was going

opportunities to grow and lend?

people don’t know about your

to be a hallmark of our delivery. In

Not a chance.

borrowers go if not to alternative lenders? In anticipation of the next cycle, are we being a bit more

CONTACT: mark@pacificprivatemoney.com | 415-883-2150 | PacificPrivateMoney.com

22 Originate Report February 2020

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

www.originate.report 23

CULTURE CORNER

Exuding the Newport Beach Lifestyle JCAP PRIVATE LENDING

C

BY LAURIE MEDINA ompany

is

are produced because he knows

to doing good, and that “we are

the

the loans are a sound investment,

all citizens of the world”. Among

company and is defined

and he wants to be included in

some of his philanthropic efforts

by its leadership. That couldn’t

them. He embodies the Newport

he has participated in a project

be more true at Jcap Private

lifestyle and translates that to

to bring sight to the blind in

Lending! The Jcap team possess a

the office where he enforces a

Vietnam, a medical mission in

strong sense of self, do what is

very casual dress code (you’ll

Peru, local urban youth programs,

right, embody a Newport Beach

find that he’s always in shorts

and he volunteers at his local

vibe, and truly enjoy who they

and a polo shirt). He encourages

church every Sunday.

work with.

new ideas, inspires his staff to

the

culture

personality

of

Bob Eakin, CEO of Jcap Private

strive for their personal best,

Jcap’s most recent project was

and mentors junior sales execs.

funding the construction of a

Lending: he founded the company

new school in India with the

in 2014 in Newport Beach after

Philanthropy:

being named one of the Top

Bob

50 Loan Originators in the US.

partnering

As the chief underwriter, Bob

organizations

underwrites like an investor –

lives of people around the world

and now provides free education

because he is an investor. Bob has

for 25+ years. He believes that

to

a position in most of the loans that

there are no walls when it comes

the community. They are also

26 Originate Report February 2020

has

organization Harvest India for

been

committed

with to

to

children who don’t have access

non-profit

to education. This project was

improve

the

completed young

in

September

boys

and

2019

girls

in

involved in helping out the local

that will include a full-on theme

community. This past summer

and prizes for the best talents!

the Jcap team did a beach cleanup for one of their local beaches!

They had a great time bonding as a team and giving back to the

They also have free snacks and an espresso bar in the office available to all employees.

community.

They

are

currently

evaluating

their local community service options and can’t wait to start

(NOT PICTURED) “When I came to Jcap Private lending, I knew that I would be joining a highly effective team, but I had no idea that I would be welcomed into a family. I look forward to coming in to work every day and being surrounded by hardworking people who also know how to make work enjoyable!”

-Rachel, Marketing Intern

giving back in 2020!

Jason Harris President of Jcap

Perks: The Jcap team organizes monthly catered

lunches

to

celebrate

holidays and/or birthdays! The office is decorated with holiday or

birthday

decorations

each

month. Every couple of months Jcap throws a small team building event. Their favorite event from 2019

was

a

Murder

Mystery

party where each team member

New Addition to the Team: Jcap would like to introduce Jason Harris as their new President. He brings with him over 20 years of experience in real estate finance, development,

brokerage

and

private lending. He is arriving from

PeerStreet, fintech

an

industry

was given a script and assigned

leading

marketplace

as different characters. They got

where he was instrumental in

dressed up and followed clues

the company surpassing $3B in

to find the “murderer” amongst

volume during his tenure. The

the group!

Their next event is

team is excited about the energy

at the end of February where

and industry insight that Jason

they’re having a Jcap Talent Show

brings.

“It’s not easy to find a company where you feel like all of your work experience comes into play and you learn something new every day.

On top of that, it’s even harder to find a company where you truly enjoy everyone you work with and look forward to coming to work every day. I’ve found that at Jcap.”

-Laurie, Marketing Manager

“Jcap is a company that allows me to wear many different hats and explore all the different facets of the private lending world. I love Jcap because I work with a tight knit team that supports and motivates each other!”

-Ellen, Executive Assistant We’d rather be at work than at home.” -Operations Team

CITIES TO WATCH

CITIES TO WATCH:

NEW YORK CITY, NEW YORK

“I

By Charles Peckman, Originate Report

want to wake up in a city

which has captivated the world’s

To your left is the Financial District,

that

sleeps.”

mind for over a hundred years, has

which has been the epicenter for

Although the lyrics to New

certainly lived up to its monikers

some of corporate America’s biggest

many times over.

triumphs and blunders. To your right

never

York, New York are most often sung by heavily-inebriated happy hour

is the Empire State Building, which

patrons, Frank Sinatra’s love letter

In a city where the bright lights of

serves as a symbol of industrial

to the Big Apple rings true to this day

Broadway mingle with the ever-

strength and the urban boom of

– after all, what is there to say about

changing ticker tape of Wall Street,

the early 20th century. Even while

New York City that hasn’t already

it would be foolish to say that there

traveling from one site to another, a

been said? The storied metropolis,

is nothing to see in the Big Apple.

ride on the ever-vibrant Subway will

26 Originate Report February 2020

NEW YORK, NY Economy: • Major industries: Publishing, media, information technology, finance, and real estate • Minimum wage: $15.00/hour • Cost of living: 87 percent higher than the national average

(expected -1.3 percent one-year forecast) • Home price change: -0.7 percent one-year change • Homeownership: 32.4 percent • Median rent price: $3,675 (two bedroom apartment)

Job Market: • Forbes List: #115

Housing:

• Unemployment: 4.1 percent

• Median household income: $50,711

• Job growth: 1.4 percent

(according to 2010-2012 estimates)

• Loan originator average salary:

• Median home price: $647,115

$71,280

produce more characters than most

Must-see Locations

searching for their passions, or

novels (and who knows, you may run

Although this city has the word new

looking to fall in love with the

into Jerry Seinfeld.) There are also

in its name, the Big Apple’s roots are

American Dream, monuments like

reverential points throughout New

in one of mankind’s oldest pursuits

York, including several monuments

– the pursuit of a better life. For

dedicated to 9/11, one of the darkest

decades – and still to this day – the

days in U.S. history. No matter

city has served as a beacon of hope

where you originally hail from, it is

for millions of immigrants from

hard to deny the urban splendor of

countries far and wide. Whether

New York City.

these people were fleeing tyranny,

The Statue of Liberty serve as an embodiment of this search and a reminder that America is a place for all. As an ancestor of German immigrants, it was one thing to see historical footage of Ellis Island Cities to Watch: Continues on pg. 28

www.originate.report 27

Cities to Watch: Continued from pg. 27

in history class growing up; but standing in the Great Hall – perhaps in the same spot as those who came before me – was nothing short of amazing.

Even if you are a casual (at the most) observer of art, New York’s selection of all mediums – from the refined brushstrokes of the Old Masters to the consumerist iconography of Andy Warhol – makes for a well-rounded and in-depth tour of art throughout the last few centuries. Well-known the world around, institutions like the Museum of Modern Art and Whitney Museum of American Art feature thousands of works by the likes of Van Gogh, Kandinsky, and Lichtenstein.

Nightlife In the late 19th century, New York City was split up into five boroughs to form the city we know today. Over time, each area has formed its own “vibe” so to speak – the measured

was illegal, speakeasies, or secret

delicious pastrami) and its many

bars, popped up around the city. This

Michelin-rated hot spots, one thing

spirit of illicitness lives on today

is for certain – your taste buds will

(even though alcohol is no longer

not be unsatisfied for long. Chef

illegal) in several 1920s-inspired

Danny

speakeasies. Located in the Financial

tavern Gramercy may not be the

District (but not sanctimonious in

most inexpensive place to dine,

any way,) The Dead Rabbit Grocery and

Grog

offers

meticulously

researched vintage-inspired drinks (including, of course, cocktails made with Absinthe.) The Back Room, the Lower East Side’s take on a Prohibition-era gangster hangout, serves its immaculate cocktails in teacups and small-batch beers in paper bags.

Meyer’s

Flatiron

District

but its ambiance, food, and service are known across the globe. The Modern, with its French/American new fare, has views that overlook the gardens of the Museum of Modern Art. To fully grasp the dining options throughout New York, be sure to read The New Yorker’s “Table for Two” column, where a cycling group of journalists describe their favorite

If the Prohibition-era scene is not for you, never fear – New York City is home to some of the country’s most well-known nightclubs. The Pyramid Club, for example, opened its ever-radiant doors in 1979 and helped define the drag and gay scenes throughout the 1980s. The Copacabana, which is located in the heart of Times Square, claims it is the “most legendary and cosmopolitan

chaos of Manhattan rubs shoulders

nightclub in New York.” With three

with the cultural influences of the

floors and thousands of square feet,

Bronx. The easternmost borough,

not to mention live Latin music, it is

Queens, brings a big-city feel without

easy to see how this claim came to

the (arguable) pretentiousness of

be – regardless of what you like to

areas within Manhattan such as the

do after the sun goes down, a short

ever-affluent Upper East Side. With

walk down the streets of the city

all of that said, the five boroughs

that never sleeps will yield a litany

create distinct differences within the

of late-night hotspots.

places to satisfy an empty stomach.

Attractions Whether you enjoy an unhurried walk through the sprawling Central Park

or

an

exhilarating

night

in a Broadway Theater, there is something to do for every occasion.

You could peruse the floors of the New York Public Library, where the smell of old books and freshlybrewed coffee is met with the sight of aspiring (and seasoned) authors, playwrights,

and

literary

critics

pounding away on their keyboards.

Although New York’s many towering skyscrapers house some of the best in art and theater – not to mention the headquarters for many corporations – the buildings themselves are rife with history. Even if you think you

nightlife of the Big Apple.

Dining

know everything about the Empire

But this night scene was not always

With cultural ingredients (see what

State Building and other landmarks,

such a hotbed for artisan cocktails

I did there?) as wide as the country

the New York City architecture

and an ever-growing list of craft

itself, New York surely has a “few”

tour will surely unearth factoids

beers – during the Prohibition, a time

restaurants to choose from. Known

not

when the sale and import of alcohol

for

Wikipedia page.

28 Originate Report February 2020

its

delicatessens

(and

their

found

on

your

standard

www.originate.report 29

FEATURE

CFPB Issues Final Rule Loosening HMDA Requirements

By Melissa C. Martorella, Esq., Geraci LLP

L

Consumer

500 open-end lines of credit. “For

provided

Financial Protection Bureau

data collection years 2020 and 2021,

addressing certain issues relating

(CFPB) issued a proposed

financial institutions that originated

to the partial exemptions that the

included

fewer than 500 open-end lines of

August 2018 rule did not address,”

temporary thresholds for collecting

credit in either of the two preceding

the Bureau stated in the press

and reporting data on open-end lines

calendar years will not need to

release.

of credit under HMDA.

collect and report data with respect

rule

ast

May,

package

the

that

to open-end lines of credit.”

The

rule

also

clarified

partial The rule is advantageous for smaller

HMDA

lenders,

that

were

eliminating

many

from

added by Congress into the Economic

reporting

Growth,

HMDA. The rule also covers reverse-

Regulatory

Relief,

and

requirements

under

Consumer Protection Act (EGRRCPA),

mortgage

which was signed into to law in May

lenders. The implementation of the

2018.

rule will lessen burdens on smaller

lenders

and

the

EGRRCPA

by

The final rule comes at a time

exemptions for lenders from some requirements

by

private

when the U.S. Supreme Court is set to hear a case challenging the constitutionality

of

the

organizational

structure.

CFPB’s The

decision could determine the fate of the agency that was formed under the Obama administration as

lenders and reduce compliance costs

part of the Wall Street Reform and

across the board.

Consumer Protection Act of 2010.

exemptions will last for another

“This final rule further effectuates

If the SCOTUS decides that the

two years, holding the threshold at

the burden relief for smaller lenders

Bureau is unconstitutional, it could

In

a

press

release

announcing

the final rule, the CFPB said the

30 Originate Report February 2020

have ramifications throughout the

five days before the original public

According to the Bureau, this two-

industry by potentially unraveling

commenting

year

all of the CFPB’s decisions over the

October 15.

period

deadline

of

extension

will

allow

time

to consider fully the appropriate

past nine years.

level for the permanent open-end The final rule incorporates into

The pending SCOTUS review may

coverage threshold for data collected

Regulation C the two-year extension

have played a role in why the CFPB

and implements further EGRRCPA

beginning January 1, 2022, after

decided to finalize its proposal. The

partial exemptions.

relating

rule proposal was made last May, and according to CFPB Director

The final rule extends to January

Kathleen L. Kraninger, is being

1, 2022, the current temporary

finalized because it adds definitive

threshold of 500 open-end lines of

clarity and is in the best interest

credit for open-end institutional

of smaller financial organizations doing

business

in

communities

across America.

In

the

May

announcement,

Kraninger said the proposed changes would provide much needed relief to smaller community banks and credit unions while “still providing regulators and stakeholders with the information we need under the Home Mortgage Disclosure Act.” In more proof that the rule issuance was fast tracked, it’s release comes

and

transactional

reviewing

coverage.

The

rule stated that the Bureau also intends to address in a separate final

additional to

that

comments

aspect

of

the

proposal.

If you have questions about HMDA compliance or reporting, Geraci Law Firm is here to help. Our transactional team is filled with experts that can assist with determining whether

rule the changes it proposed to the

HMDA reporting requirements apply

permanent coverage thresholds for

to you. Please reach out to Melissa

open-end lines of credit and closed-

Martorella at 949-379-2265 for a

end mortgage loans.

consultation.

ABOUT THE AUTHOR: Melissa Martorella joined Geraci Law Firm as an Associate Attorney in the Banking and Finance section in August 2015. Ms. Martorella’s experience includes representing lenders and brokers, preparing commercial, residential, and construction loan documents, as well as drafting assignments, extensions, modifications, and subordination agreements.

Ms. Martorella also has experience assisting with negotiating the terms of transactions, drafting custom language, and closing loans.

Contact: m.martorella@geracillp.com

www.originate.report 31

Where Most Private Lenders Go Wrong Scaling Their Business

By Abhi Golhar

F

ollowing the Great Recession

continues to evolve, private lenders,

surprise outcomes are likely to be

that hit the United States

both big and small, must become

negative for you.”

in 2007, the private money

more agile and continuously adapt to

- Nassim Nicholas Taleb

lending industry has significantly

overcome increased competition.

evolved. Prior to 2008, private mortgage lending was dominated by

So, what do private lenders really

a handful of very large companies

need right now? Strategies on the

— Landmark Capital & Investment

best ways to scale your business so

Company, Mortgages Limited, and

you’re set up to support growth in

IMH Capital, to name a few. Along

your organization. And guess what?

with these major players, a few

All it really requires is a little bit

smaller ones poured in and managed

of planning coupled with the right

to compete on a small scale.

technology, processes, and partners.

Before we can identify how to scale

Lagging Behind The Competition Consider the enormous size of real estate lending today. The Fed’s recent report shows mortgage debt topping $9 trillion. When accounting for lending to businesses, it tops $15 trillion. And, over 10 million commercial properties and homes sell each year in the US.

Back in those days, private money

your lending business, let’s first look

lenders could easily charge higher

at some of the common problems

fees since there was very low supply

faced by private lenders today.

converging

to take an aggressive approach and

day, it’s no surprise everyone wants

Challenges Faced By Private Lenders Today

a piece of the market. As the industry

“If you are in banking and lending,

rates, making deals a lot riskier.

and a comparatively high demand for capital. Fast forward to present

32 Originate Report February 2020

As more capital enters the space to

lower

yields,

competition is forcing private lenders write loans at higher loan-to-value

is vulnerable to manual errors,

and create tailored tech solutions

there is no way to substantiate a

based on the latest innovations. Here

borrower’s claim of a payment if the

are a few examples:

lenders forget to make a note of the

•

Allow

making

borrowers

payments

transactions. Feel like losing some

for

and

sleep? Doing things manually is the

dashboards for investors directly

best way to get there.

from

mobile

creating

devices

using

e-wallets through apps; a musthave in today’s market

Going Through Lengthy Procedures •

Before The Deal Is Done

borrowers

make

wise,

Regardless of the size of the private

data-driven asset management

lending

decisions with the help of Robo

organization,

a

blazing

fast loan origination process is a competitive advantage.

Most

lenders’

current

advisers •

Better

handle

authentication

in large-scale transactions and streamline

processes

and systems include tardy manual That can’t be good.

Help

steps. Given borrowers usually turn to private lenders when they have

Using Outdated Processes

limited time at hand and don’t wish

The amount of data that exists on

to go through the lengthy and tiring

borrowers can easily startle anyone.

processes most traditional banks have

While traditional institutions have

in place, quicker lender processes

completely automated their back-

yield quicker turnaround times for

end operations and workflows, most

borrowers yields more business for

private lenders are still too primitive

you and most importantly, happier

when it comes to accommodating

(and repeat) borrowers.

Let’s now take a look at a few ways

using excel sheets leading to multiple

you can scale your lending business

errors that might be very difficult to

with the right practices.

correct. What does all this mean for private lenders? Accounting, legal

The RIGHT ways of undoing

and compliance nightmares.

everything that’s wrong!

Paper-based loan processing makes

Software Development = Overall

the task of maintaining records a

Development

monotonous one. This further makes

SaaS solutions have played a vital role

keeping track of a loan’s status and

in helping private lenders expedite

the process of retrieving critical

and organize their operations like

information time-consuming.

never before. And even then, lenders aren’t paying much attention to

Keeping track of a loan’s status could

developing custom software to suit

be pretty complicated when it’s

their needs.

recorded manually. Since the process

Your developer can help you design

through

blockchain technology •

Input data of general and limited partners

•

View and edit relevant data about partners and investment decisions

•

Create detailed reports about investments

•

Tally

management

fees

and

compute carried interests •

Increase productivity by helping administrative

tech and software advancements, resorting to manual accounting or

processes

personnel

in

creating scalable strategies and actions Custom software development can also leverage the latest data analytics to survey borrower data and create personalized solutions your clients expect, leading to increased loyalty.

It can help with your company’s cybersecurity

risk

management

and

mitigation,

fraud

detection

and

prevention,

and

regulatory

compliance.

Work Smarter Ft. Artificial Intelligence Abhi Golhar: Continues on pg. 34

www.originate.report 33

Abhi Golhar: Continued from pg. 33

Many

traditional

lenders

are

leveraging artificial intelligence (AI) to sift unconventional data to foretell creditworthiness

of

borrowers.

Doing so is especially important for markets where a growing middle class uses smartphones but dearths traditional credit.

digital

footprint

for

creditworthiness by having them download an application. With the app feeding data to a credit scoring platform, variables such as browsing, social media, geolocation, etc. are used to get a complete picture of the borrower. One organization called Lenddo has done this across Asia and Africa.

nagging. Private lenders can provide

documentation. All these solutions

a controlled, neutral environment

are highly customizable with respect

for customers to ‘discuss’ their

to your client’s experience too.

circumstances

Industry experts believe the growing

Chatbot

by

leveraging

technology

and

the

analyze

resolution opportunities baked into the bot itself.

data from online behavior and other sources to examine people’s location, search, and payment details to calculate creditworthiness in what’s called a “social credit” system.

Some lenders who had laid the groundwork in North America are experimenting with search history

within which clients usually tend to lie, programming the chatbots for adequacy is quite possible. Gradually, the interactions carried out by these bots will serve as a template for training to make the process more effective – leading to lower costs and higher resolution rates.

data. Many car buyers, especially young people who haven’t taken out much credit before, don’t qualify for auto loans. Auto lenders are now getting comfortable extending loans despite “thin” credit scores when the search

characteristics

in

experience

a

mobile-optimized

will

lead

to

greater

A Few Closing Words In order to stay ahead of the game in today’s competitive climate, private lenders must consider implementing digital

solutions

like

custom

software and artificial intelligence or chatbots. Quick implementation, lower

costs,

and

near-universal

availability are some of the key

The Next Big Thing: Smartphones!

Earlier, a mere 2% of mortgage devices. However, since the past 2-3 years, that number has leaped to 20%. This notable increase has occurred due to the increasingly busy lifestyles of individuals, and smartphones replacing laptops and desktops in the private browsing space.

The

interest

demand for online lending services.

applications were filled on mobile

Technology companies can now pull

borrowers’

origination, processing to compliance

Given the limited radius of issues

With AI, you can easily analyze borrowers’

follow-ups without coming across as

benefits of these solutions. Adding them to your arsenal will not only help you eliminate tedious manual practices, but it will also allow you to modify processes swiftly as markets continually change.

It’s super important that private lenders

begin

evaluating

incorporating innovative technology into their offerings. Just as the evergrowing pace of tech advancements

integration

of

smartphone

has enhanced countless facets of

solutions with the technology mix

our daily life, technology too is

will entirely transform the way

remodeling loan origination, enabling

in which lenders and borrowers

speedier funding decisions for your

interact.

borrowers

while

simultaneously

lowering processing costs, as well Current solutions in the market range from POS

as

improving

profitability

efficiency in the lending realm.

are favorable.

Mainstream Intervention? Nope.

A

technology

led

non-invasive

approach is the key to taking client

34 Originate Report February 2020

and

ABOUT THE AUTHOR: Abhi Golhar helps companies grow faster. Learn more at AbhiGolhar.com

and

DISCOVER THE

Symbol of Excellence

FOR PRIVATE LENDING

Members of the American Association of Private Lenders are the new trend-setters in the private lending industry. From their voluntary adherence to a Code of Ethics to their knowledge of the private lending process, they are the gold standard for the profession.

Activate your membership with the American Association of Private Lenders to give your business the professional advantage and career boost it needs.

You will: • Join a viable network of industry experts.

• Get immediate recognition as an industry professional.

• Have a voice in creating the standards for the industry.

• Have access to exceptional professional development opportunities.

• Get added marketing support and opportunities to enhance your business.

It’s time to take your business to the next level.

JOIN AAPL TODAY!

AAPLONLINE.COM  (913) 888-1250

www.originate.report 35

UPCOMING EVENTS 2020 EVENTS CALENDAR

AUGUST 19-21, 2020 | COSMOPOLITAN HOTEL, LAS VEGAS Where deals and capital meet! Join us for our flagship show of the year in Las Vegas! Captivate will turn its attention to the real need in the non-conventional lending industry: capital. Our Captivate Conference will connect lenders and investors and show you the tools you need to grow your business. With two and a half days of networking, Captivate will connect top sponsors directly with high net worth individuals who are looking to make their next business deal. All attendees will have access to network with one another through an app prior to the event. Join us in Las Vegas for good times, great memories, and valuable connections!

Showcase Your Upcoming Event Here Contact Alicia Carter at a.carter@geracillp.com for more information.

36 Originate Report February 2020

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 Upcoming should be clear Business Development • Fintech/Newest Loan Programs • Automation in Today’s Evolving Society 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.

www.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

5M 10M 2M

150K 200K 50K

55/33

Direct Lender

75/30

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

10M

Direct Lender

100K Helvetica Group www.helveticagroup.com loans@helveticagroup.com (310) 575-3301

*AZ, CA, NV

*All 50 States

*CA

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

*CA

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

LET LENDERS KNOW YOU FOUND THEM IN ORIGINATE REPORT! 38 Originate Report February 2020

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 V te d a en Fo ge t 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 les AX to m e / /S TE Co o RM Re mm yn t ag t a i i ve (YR e og l( rc i S) S En ue al/ te r h o p s L s o t ai t) Ga nm / Str sS ip en Ma Le t at i o t lls isu 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

M A K E WAV E S AT

FEBRUARY 20-21, 2020 NEWPORT BEACH, CA Interested in attending or sponsoring?

Contact Alicia Carter at A.Carter@GeraciLLP.com Balboa Bay Resort 1221 West Coast Hwy, Newport Beach, CA 92663 949.379.2600 | www.geracicon.com www.originate.report 39

IT’S NOT JUST ABOUT IDEAS. IT’S ABOUT THE EXECUTION. 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.

CORPORATE AND SECURITIES

LITIGATION AND BANKRUPTCY

BANKING AND FINANCE

MEDIA SERVICES

Securities Offerings & Compliance* Entity Formattion* Corporate Governance* Licensing*

Creditor Representation Title Claims Loss Mitigation

Loan Documents* Lending Compliance* Foreclosure/Loss Mitigation

Branding Consultation Pitch Decks Logo Design Web Development Graphic Design

CONNECT WITH US! 90 Discovery Irvine, CA 92618 | Phone: 949.379.2600 | Fax: 949.379.2610 www.geracillp.com | www.geracicon.com | www.geracimediagroup.com 40 Originate Report February 2020

*All 50 States