Social lending or peer to peer lending begins with the idea that people are willing to lend other people money. If you have not heard of it before you are not alone, but it is a growing trend. The most basic definitions are individual investors loan money to individual borrowers. Revolutionary idea right? Well, actually it isn?t and here is why.

Banks have been doing this for hundreds of years. They take depositors money and make loans and mortgages with it. They pay a low interest rate to the depositor of the money and collect a higher interest rate from the borrower. So in a way people have been lending to people indirectly for a long time.

Peer to peer lending is what happens when there is less bank involvement. The bank in some sense becomes a financial intermediary that connects lenders to borrowers. The transaction are underwritten and facilitated by this intermediary but in exchange for less involvement they ask for a small return. Often this takes the form of fees for doing the loan and a small piece of the interest rate charged to the borrower. Since the money is coming directly from individual, the risk in some ways transferred directly to the individual lenders. Moreover, since there is a transfer in risk, the return must be higher for the individual lender.

Now, are you already thinking that this is for you or no way? Well, you might already come to the conclusion that if you are a saver, you want no part. This is understandable and there are very specific reasons as to why. First, why are you putting you money in the bank anyway? The answer more than likely is that is safe. The banks do not expose you to any of the risk on the loans they give. In return you get a low interest rate. Second, the money you have is liquid. You can get it at any time and regardless of the bank lent your money previously they must honor your withdrawal. If you lend your money in peer to peer lending, your loan pays over time and it is impossible to truly get your money out without selling your right to the loan.

We have only talked about risk, but there are the returns. If you this has sparked your interest, you could be an investor. The returns listed by lending club.com are anywhere from 6.69% to 19.37%. This is a far improvement over what banks are paying in savings accounts. Furthermore, every loan is underwritten by the financial intermediary, checking borrower?s income, credit statement, credit rating and background. They handle as a normal loan by a bank and borrowers that don?t meet quality standards are declined. The default rate listed also by lending club is 2% in last 120 days. Lastly, there is potential of diversification with peer to peer loans. You don?t have to fund just one loan but several. This spreads you money out between several different loans and loan grades further hedging your ability to avoid default by borrowers.

Now, savers are not investors and vice-versa. It depends on what you are actually looking to do with your money. You always need to weigh your options or seek professional advice, but peer to peer lending could provide one way for a saver to become an investor.

It was a real estate boom like no other. Interest rates were dropping incredibly, homes were garnishing appreciation by the week, the stock market wasn’t moving and first time home buyers were getting their piece of the American dream. Mortgage brokers, Real Estate Agents and New Home builders were raking in the cash. It seemed like it would never end. Month after month, year after year the sales of new and existing homes climbed. Investors threw their money into the housing market and then as fast as it came it went thud.
The thud started around November of 2006. It started incrementally with a slower than expected August, a quiet November and the news articles started to reflect which was inevitably going to commence. In January of 2007 the Real Estate Taxes were due and crash it went. What seems to be happening now is a rush to unload. From the outside looking in you can see the stock market rise as the housing market falls. New home builders with still a glimmer of hope increase the price of new homes yet offering larger than expected home incentives. Upgrades galore, creative financing, buyers agents bonuses and yet they continue to build on the land they have allocated for future expansion. If it seems familiar, it is. It has an uncanny sense of 1983 all over again.
How did this happen and what makes this housing thud different from the last? There are some minor differences that make this more unique than the last housing crash. Back in the 80′s interest rates were at sometimes 16%. At that point it made sense to try to assume a mortgage that was a lower interest rate and throw your cash into their equity. But it wasn’t realized equity. It was an inflated sense of a market share. As prices dropped home owners found they were in an over valued situation and as the job market suffered they could no longer pull their money out of their house to move on with their lives. It caused a ripple affect of people walking away from thousands of dollars just to save what they had left. Real estate was sold at auction in a manner that you would buy livestock or sheriff’s sales and the late night infomercials were non-stop. “No Money Down” was the catch phrase. You can still find those publications that cite 20% interest rates and how finding a home with a 10% interest rate was a real steal.
So what happened in the last decade? Feeding on that premise that no money down is something of a desired situation and interest rates dropping most people would assume the best investment was their home. Out the window went the premise of paying down your note and having a secure position in your most valued asset. For some time it was just a matter of the educated investor refinancing a higher note and gaining equity in their home just by dropping their interest rate. It was a normal progression of an intelligent move. Refinancing could shorten the length of your home loan in some instances by 15 years and also lower your monthly payment. And then arose the hungry new home builder, the starving loan officer competing in a new market and the incredible increase of Real Estate Agents flooding the market.
Here’s how it worked. In most instances this was a first time home buyer. They were to purchase a house no money down. There would be two loans. The 80% back loan that was a fixed rate of sometimes as low as 5% and then the front loan. The front loan represented the 20% down that was typically the homeowner’s down payment. That 20% loan was an adjustable rate mortgage that was incrementally to increase over 5 years and then a balloon was to sit waiting at the end. The buyer confused by all this new jargon would ask, and then what? It was explained with the advent of interest rates dropping it was standard practice at that point to refinance that loan with another fixed rate loan or refinance the entire note at one fixed rate. It became such a standard practice that the next step made even less sense. Why not just incorporate your closing costs as well? And they did. Up to 6% of your closing costs could be rolled back into your loan. The buyer would ask what their monthly payment was and assumed that was an affordable note and there you have it. It was a disaster waiting to happen.
The second victim was the investor. The investor that in most instances was watching their money sit either in CD’s that showed a dropping interest rate or a stock market that refused to move. The investor would buy these new homes with incredible incentives and it was explained that the home had these upgrades to the standard built home, the home would ofcourse appreciate to where they could sell in 5 years and realize the equity of a moving home market, and then reinvest. They even came with appliances so that they could rent them immediately. Could there be a catch?
So here’s where it all plays out now. The new home buyer is in the home of their dreams. And the interest rates instead of dropping are now increasing. So incrementally their payment increases. Then to add insult to injury the home they purchased had an estimated tax base of an empty lot. So the taxes figured at closing were estimated on a fraction of the value of completed construction. Here comes the new appraisal on completed construction and your tax base increases by 150%. These new home buyers revisit that 20% loan and notice that the note is coming due. Struggling to understand the increase in their monthly mortgage payment, coming up with the added cash for their balloon, compounded with the increase in gas and consumable goods is overwhelming. So, as suggested by their loan officer they search to refinance.
What was not explained to them is with the rush of foreclosures on the market and millions of people in the same situation, you must have equity to refinance. You must show the ability to be able to support your note. And they are turned away.
The investor finds themselves in a new subdivision competing with new home sales and no equity. The builder has built in their contract that they can not erect a sign in their yard advertising the property for sale until the subdivision is completed. There are not to hang a lock box on the door. So basically they must rely on the local MLS to market their property. To add insult to injury now the new homes are selling the exact same house they purchased 2 to 5 years earlier for less than they purchased it and adding more upgrades and incentives to new home buyers.
This created a flood of foreclosures on the market. People frustrated are electing to walk away from the home and their good credit rating. Lenders are found at the court house steps now purchasing these homes, fixing them up and reselling them. In some instances the homes are not even rehabbed but placed back on the market sold “as-is, where-is”. That would be the new catch phrase.
In order to circumvent the costs of the foreclosure the lending market created an alternative for a homeowner to stop their foreclosure. This system has now been name a “short sale” or a “pre-foreclosure”. The short sale is handled this way. The homeowner without any equity in their home approaches the mortgage company and requests a short sale. They are to fill out financial information substantiating that they are no longer able to pay the note. Upon acceptable of the package the home is then listed by a real estate agent on the local MLS and marketing as a “short-sale” or “pre-foreclosure”. The offers are then submitted directly to the lender and the lender will make the decisive move as to whether to accept the offer or renegotiate. The homeowner at this point is nothing more than a signature on the listing agreement or the closing statement.
Once the lender comes to an agreement with a prospective buyer the closing date is set and the house changes hands. In most instances the loan is reported as being satisfied and the homeowner now can relax and move to a more comfortable situation. There are floods of new seminars on purchasing property in this type of distressed situation and even though it is a reliable way to purchase property the best case scenario is ofcourse an end user. This is a particularly good way for a home buyer to purchase a property in relatively good condition for a discounted price.
As a real estate agent in the Houston area I have found it difficult to find documentation to send my sellers to to educate them in the process. Most websites are about buying real estate in a short sale situation but I have been limited in finding documentation to support how you would sell such home. Henceforth the publication of this article.

Castle Rock, CO 7/2/2009

Unless you’ve been shipwrecked on a desert island, you are aware that the housing market is in the doldrums. Even though the Denver market is faring better than other areas, the average price of an existing home keeps sinking. However, one part of the real estate market has recently swelled:

The Short Sale market.

In a Short Sale, the existing lender agrees to take less than the amount owed and then releases the mortgage lien so the house can be sold. If a homeowner falls behind in his mortgage payments, the idea of a Short Sale can seem pretty attractive. The homeowner sells his house and the new buyer gets a house at a discounted price. But, if it seems too good to be true – like the ship coming to rescue you from that desert island – it probably is. When you get a mortgage, your lender has two available paths to secure his mortgage. The first path is the mortgage lien and foreclosure power of sale on the house itself. The lender can take back the house, sell it in a foreclosure sale, and pocket the proceeds.

The second path is the personal mortgage obligation of the homeowner. In the promissory note and deed of trust, the homeowner personally guarantees the repayment of the mortgage. If the lender doesn’t get what he is owed, a deficiency occurs. A deficiency judgment is a judgment lien against a debtor, defendant, or borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. Previously, when a deficiency occurred, the lender was satisfied by writing off the loss. The lender would simply send the homeowner an I.R.S. Form 1099, thereby characterizing the amount of the deficiency as a ‘gift’ from the lender to the homeowner. This gave the lender a tax deduction, but for the foreclosed homeowner it became taxable as income. This all changed in December 2007. The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for this relief. This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million for taxpayers who are married filing separately).

What happens now that there is no longer this relation of tax deduction and tax payment? Can the lender choose to sue the homeowner for a deficiency judgment, i.e., the amount the lender lost? There is a certain amount of confusion on this issue among real estate professionals. * The first confusion concerns whether a lender can get a deficiency judgment in Colorado. The answer is yes, it can. Not all states allow deficiency cases, but Colorado does. A number of states, including California, Oregon and Washington, have laws which restrict deficiency judgments – it is easy to see why this confusion exists. Colorado decided to clear things up.

In December 11, 2008, the Colorado Division of Real Estate issued a Revised Position Statement concerning Loan Modifications in general and Short Sales in particular:

” The Director of the Division of Real Estate finds that a position statement regarding loan modifications is necessary in order to provide clarity to the industry. . . The purpose of this position statement is to clearly notify loan modifiers (those who engage in the act of directly or indirectly negotiating a loan modification) of the applicability of Colorado mortgage broker law.. . . Short sale – A short sale is the sale of a real property for less than the mortgage loan balance. In the settlement of the short sale transaction the existing mortgage is extinguished. Any deficiency created from the settlement of the transaction may be transformed into a promissory note, charged off, forgiven, or pursued as a judgment against the previous owner.” (emphasis added) . * The second confusion is a misunderstood belief that the federal government passed a law that did away with deficiency cases. This refers to the Mortgage Forgiveness Debt Relief Act of 2007. This act lifted the homeowner’s tax burden but did nothing to stop deficiency cases from being filed. A Short Sale creates a deficiency just like a foreclosure does. So what is a homeowner to do? **- First, if the parties choose a Short Sale, the homeowner must make sure that there is a specific clause in the documents stating the lender will not pursue the homeowner for any deficiency. One example is the clause of “payment in full without pursuit of any deficiency judgment.” Unfortunately, in most Short Sale situations, the parties are all so eager for the sale to go through that most attention is paid to the release of the mortgage lien on the property instead of any protection for the seller. **- Second, the homeowner should explore whether the house can be sold without the mortgage lien being affected, thereby avoiding any possibility of a deficiency. This can be done with an Installment Land Contract, Wraparound Financing or our firm’s Bankless Financing Program (BFP). With no deficiency, there is no deficiency judgment. **- Finally, if the foreclosure or Short Sale has already been done and the lender seeks a deficiency judgment, the homeowner can explore discharging the judgment in bankruptcy. Short Sales have both good and bad characteristics. The goal of all homeowners in this situation is to stay afloat. Mike Robinson is Senior Partner at Robinson & Henry P.C., a Castle Rock, CO Law Firm. He was assisted in writing this story by Ryan Wood, an Associate with the firm.

WHAT ARE HEDGE FUNDS?

One of the most important aspects of the short sale business is determining the value of the property you have under contract. It?s impossible to formulate your offer to the short sale lender without knowing the home appraisal value of the property you are interested in. Likewise, knowing the appraisal value of the property is just as important to the loss mitigator at the bank. The loss mitigator must establish an appraised value for the short sale property so he has a baseline price for negotiation. The appraised value of the property establishes the playing field on which we negotiate the short sale price of the property.Getting Property Comparisons The best way to determine the home appraisal value of a property is by using property comparisons (comps). Look at the properties in the same area of the short sale property. You can get these comps with a little effort. There are a few ways to find market value comparisons for your area: ? Subscription programs (one is Haines, a subscription service on disc) ? Multiple Listing Service (MLS) if you have access ? Network with a realtor who can pull comps for you ? Free comps services on the Internet It?s not recommended that you use the free market comparison services found on the Internet. These free services are worth about as much as you pay for them. If you have to spend some money getting comps, that?s a good thing. It means that someone is actually doing research behind the website or program. Finding Home Appraisal Value: An ExampleA busy real estate investor may outsource their home appraisal needs to another company or a certified FHA appraiser. When a deal comes in the real estate investor will email the FHA appraiser, the address and owner?s name. In about 24 to 48 hours the appraiser will send back a limited desktop appraisal with three comparison prices on other similar sold properties and the market value that the appraiser has determined for the property that the company is interested in. The appraisal may also include some additional information and a map. This appraisal gives an idea of the market value of the property in comparison with other distressed properties in the area. When looking for comps, don?t look for sales of well maintained properties, instead look for comparisons of other properties in foreclosure, REO properties, or corporate-owned properties. Be Prepared to Pay for it! Companies spend money getting their comps because they want good, accurate market value comparisons. When you are figuring the budget for your short sale business, remember to allocate some funds to pay a company or a certified FHA appraiser for that home appraisal. It?s well worth it to pay for a home appraisal so that you have accurate comps from third person parties or neutral parties outside of your short sale deal. You present their appraisals as objective evidence to convince the bank to accept your short sale offer.Factoring in Cost Estimates for Repairs The physical condition of the property is just as important as comps in a home appraisal. See if there are any repairs to be made on the short sale property. Make notes of what?s wrong, take photos, and get construction estimates for the cost of repairs. When you do your cost estimates remember that the bank will be making the repairs, not you. Get cost estimates from a general contractor the bank would typically hire. The best way to get cost estimates for your home appraisal is to hire a certified home inspector. You can look one up in the yellow pages. There?s also an organization called the National Association of Home Inspectors (NAHI). NAHI has high standards and finding a home inspector affiliated with this organization is a good way of making sure you get a thorough inspection.A typical home inspection can take two and a half to three hours. The inspector gets up on the roof, checks the crawlspace and goes over the home with a fine-toothed comb. On completion of the home inspection the inspector hands over a report that can be 20 pages with detailed information about the property defects. Home inspectors may also takes photos and provide detailed cost estimates. Paying a home inspector to get cost estimates is a great way to calculate the home appraisal value for your property. You?ll know exactly what?s wrong with that house because you?ve gone to a neutral third party expert. Getting the Cost Estimates: An Example Dan Shields is a typical home inspector. He?s a member of NAHI and does all of the home appraisal evaluations and repair estimates for many investors.Dan states that a home inspector will start an inspection from the outside of the property to get a look at the big picture. He?ll check the roofing, gutters, siding, and windows to make sure they?re properly installed and flashed. He will also check out porches, columns, etc.From there the home inspector enters the home for the interior survey, to document built-in amenities, appliances, and flooring. He will next go to the mechanical room and check the heating/cooling package and plumbing. Finally, the home inspector will check the attic and find the insulation factor for the short sale property, literally working from the ground up on the home inspection. A Broker?s Price Opinion ValueWhen you complete your home appraisal and submit the short sale package to the bank you will be assigned to a specific loss mitigator who will want to determine their own estimate of property value. The loss mitigator orders the bank?s appraiser to go look at the property and get a broker?s price opinion (BPO) or market value. Sometimes it?s done by a realtor, sometimes an appraiser. It?s your job to be the contact person that the appraiser goes through to get into that property. It?s very important that you meet the appraiser at the property to convince him your home appraisal value is about the same as the BPO value. When you meet with the bank?s property appraiser let him know the property is in foreclosure and that you?ve been working with the seller to try to do a short sale with the bank. Get that point across immediately. You don’t want the meeting with the bank?s appraiser to be a confrontation. This is first impression time, so just be yourself and let your personality shine. Shake hands with the property appraiser. Get to know him for the five minutes before you start shoving your material on him. The whole BPO process will probably take less than 15 minutes. You have 15 minutes to let your personality shine so make it your best effort. During the BPO When you go out to these appraisals, take three things; a copy of the Real Estate Purchase Contract with your offer amount, your market value comparisons and a copy of your home inspector?s report Try to present the material in a conversational tone. Ask if he?d like a copy of the offer you have made on the property and so on. If it?s an appraiser, he will always want a copy. Realtors are a different story?you can never tell what they?re going to take. Just ask and see what he?ll take from you. An appraiser will always take the property inspection report because it?s a good, neutral indication of property damage. Let the appraiser know that your Purchase Contract has been at least preliminarily accepted by the bank and that?s why he is appraising the market value. You?d be surprised how often the bank?s appraiser doesn?t even realize the property is in foreclosure. You also want to share comps with the home appraiser. Most of the time, appraisers have pulled comps before they go out to the property, so you may be able to share comps to get an idea of the BPO. Make sure the appraiser knows about specific problems with the property such as; mold, termites, or foundational problems that are not readily apparent. This is something the appraiser won?t spot during his 15 minutes with the property. Once you get these three documents into the hands of the bank?s home appraiser chances are higher that the bank?s BPO comes in close to your home appraisal value. When you get a good home appraisal value and cost estimates on that short sale property. You?ll have armed yourself with the best tools in convincing the bank to accept your low short sale offer. Pick up more information about real estate shortsaling at Real Estate Investor.com. This is the place to go for the latest real estate news and advice. You?ll find a network of other real estate investors ready to help you out, along with free articles, blogs, contracts and documents for your use.

can anybody recommend some good ones.. except for rich dad poor dad (I already read that one)

I have been attending business school for my first year and it’s time to choose whether I should go into accounting, marketing, finance, or management. I was thinking that if I was to invest into property, finance might be the best option for me. Also if I chose not to invest in real estate, but decided to start a franchise or company of my own, would finance be the best option as well? If you could provide any insight regarding the best option for me it would be appreciated. Thanks,

AZ short sale is one of the fastest ways to free yourself from mortgage woes. But if you think that borrowers like you are the only ones that will benefit from AZ short sale, think again. More than you know, the bank or the mortgage lender and the buyer of your property via Arizona short sale or short sale Phoenix also benefit from such transactions.
For the banks, an AZ short sale allows them to avoid holding on to your defaulted property that, come to think of it, really has nothing to do with their business. If banks would jump at the idea of foreclosing every property that secures default mortgages, they will have a lot of non-performing assets in their books. And they don’t like that. With borrowers opting for short sale Phoenix or the statewide Arizona short sale, a bank gets cash instead of empty houses. Through AZ short sale, banks will have more money to invest in income generating activities or operations. When a property mortgage runs in default, banks are required to put up reserve funds to cover the outstanding loan. But because after an AZ short sale, banks will be taking mortgage receivables off their books, idle funds are freed up for more profitable use.
An AZ short sale is also advantageous for homebuyers or investors. For one, they can buy new homes for a significantly reduced price. Mortgage borrowers who opt for Arizona short sale do not want to experience foreclosure because it can be bad for their credit rating in the long term. With an AZ short sale, defaulting homeowners simply sell their homes without ruining their credit. So, more often than not, borrowers would choose to sell their homes at big discounts. If you are an investor in a short sale Phoenix, this is definitely good news.
Now, the real benefit to buying AZ short sale homes at low prices is selling them for a much higher figure later on. Arizona short sale simply allows buyers to get better deals. Besides, banks tend to be friendly with investors who invest in short sale Phoenix or the statewide AZ short sale. That’s because such investors save the banks considerable money and effort that would otherwise be spent on processing foreclosure procedures, not to mention the headaches related to managing idle assets. On top of everything, Arizona short sale transactions belong to what many would call a niche market. You see not many people are aware of short selling. So, if you are a budding investor, short selling may be the best way to start up in the industry.
As for the defaulting homeowner, qualifying for AZ short sale is more than just having a clean credit report. With short sale Phoenix, a homeowner can also have a chance, though slim, to retain some equity in the property through the investor. As a stopgap measure against foreclosure, an AZ short sale allows a homeowner to start a new life, financially that is. By helping a homeowner avoid the stigma of foreclosure, an AZ short sale can rebuild one’s reputation and maybe even get a new home.

Short Sales are the hot real estate topic in Colorado Springs.Faced with foreclosures, banks and homeowners are working with industrious market professionals to sell property at lower costs.If a homeowner is behind on payments and is in danger of foreclosing, a realtor can assuage the situation with a short sale.Short sales are tricky, though. According the Colorado Springs Business Journal, it takes a dedicated, savvy realtor to complete the process.The article reports:There are several keys to the process, but one of the most important is to contact the borrower?s lender. That?s a lot easier when the lender is local. Otherwise, you end up spending hours trying to track down loan information ? and even more to get current home values, public records or to work through loan serving companies.Short sales are an alternative to foreclosure. They sell property for less than what is owed by the homeowner. They offer the lender roughly 80% of the property’s value, which, obviously, is better than losing out completely.A foreclosed home faces challenges. Banks need to reestablish its value. If the home is damaged, they need to pay for repairs. Broker commissions are often high, and it may takes many months or even years to sell the property again.Short sales, then, give banks options. But it takes a dogged realtor to put the deals together.The article continues:Tiffany Lachnidt, team leader of The Distinctive Group, a Keller Williams Real Estate affiliate, was drawn head-first into distress transactions during 2007 when an investor-client asked her to list and sell seven residential properties facing foreclosure.?We got them all sold within a year,? she said.In what seems to represent the new ?norm,? half her business consists of homes in danger of foreclosure, bank real estate owned homes (REOs) or short sales.Short sales often require the realtor to work quickly and effectively. If the lender is not local, realtors need to put pressure on lenders to provide loan and property information. Once the information is acquired, the realtor needs to complete the loan submission packet. Then a delicate balancing act transpires. The realtor must determine when and if a real estate attorney is required, answer questions about appraisals on first, second, or possible even third time mortgages, and attract potential buyers, all before the home goes into foreclosure–a big challenge, especially if the homeowner is already behind on payments.Difficulties aside, short sales are getting property sold. The process demonstrates a realtor’s bold, creative verve, and a circumstantial willingness on the part of the lender. A struggling market needs smart alternatives to survive. It seems realtors and banks realize this.If you would like to find information about Colorado Springs Real Estate, visit the Real Estate Book, the web’s most comprehensive resource for homeowners and homebuyers.

SPOT CURRENCY TRADING “FX” IS THE NEWEST AND FASTEST GROWING INVESTMENT VEHICLE IN THE HEDGE FUND INDUSTRY.