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1 Go Direct Gold Training. It used to be SOoooo easy to get a loan! WHAT HAPPENED?  2010: ASIC DECREED THAT ALL FINANCE SERVICE PROVIDERS MUST BE LICENSED.

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Presentation on theme: "1 Go Direct Gold Training. It used to be SOoooo easy to get a loan! WHAT HAPPENED?  2010: ASIC DECREED THAT ALL FINANCE SERVICE PROVIDERS MUST BE LICENSED."— Presentation transcript:

1 1 Go Direct Gold Training


3 25,000 APPLIED 5,600 WERE GRANTED LICENCES The good:  The dubious “NO WORRIES WE WILL SAVE YOU” kind of Broker exited the loan business The bad:  Tougher restrictions were placed on the type of borrower the Banks would accept The ugly:  Borrowers who previously met criteria were now refused credit 3

4 HOW DOES THIS IMPACT ON YOUR BUSINESS? Renters who enter into rent to own contracts usually fall into these categories:  Bad Credit  Minimal Deposit  Self-Employed without financials  Re-building their lives after major trauma All need to be made “LENDER READY” within a pre- determined timeframe. 4

5 THE INCONVENIENT TRUTH How bad is BAD CREDIT?  TELCO paid or unpaid most lenders will ignore PAID defaults up to $750.00  Other debts that appear on credit reports paid or unpaid?  Too many enquires on a credit report? FORGET THE BANKS 5

6  In an ideal world, before a tenant is placed in your property you would have a credit check detailing their history so that you could make informed decisions OR  If you have a tenant that is about to become lender ready, you need to know of any hiccups that may appear and how best to tackle them so that the purchase is seamless 6

7 DAW HELPS  Debt is challenged by borrower  Creditor will not remove until paid  Client then works with a credit provider to have debt removed, reduced, or arranges payment  Negotiation of reduced pay out figure in return for removal of default/judgment  Debt stays on credit report for 5-7 years  Bankrupt discharged remains on report for 7 years 7

8 VALUATIONS  Historically Valuers ued a comparable sale method  Some banks have now issued instructions to use comparables within 1 km of property, instead of the customary 5 km radius  Sometimes units and townhouses in the same complex are not used – makes new projects difficult unless there is an almost identical project nearby 8

9 REASONS FOR LOW VALUATIONS  SCARCITY: often has a premium attached to it because of its unique features – hard to value – no comparisons  SUBJECTIVITY: no two properties are identical – no quantitative means for a Valuer to remain neutral/unbiased  TIMEFRAME: historic data is “past tense focused” RPD Data takes three months for new sale to register 9

10 LOW VALUATIONS  LIABILITY: banks are (as a result of the GFC) quick to take legal action against Valuers, leading to more conservative valuations  DISTINCTION needs to be made between a fair market price and a bank’s valuation  THE BANK’S OBJECTIVE is no longer simply to make huge profits through carefree lending. Rather, it is to control the amount they could potentially lose. 10

11 VALUATIONS: DID YOU KNOW?  DESKTOP VALUATIONS to pre-approve loans, then pick approval as a condition full valuation ordered  Result: clients lose two properties  CASE STUDY: Inner city warehouse conversion  Selling price $649,000 valued at $480,000  Requested re valuation at $600,000  New lender valuation came in at $645,000 11

12 PUTTING THE CART BEFORE THE HORSE  Trying to put a loan proposal together with no real knowledge of the client’s financial circumstances is in many cases asking a Provider to perform a miracle  Even with years of experience, most Brokers have limited knowledge of the non-conforming and specific market and the application is either “shopped around” or goes in the too-hard basket. 12

13 SOLUTION: NON-BANK & NON- CONFORMING LENDERS (Specialty)  All securitised or wholesale Funders  All have different credit policies  Debt paid or unpaid  Low Doc or Full Financials  Good Behaviour policy  Low Deposit 13


15 SHOWSTOPPER ONE  Client ready to purchase, full doc loan supplies pay slips with NO TAX DEDUCTIONS  Only has 5-10% deposit. Good Credit, Great Income  Rejected by 3 lenders  SOLUTION: organise ABN and GST. Lender found to take on as a full doc deal.  Interest rate reduced from 12.5% to 9.19% Good Behaviour clause 15

16 SHOWSTOPPER TWO  Client applies for loan with 20% deposit, is self- employed with excellent outcome  Credit report shows “clearout” by Esanda for $10,000 incurred by ex-wife  Marriage is not a financial condom  Default 5 years old but Esanda will not remove for another two  Lender found who will pay out debt at settlement and reduce rate after one year 16

17 SHOWSTOPPER THREE  Self-employed couple, good income – refinance from Private (Solicitors Funds) $560,000 on $1,00,000 property  Banks refuse to refinance private money even though statements of repayments produced  Six-week deadline  Lender found who will do low doc and accept solicitors statement. Repayments $1600 pm less 17

18 SHOWSTOPPER FOUR  Client applies for loan clear credit, or so it was thought until credit report shows 44 enquiries  Most banks credit score  Found Specialist Lender who does not credit score and loan application accepted under normal terms 18

19 PROPER PRIOR PLANNING  Prevents poor performance  Wind back the clock on that client that is going nowhere towards taking ownership of your property  Before possession you organised a credit check and two-page analysis (signed) that gave you all the information you needed to work within a timeframe of getting lender ready 19

20 KNOW YOUR CLIENT  An accredited Finance Provider should be able to help assess the situation and make a decision together with you on whether the client will be able to meet lending criteria at exit stage  Repay any outstanding debt within timeframe and clear credit/defaults  May need assistance from Broker to re-establish credit 20

21 HOW TO: AVOID A MELTDOWN  Ensure we provide you with the following information on your prospective/existing client:  CREDIT HISTORY  SERVICEABILITY  FUNDING POSITION  ARREARS AND DEFAULTS  Prepare a two-page analysis (signed by client) giving all the information you need to work within a timeframe of getting your client lender ready 21

22 WHY USE DOLLARS AT WORK?  Experienced in both bank and non-bank lenders policies and requirements  Used to handling basket cases, knows the time involved – 3-4 applications in some cases before getting a result  Detailed knowledge of credit – both impaired and non- impaired  Negotiates with client/lenders and credit removal – full or reduced payment(s)  ACL License – 20+ years experience 22

23 FINANCIAL CUL DE SAC  Our job is to assist you in the process of getting the right loan for your client wherever possible within the timeframe you are working towards  To keep you informed of the progress and to avoid last-minute roadblocks that threaten settlement 23

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25 1: BAD CREDIT  Client begins program with one or more DEFAULTS paid or unpaid, then creates more bad debt over the two years until refinance  These remain on credit file for 5-7 years depending on whether they are classified as “clearout” or not  SOLUTION: work with client to repair or repay debt 25

26 2: LOSS OF EMPLOYMENT  Employed at start of your program, retrenched 15 months later  No prospects of employment… Delays refinance indefinitely  New position… Being on probation delays refinance for up to 6months  SOLUTION: Earlier client contact means a lender may take on a probation situation 26

27 3: OVERSEAS EMPLOYMENT  Client works 4 weeks on and 4 weeks off in Nigeria, paid $187,000 a year in US Dollars and income banked into a Tax Haven  Lender wants to treat your client as “foreign investor” as no tax paid in Australia  SOLUTION: Prior knowledge of employment status may have resulted in changed banking arrangements 27

28 4: LONG-TERM ILLNESS / ACCIDENT  You are not informed and don’t suspect any change has occurred that would affect refinance as payments are being made on time. Family chipping in??  Client has been off work for many weeks and is entitled to compensation. Workers Comp not usually taken into account  On Insurance Claim provided through Superannuation, some lenders will take this on but only at 80% of the benefit achieved  No income coming into the household  SOLUTION: Difficult to resolve – Specialist Lender 28

29 5: ADDITION TO FAMILY  Arrival of a new dependant affects serviceability of refinance, especially if mother on Maternity Leave for 12 months, even more drastic if not returning to work  SOLUTION: Contact with client could have set up Plan B to renegotiate terms of contract and to rework refinance 29

30 6: BUSINESS FAILURE  Client’s business fails and although payments are being made on time, this affects chances of getting a loan through normal channels as the business may have gone into liquidation  SOLUTION: Assess chances of bankruptcy happening and organising Specialist Lender if not to take on debts – paid or unpaid 30

31 7: BANKRUPTCY  Client declares bankruptcy and is not discharged for 3-5 years  Stays on credit file for 7 years  Renegotiate terms of contract?  If one partner is OK will they quality for a loan individually?  SOLUTION: Assess partner, find a lender who will take on a loan one day after discharge 31

32 8: INCOME TOO LOW TO SERVICE LOAN, or BORROWER OVER 55  If client has filled out an information sheet before entering into your contract and this is passed to DAW, you will be informed immediately whether they are a likely candidate or not for your property  Over 55… Although Lenders say they don’t age discriminate, THEY DO! Exit strategy must be in place  SOLUTION: Asset test your client before taking them on – a NO now avoids heartache later. We may be able to have a family member/friend go on the loan 32

33 9: UNREALISTIC PURCHASE PRICE  Client agrees to purchase on the Central Coast (Gwandalan) at $450,000  Valuation comes in at $360,000  Reason from Valuer: too many repossessions in area  SOLUTION: Prior knowledge of area and potential growth 33

34 HOW IT WORKS  We believe we have created the SOLUTION that will make your jobs easier in the months/years to come by BABYSITTING your clients and providing you with outcome of personal interview with client, by phone and followed up with email  A four-monthly report on your client that outlines any changes in both their financial and personal circumstances  Updated credit file  Proposed action plan to remedy or make ready for refinance  A 10-point scoring system that will keep you informed on the progress and likely outcome of getting a loan, rather than the time-consuming work we are all putting in at the moment and trying to avoid disappointing results 34

35 INTERESTED?  YES there will be an annual fee of $350.00  Plus $50.00 per client, per year  Please indicate on your feedback form if you would like to take up this offer  The first of ongoing reports that will be sent to you on a monthly basis is Low Doc – Changes in the Industry and how this will affect your self-employed clients 35

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37 THANK YOU FOR BEING HERE!  Please fill in your feedback form, your comments are welcome  Our team members are ready to talk to you during the break, or at another time that’s more convenient for you 37

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