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Real Estate Note Buyers and Seller Carry Consultants
The October 3rd NOTE INVESTORS FORUM will be special. Quest IRA will be sha
ring how to best intergrate your note / real estate transactions into your IRA retirement planning. The Quest team is flying in to present. Bring your questions. Be prepared to take notes.
TO RESERVE YOUR SEAT 
Note Due Diligence 201
buying
selling
seller carry
partials
one offs or a pool of assets.
Expect standing room only. The room is maxed out @ 50 attendees.
Buffet lunch served.
Click on the link below to reserve your spot.
$16.83 includes networking, information, food, tax and tip.
$20 at the door.
Over the past few months, Mick Mulvaney has provided smaller indications about how much differently the Consumer Financial Protection Bureau will function under his leadership than it did under the bureau’s former director, Richard Cordray.
But Monday, Mulvaney fully revealed his plan to dramatically alter how the CFPB operates.
The CFPB on Monday released a new strategic plan, in which Mulvaney lays out how the CFPB will now operate and established new goals for the bureau.
“If there is one way to summarize the strategic changes occurring at the bureau, it is this: we have committed to fulfill the bureau’s statutory responsibilities, but go no further,” Mulvaney said in a statement. “By hewing to the statute, this strategic plan provides the bureau a ready roadmap, a touchstone with a fixed meaning that should serve as a bulwark against the misuse of our unparalleled powers.”
According to the CFPB, the plan “draws directly” from the Dodd-Frank Wall Street Reform and Consumer Protection Act, and “refocuses the bureau’s mission on regulating consumer financial products or services under existing federal consumer financial laws, enforcing those laws judiciously, and educating and empowering consumers to make better informed financial decisions.”
Included among the changes is that the CFPB will now focus on “equally protecting the legal rights of all, including those regulated by the bureau,” a tactic Mulvaney previously revealed in a memo to the CFPB’s employees.
Also, it appears that the only new rulemaking the CFPB will engage in will be to “address unwarranted regulatory burdens and to implement federal consumer financial law and will operate more efficiently, effectively, and transparently.”
As Mulvaney previously stated, the CFPB will no longer be “pushing the envelope” when it comes to new rules, regulations, or enforcement.
“Indeed, this should be an ironclad promise for any federal agency; pushing the envelope in pursuit of other objectives ignores the will of the American people, as established in law by their representatives in Congress and the White House,” Mulvaney says in the strategic plan. “Pushing the envelope also risks trampling upon the liberties of our citizens, or interfering with the sovereignty or autonomy of the states or Indian tribes. I have resolved that this will not happen at the bureau.”
In pursuit of this goal, the CFPB establishes a new mission that is much different from what it was previously.
Under Cordray, the CFPB’s mission (as taken from the CFPB’s previous strategic plan) was the following: “The CFPB is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.”
The CFPB’s new mission, as laid out by the new strategic plan is this: “To regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws and to educate and empower consumers to make better informed financial decisions.”
According to the new plan, the CFPB will accomplish its new mission by: seeking the counsel of others and making decisions after carefully considering the evidence, equally protecting the legal rights of all, confidently doing what is right, and acting with humility and moderation.
The new strategic plan also lays out new goals for the CFPB.
Previously, the CFPB had four goals:
Under Mulvaney, the CFPB’s new goals are:
Part of that first goal will be to “regularly identify and address outdated, unnecessary, or unduly burdensome regulations in order to reduce unwarranted regulatory burdens,” according to the plan.
Under the second goal, the CFPB lays out two objectives that are designed to help meet the goal, including protecting consumers from unfair, deceptive, or abusive acts and practices and from discrimination.
To meet that objective, the CFPB will “enhance compliance with federal laws intended to ensure the fair, equitable and nondiscriminatory access to credit for both individuals and companies and promote fair lending compliance and education,” and “strengthen prevention and response to elder financial exploitation.”
Additionally, under the “implement and enforce the law consistently to ensure that markets for consumer financial products and services are fair, transparent, and competitive” goal, the CFPB will “enforce federal consumer financial law consistently, without regard to the status of a person as a depository institution, in order to promote fair competition.”
Included in the strategies to achieve that objective is focusing supervision and enforcement resources on “institutions and their product lines that pose the greatest risk to consumers based on the nature of the product, field and market intelligence, and the size of the institution and product line.”
The third goal deals mainly with the CFPB’s internal operations, including safeguarding the CFPB’s data, maintaining a “talented, diverse, inclusive and engaged workforce,” and working to manage risk and promote accountability at the bureau.
To read the CFPB’s new strategic plan in full, click here.
Fellow Note Investors:
The next Phoenix Note Investors Forum will be Tuesday March 6th.
MEETING TOPICS
Our special guest will be Charles Parker of AZ Credit Medix.
He will discuss how to build business credit so a business owner can borrow funding without personal indemnification.
Additionally we discuss the broad basics of seller financing your investment properties with a case study.
Look forward to seeing everyone Tuesday March 6th 11:30am – 1:30pm!!
Dave
RESERVE YOUR SPOT @
https://www.eventbrite.com/e/note-investors-forum-tickets-42219550813
Meeting Location:
1644 S Dobson Rd Mesa, AZ Dobson Ranch Inn Resort–Fiesta Bar & Grill
SW Corner of Dobson & Superstition Route 60
Mesa, AZ
Topic
INVESTMENT GOALS & EXPECTATIONS
Our February Note Investors Forum Meeting will followup
on Stan Harley’s presentation– Taking what he shared and incorporating that with with YOUR individual goals. What is most important to you? Cash Flow or Capital Accumulation.
Or……………And more specifically how does risk tolerance fit into your needs and expectations.
We’ll consider Performing and Non-Performing notes
How note due diligence can expand your expectations.
Case studies with 2 special out of state note investors
Click Here for more information
February 6th
Dobson Ranch Inn Fiesta Bar & Grill
1644 S. Dobson Rd
Mesa, AZ
SW Corner of Dobson & RT 60 – Superstition Freeway
Article originally appeared in CoStar
Most Financial Services Firms Maintain Optimistic Outlook for US Capital Markets in 2018, but Also Advising Note of Caution
Investors and lenders are expected to closely monitor
property fundamentals in the markets and property sectors they invest in for 2018 as the U.S. economy continues its extended recovery now heading into its 10th year.
Despite record low unemployment, increased consumer confidence and a strong stock market, many in the industry see slower growth ahead for rent increases, property prices and overall demand for commercial space. As the capital market moves later into the current real estate cycle, financial services firms are maintaining an optimistic outlook for the U.S. economy, although many are also recommending a cautious approach.
S&P Global Ratings, for example, does not expect a steep correction in real estate prices in the New Year, but is forecasting modest price pressure given slowing fundamentals in light of lower economic growth than in previous years.
There are other risks that could develop, S&P added, that could potentially cause a steeper correction in real estate values, including capital market volatility from a steep equity market correction or sudden spike in interest rates. In addition, bank exposure to CRE is at peak levels and a significant reduction in loan originations could dampen valuations.
In its outlook for 2018, LaSalle Investment Management refers to a Goldilocks environment, in which investors should look for an investment that is neither too ‘hot’ nor too ‘cold’ driven by balanced fundamentals and steady pricing.
LaSalle is expecting debt for real estate to remain plentiful in 2018. At the same time, it expects lenders will continue to tighten their underwriting, especially for specific sectors that become “overheated.”
Over the course of the year, Morgan Stanley noted that larger banks of more than $20 billion in assets tightened their lending standard much more than smaller banks. Multifamily loans had the greatest increase in net tightening and loan demand declined more in that category more than others in 2017.
On the positive side, LaSalle expects less hurdles for the major lending sectors in 2018 after the market overcame several potential obstacles in 2017, including the maturity of 2007 vintage loans, CMBS risk retention and Fed oversight of bank real estate.
As 2017 progressed, it became clear that risk retention wasn’t going to be a major market impediment, and issuance increased as the year went on, according to Kroll Bond Ratings Agency (KBRA). Transaction sizes, however, largely remained under $1 billion, which was partially attributable to risk retention that forced a number of originators to exit the market, as well as the size of the CMBS investor base.
On the up side of peaking property this year, KBRA noted, is that single borrower refinancing deals should continue to thrive as borrowers look to lock-in gains from property value increases. Borrowers may also want to lock in rates the Federal Reserve sending signals that more rate increases are to come in 2018.
As always, job growth will be a critical driver of real estate demand. And to the extent that the recently passed tax legislation that slashed corporate rates spurs additional business investment and hiring works as intended, job growth could exceed expectations.
“We’re now confronting a wider range of possible outcomes for the economy, depending on how various initiatives such as federal policy changes play out,” said Spencer Levy, CBRE Americas head of research and senior economic advisor, who added that agility will be more important than ever for investors this year.
Investors should shift to focusing on income gains rather than appreciation as their primary source of returns as cap rates flatten out or, in some cases, start to rise, Levy noted.
Major U.S. office markets are on the verge of a cyclical tipping point, with new construction and softening demand mirroring the evolution of previous CRE cycles, Moody’s Investors Service reported.
And while the markets may be hoping the supply-and-demand cycle plays out differently this time, that isn’t likely, Moody’s noted.
“New office construction is ramping up in many major U.S. cities, so that by the end of next year new inventory will be coming online at roughly double the rate of the past three years, while at the same time the growth of office-using employment will be slowing,” said Kevin Fagan, a Moody’s vice president and senior analyst.
As we enter 2018, there is 154.5 million square feet of new office space under construction, according to CoStar data. That compares to 97.8 million square feet delivered in 2017.
While the amount of office construction is increasing, the 252 million square feet delivered last year or under construction is still one-third lower than the 381 million square feet delivered in 2006 and 2007 when CRE markets last peaked.
However, underwritten office property values today far surpass those of the pre-financial crisis peak, particularly for CBD offices, Moody’s Fagan said.
Similar to the office market, new supply is also running high in the industrial property sector going into 2018 with 318.1 million square feet under construction following 311.6 million square feet delivered last year.
The big difference compared to office is that demand remains very robust for both bulk warehouse and closer-in delivery hubs as e-commerce continues to reshape and boost demand for distribution space. This positions the industrial market to perform well in 2018, although risks would escalate should economic growth slow, according to LaSalle.
While E-commerce is boosting the industrial investment potential, the retail sector continues to bear the brunt from lower traffic and sales. Construction of new retail space continues to decline with just 86 million square feet under construction at the beginning of 2018, well down from the 103.6 million square feet of retail space delivered last year.
Investors see exceptions within the sector, however. Grocery-anchored retail space in well-located centers remains in demand as reflected in the strong capital market activity at these centers that we believe will continue, according to LaSalle.
CBRE sees retailers and investors gravitating to either the discount and off-price sectors or luxury. This may create weakness, and, in many cases, investment opportunities, in secondary and suburban markets.
H.R. 1360
I was so honored and pleased to be part of the The Seller Finance Coalition first annual fly-in event July 18th and 19th in our Nation’s Capital. What an impact we made! There was close to 40 attendees from all over the country on Capitol Hill for a day and a half telling the story of how seller financing can impact consumer’s ability to become homeowners as well as its effect on stabilizing neighborhoods.
The theme of affordable housing and providing access to private capital in underserved markets such as inner cities and rural communities was well received from members of Congress on both sides of the aisle.
The group had an experience to remember as we heard from four Congressmen and one U.S. Senator on their latest on where they stand on regulatory relief and their support of The Seller Finance Enhancement Act known as H.R. 1360.
L to R – Troy Fullwood, Bob Zachmeyer, Congresswoman McSally, Dave Franecki
The event also included panel discussions as well as meeting with over 70 Congressional and Senate offices including meeting with another of our original bill sponsors Henry Cuellar (D-TX) and Chairman of the Financial Services Committee, Jeb Hensarling.
One of my visits was with
Congresswoman Martha McSally (R-AZ-2).
She was genuinely very warm & friendly. She was the first American woman to fly in combat following the 1991 lifting of the prohibition of women in combat.
In addition to meeting with Congresswoman McSally, I met with
All of the meetings went well, with no push back on our message.
My message was very simple–
H.R. 1360 –The Seller Finance Enhancement Act is a one page Amendment to the Dodd-Frank Act keeping all the provisions of the bill but one–it changes the number of seller financed transactions a seller can have from 3 per year to 2 per month.
Passage of the one page bill will benefit several groups:
The trip was hot. The People were great. It was a wonderful experience.
A recent unanimous Supreme Court decision on Monday could have vast implications for the mortgage and loan industry, particularly the secondary market, unless the Fair Debt Collection Practices Act (FDCPA) is amended by Congress.
In the case Henson et al. v. Santander Consumer USA Inc., the petitioners claimed that Santander, who had bought a number of defaulted car loans from CitiFinancial Auto, had to abide by the rules and regulations set out by the FDCPA as debt collectors, not loan originators who were trying to collect a debt for themselves. The petitioners brought their case in front of the Supreme Court in an appeal of the 4th Circuit Court ruling that, ultimately, the Act defines debt collectors as a person or entity that “regularly seek[s] to collect debts ‘owed … to another.’” The court found that, since Santander was seeking to collect the debt they themselves were owed, they were not collecting on behalf of another person or entity.
The petitioners continued this same line of semantic argument in front of the Supreme Court. The word “owed” they said, is a past participle of the verb “to owe,” which would encompass the attempted collection of any debt previously owed to another.
The Supreme Court, however, thought this to be too much a stretch. They are of the opinion that Congress has, in the past, been very specific as to their definitions, and that while they may not have envisioned a time when the secondary market would be such a large industry, that still did not change the fact it was not within the purview of the court to extend the reach of the a law.
In the report, Justice Neil Gorsuch writes, “And while it is of course our job to apply faithfully the law Congress has written, it is never our job to rewrite a constitutionally valid statutory text under the banner of speculation about what Congress might have done had it faced a question that, one everyone’s account, it never faced.”
So what does this mean for the mortgage industry? Any entity, bank, or credit union that purchases a defaulted loan is not, under the letter of the law, considered a debt collector, and thereby not subject to the rules and regulations set in place by FDCPA.
It is worth noting, though, that the petitioners believed Congress excluded loan originators from the Act because Congress believed they already had legal and economic incentives for good behavior. Given that many organizations that participate in the secondary market also have business dealings in originations, there is reason to believe the good behavior could continue without congressional intervention, although it may be necessary.
“Many wondered what impact U.S. Supreme Court Justice Neil Gorsuch would have on the court, and now we know: author of a 9-0 decision “limiting” the definition of a debt collector, meaning someone buying debt to collect it for themselves does not fall under the FDCPA,” said Michelle Gilbert, Managing Partner of Gilbert Garcia Group P.A. “Given the expansion of the reach of the FDCPA by courts and judges since its enactment in 1977, this decision should propel our industry to work harder to lobby Congress for changes in the law.”
Supreme Court: NPN Investors Not Subject To Debt Collection Laws
Recently I meet a new real estate investor at AZREIA (Phoenix Real Estate Investors Club). She shared with me how seller financing literally saved her from a poorly performing duplex in Kingman, AZ. What follows is her narrative – with my comments.
I currently hold a note on a Duplex in Kingman AZ. This note came about as an accidental solution to a really bad problem property. It is a very short term note with 5% interest(VERY LOW INTEREST RATE) and a balloon. The note has been extended once, and there is an option to extend it again.
I originally acquired the property in August 2014. My investor and I paid cash for the duplex. It was in very bad repair and needed a full rehab. We had originally intended to rehab it and rent it out. We had a lot of issues with the property, many problems with contractors, problems within the partnership, and tons of money issues. We couldn’t get it finished, and it was just sitting vacant and getting vandalized. It was a huge headache for me, a source of serious stress, and a huge money pit. I drove back and forth to Kingman many times to deal with the property, contractors, solve problems, etc. My partner and I fought about it all the time for two years. After a year I wanted to sell it and get out, but he did not. It was a good property. We just could not agree on any aspect of the property. We both had completely different rules for our investing and very different ways of doing things. After almost two years of butting heads and losing money I’d had enough and was desperate to find a way out.
We owned one other property together that I also wanted out of. Both were good properties but it was technically the partnership that I wanted out of. He did not want to sell the other property either. With the help of a local note investor in structuring a buyout contract, I acquired the duplex solely as part of my partner’s buyout of my share of the other property.
I immediately put the duplex up for sale. I was a very motivated seller, but I did not want to discount the price very much because it was a very good property in a good location in downtown Kingman. We had already put 15K into the rehab so one side was really close to being rent ready. The other side still needed full rehab, but it could have cash flowed or at least broken even with just the one side rented.
Very quickly my real estate agent found me an investor buyer who wanted to live in the finished side and slowly rehab the other side until she could rent it out. She was willing to pay full asking price but wanted seller financing and was going to refi within a short period of time. She was willing to put down the amount I asked for (about 40%) which took care of my partner’s buyout of the other property and the small private money loan on the duplex for rehab costs. In September I wrote a $37K note for 6 months at 5% with a balloon due in March of 2017. The sale of this property as a seller finance turned this disaster of a property into an easy, stress free cash-flowing asset.
In March, my buyer was not able to refi and cash me out. Rather than foreclose, I extended her loan. I charged her a fee to extend her loan. She could not pay the fee up front so I added it to her monthly payment. The property now cash flows at a net of $435.50 every month and I do nothing except get a deposit into my bank account. (AKA – Mail Box Money) Taking a note on this property not only turned a disastrous and extremely stressful negative cash flow property into a stress-free income-producing asset, but the new owner is happy because she lives there and works on the property. Eventually her renters will pay her more than she needs to cover her payment to me, or she can sell it. The work she has done so far has increased the property value by quite a bit, so if she sells it she can cash me out and still have a profit.
This is an incredible story with a heart warming solution.