Tag Archives: loans

MultiFunding Aims to help Small Businesses Find Loans

The mission of MultiFunding is to help small-business owners and entrepreneurs through the challenges of getting loans and working capital, according to its founder Anne Kassar.

MultiFunding aims to match borrowers with lenders so borrowers get the best loans: the lowest possible price with the best possible terms.

Small-Business Lending Is a Highly Inefficient Market

Few owners have the time to investigate credit markets. The processes are confusing and overwhelming.

Small-Business Lending Is a Confusing Mess

The owner poses  good questions: Why has there been a decrease in lending?  Have the banks stopped making the risky loans they were making before the economic crisis hit? Did they overreact and stop making even sound loans to sound companies? Or did lending drop because after the recession, businesses started to retrench and their demand for credit declined? Did all banks stop lending or was it just the big banks? It is very hard to get definitive answers to these kinds of questions.

One reason is that we can’t even agree on important definitions. The Small Business Administration reports on lending activity, but nobody knows what percentage of overall lending the S.B.A. accounts for. The big banks release their scorecards on small-business lending, but they define small businesses as those with revenue of $20 million or less. For its reports, the Federal Reserve defines small businesses as having revenue of $50 million or less. The  Federal Deposit Insurance Corporation defines small-business loans as those with balances of $1 million or less in its reports. The merchant cash advance lenders and factors do not release reports at all.

Many Small Business Owners Are Still Reeling

Some say that the recession is over and that the economy is on the  mend. However, most small-business owners report that they are still reeling from the recession and struggling to catch up. Working capital is a fight. Banks are not easy to deal with, and fair loans are tough to come by.

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Filed under A Need to Know Basis

Home Affordable Modification Program (“HAMP”) to Be Extended and Expanded

Friday, the administration announced its plans to expand the eligibility for its Home Affordable Modification Program (“HAMP”).

Didn’t Work As Planned

In February 2009, HAMP was introduced as a plan designed to help 4 million mortgage borrowers. However, HAMP has helped fewer than 1 million homeowners.

Banks Encouraged to Reduce Loan Principal

To encourage the implementation of the expanded plan, incentives will be tripled to pay banks that reduce principal on loans.

Lenders will be paid between 18 cents and 63 cents for every dollar the lenders take off the mortgage principal. The prior amounts were between 6 cents and 21 cents for every dollar.

Freddie Mac and Fannie Mae Included

The expanded plan will include incentives for Fannie Mae and Freddie Mac to reduce principal on loans.

Until now, only private lenders and banks were offered incentives to reduce principal on loans.

Calculation of Debt to Income Ratios Will Be More Flexible

HAMP was designed to lower the debt ratio of mortgage borrowers to 31% of their income. Homeowners with mortgage payments below that ratio did not qualify for a loan modification. New guidelines will permit a more flexible calculation of debt to income ratios.

Expanded Umbrella

Previously, only mortgage holders of owner-occupied homes qualified. Now owners of rental properties may also qualify, thereby expanding the number of people this can affect.

Program Extended

The program is extended to December 2013. It was initially set to expire at the end of this year.

The changes in HAMP do not take effect until the end of April 2012.

How does the Federal Housing Finance Agency View the Changes?

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, issued a statement that said it would consider the changes to HAMP.

However, it noted that an analysis it recently conducted found “that principal forgiveness did not provide benefits that were greater than principal forbearance,” signaling that the housing authority may not support reducing the principal on loans as a way to help homeowners.

Questions For You

What do you think about the Federal Housing Finance Authority Agency Study?

Do you think real estate investors should be subsidized with taxpayer money while rents are rising in this economy?

Do you think it is a good idea to subsidize the real estate investor in an effort to prevent housing vacancies and lower housing values?

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Filed under Consider the Law