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Archive for the ‘Banking’ Category

The Challenges Facing Fannie Mae and Freddie Mac Focus of April 25 Economic Perspectives

Posted by Hopeton on April 25, 2011

Stijn Van Nieuwerburgh, co-author of Guaranteed to Fail: Fannie Mae, Freddie Mac, and the Debacle of Mortgage Finance will be a guest on Economic Perspectives today at 5:30 p.m. central time. Stacy Dukes-Rhone, executive director of BiGAustin, will also be a guest and will discuss BiG Idea Day which is on April 29. Listen live online at kazifm.org.

Guaranteed to Fail opines how “poorly designed government guarantees” for Fannie Mae and Freddie Mac led to the debacle of mortgage finance in the United States, weighs different reform proposals, and provides recommendations. This book unravels the dizzyingly immense, highly interconnected businesses of Fannie and Freddie. It proposes a model of reform that emphasizes public-private partnership, one that can serve as a blueprint for better organizing and managing government-sponsored enterprises like Fannie Mae and Freddie Mac. In doing so, Guaranteed to Fail strikes a cautionary note about excessive government intervention in markets.

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Posted in Austin, Banking, Books, Business, Entrepreneurship, Housing, Interview, Mortgages, small business | Tagged: , , , , , | Leave a Comment »

504 Loan Refinancing For Eligible Small Business Assets Under Jobs the Act

Posted by Hopeton on February 21, 2011

Market research shows that a large percentage of commercial mortgages outstanding are set to mature within the next few years, particularly those held by community banks.  As real estate values have declined, however, even small businesses that are performing well and making their payments on time can have a hard time refinancing these loans and may need to restructure their debt.

Under the Small Business Jobs Act, the SBA will implement a temporary program—authorized until Sept. 27, 2012—allowing small businesses to refinance eligible fixed assets in its 504 program without requirement of an expansion, as is the case with typical 504 loans. This program will provide small businesses the opportunity to lock in long-term, stable financing, as well as protect jobs.

Key Program Features

  • SBA will launch this temporary program on Feb. 17, 2011 and will begin accepting loan applications on Feb. 28, 2011.  The program will end on September 27, 2012.
  • Borrowers can finance up to 90 percent of the current appraised property value, or 100 percent of the outstanding principal, whichever is lower, plus 504 eligible refinancing costs.
  • SBA will initially open the program only to businesses with immediate need.  Priority will be on those businesses potentially at risk because they face loan maturity or balloon payments before Dec. 31, 2012.  SBA will later revisit the program parameters, and may open the program to businesses with later balloon payments or that can demonstrate need in other ways.
  • The program is structured like SBA’s traditional 504 loan program: borrowers will work with third-party lending institutions and SBA-approved Certified Development Companies (CDCs), typically private, non-profit organizations to obtain financing, in a traditional 10%/50%/40% split.
  • SBA estimates that as many as 20,000 businesses may ultimately participate in this program, which will provide up to $15 billion in SBA-guaranteed financing leading to total project financing of over $30 billion.
  • The program, which is completely separate from SBA’s traditional 504 program, is zero-subsidy, requiring no cost to the taxpayer: It will be funded entirely through additional fees assessed for refinancing projects.

Key Risk Mitigating Factors

  • Applicants must demonstrate that their loans are current and that they have successfully made all required payments in the last year.
  • A new, independent appraisal will be required for all projects.
  • SBA will perform full and thorough underwriting on all refinancing applications (i.e., there are no ‘delegated’ lenders).
  • Initially, the first mortgage loans on existing 504 projects are not eligible, and “cash out” refinancings are not permitted.  SBA may later revisit these restrictions.   In addition, no government guaranteed loan is eligible for this refinancing program.

SBA’s 504 Loan Program

SBA’s 504 loan program is a long-term financing tool, designed to encourage economic development within a community. The 504 Program accomplishes this by providing small businesses with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

Proceeds from 504 loans must be used for fixed asset projects, such as:

  • The purchase of land, including existing buildings
  • The purchase of improvements, including grading, street improvements, utilities, parking lots and landscaping
  • The construction of new facilities or modernizing, renovating or converting existing facilities
  • The purchase of long-term machinery and equipment

Typically, a 504 project includes three elements:

  • a loan (or first mortgage) secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost,
  • a second mortgage secured with a junior lien from an SBA Certified Development Company (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost,
  • and a contribution of at least 10 percent equity from the small business borrower.

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SBA New Lending Initiatives Focus of Jan 31 Economic Perspectives

Posted by Hopeton on January 28, 2011

With small business owners and entrepreneurs in traditionally underserved communities continuing to face challenges accessing capital, the U.S. Small Business Administration announced two new initiatives aimed at increasing SBA-backed loans to small businesses in these markets.

Yolanda Olivarez

Yolanda Olivarez, Regional Administrator for SBA Region VI, which is headquartered in Dallas and includes Texas, Arkansas, Louisiana, New Mexico and Oklahoma, will discuss these initiatives on the January 31 edition of Economic Perspectives. Listen live at 5:30 p.m. on KAZI 88.7 FM or at kazifm.org.

SBA and U.S. Department of Commerce studies have shown the importance of lower-dollar loans to small business formation and growth in underserved communities. With that in mind, the two new loan initiatives – Small Loan Advantage and Community Advantage – are aimed at increasing the number of lower-dollar SBA 7(a) loans going to small businesses and entrepreneurs in underserved communities. The agency’s most popular loan product, 7(a) government-guaranteed loans can be used for variety of general business purposes, including working capital and purchases of equipment and real estate

Built on what the agency refers to as its “Advantage” platform, both Small Loan Advantage and Community Advantage will offer a streamlined application process for SBA-guaranteed 7(a) loans up to $250,000. These loans will come with the regular 7(a) government guarantee, 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000.

Small Loan Advantage will be available to the 630 financial institutions across the country in the agency’s Preferred Lender Program (PLP). Under PLP, which includes most of the agency’s highest volume lenders, SBA delegates the final credit decisions to lenders.

SBA Administrator Karen Mills also today named Catherine L. Hughes, chairperson and founder of Radio One, Inc., and a former SBA borrower, to chair the agency’s new Advisory Council on Underserved Communities.

The Council will provide input, advice and recommendations on how SBA through its programs can help strengthen competiveness and sustainability for small businesses in underserved communities.

Posted in Banking, Interview, Radio, Small Business Loans, Uncategorized | Tagged: , | Leave a Comment »

Top 10 SBA Lenders in Travis County, Texas

Posted by Hopeton on August 17, 2010

If you’re looking for a bank that is lending to small businesses in today’s economic environment, the U.S. Small Business Administration’s (SBA) list of lenders is a good place to start.  Enclosed are the top 10 SBA lenders in Travis County, Texas for October 2009 – May 2010.  The source for this information was the San Antonio District Office of the SBA.

Lender Name Total # of Loans Total Loans Gross Amt
JPMORGAN CHASE BANK NATL ASSOC 27 $  4,278,400.00
SUPERIOR FINANCIAL GROUP, LLC 23 $     210,000.00
HORIZON BANK, SSB 19 $  7,351,500.00
COMPASS BANK 18 $  6,524,000.00
CAPITAL CERT. DEVEL CORP 16 $  8,131,000.00
AMERICAN BANK OF COMMERCE 14 $  3,664,400.00
WELLS FARGO BANK NATL ASSOC 12 $  2,229,800.00
PLAINSCAPITAL BANK 9 $  8,283,000.00
AMER BANK NATL ASSOC 7 $  3,108,000.00
FIRST STATE BANK CENTRAL TEXAS 7 $  2,166,800.00

Posted in Banking, Small Business Loans | Tagged: | Leave a Comment »

Listen to Interview on Impact of New Debit Card Regulations From August 9 Economic Perspectives

Posted by Hopeton on August 7, 2010

Since July 1, a financial institution cannot charge a fee for a non-recurring debit or ATM transaction that exceeds a customer’s balance without permission — even a customer who has been the bank’s overdraft program before this new regulations went into affect.

What does this mean for consumers?

What does this mean for banks?

Learn more about debit card regulations by listening to  the Economic Perspectives interview from August 9 with Dennis Simmons, president of SWACHA, an association that provides electronic payment information and resources to financial institutions, corporations, e-commerce companies, and payments technology providers around the country.  To listen click here: Dennis Simmons Interview.

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Sam’s Club Testing Online Small Business Loan Program

Posted by Hopeton on July 19, 2010

Existing small business owners and entrepreneurs with hopes of starting up continue to seek access to capital in the form of bank loans, yet are still struggling to land credit. Only half of small businesses that tried to borrow last year got all or most of what they needed, according to a survey by the National Federation of Independent Business. In the mid-2000s, 90% of businesses said they got the loans they needed.

To help support small business and its business members, Sam’s Club is testing an online program with Superior Financial Group, a Small Business Administration (SBA) lender, which would make $5,000 to $25,000 loans available to its members who qualify. In a November 2009 state of small business survey conducted by Sam’s Club, nearly 15 percent of its business members reported being denied a loan to run their operation, up from 12 percent in April 2009.

The Sam’s Club small business loan pilot program is a first-of-its-kind and will complement other offerings that cater to small business including low rate merchant credit card processing, convenient order-ahead programs and early shopping hours.

The Sam’s Club small business loan pilot will focus on serving Main Street minority, women and Veteran owned small business owners as well as micro-entrepreneurs under the SBA’s Premier Outreach Express products such as Community Express, Patriot Express and Export Express loans.

“Access to capital is a major pain point for our members and the small business Main Street community.  We believe this pilot program is a step in the right direction to help fuel small business growth and create jobs to stimulate our economy. It’s also simple to apply and costs less, which is consistent with our goal to help our members make smart choices and provide superior value,” said Catherine Corley, vice president, Membership at Sam’s Club.

SFG is one of only 13 approved Small Business Lending Corporations (SBLC) federally regulated by the SBA, and specializes in providing access to credit for Main Street and underserved borrowers. Additionally, SFG offers free online technical assistance and online training courses that specifically target the borrower’s weaknesses. The courses even include a “how to” on writing a business plan, complete with a business plan writing template.

“All Lenders are trying to make an impact on Main Street, which includes minorities, women and veterans to help create jobs. Main Street however remains the most difficult underserved market to reach, said Tim Jochner, CEO Superior Financial Group.“Sam’s Club together with SBA’s premier outreach express loan programs provides both a unique and powerful opportunity to reach and provide capital along with technical assistance and training to increase successful penetration into this underserved space.”

Sam’s Club members who apply for a small business loan online during the pilot will receive a $100 off the application fee, a 20 percent discount and a 7.5 APR, which is 25 basis point discount. The terms of the loans will remain at 10 years, which is common to help keep monthly payments low. There is no penalty for early repayment. Business memberships cost $35 annually at Sam’s Club.

While the majority of the Sam’s Club small business loan pilot program is to be delivered online, Sam’s Club will test some in club communication and other marketing efforts to reach business members and small business owners. For more information visit samsclub.com and click on the services tab.

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Book Review – The End of Wall Street by Roger Lowenstein

Posted by Hopeton on July 16, 2010

By Travis Kent

The End of Wall Street is the most complete historical account of the sub-prime mortgage crises that I have seen.  The author, Roger Lowenstein, is a contributing editor for The New York Times Magazine.  He conducted 180 interviews with government officials, Wall Street power brokers and heads of industry. The result is an easy to read and follow account of the time lines and decisions that helped lead the U.S. to it’s current economic state.

Mortgage lending in the U.S. has predominantly been an upfront money down, 30 year note market. Lenders (mostly bank’s at this time) historically adhered to tight underwriting standards and rarely took chances with their long term credit decisions often requiring as much as 33% down payment. Then in 1960 Beneficial Loan Society entered the market, lending to those with weaker credit and accepting 20% down payment. Since it accepted no deposits, Beneficial was outside the “purview of bank regulators.”  These were the early days of the sub-prime mortgage market.

What  Lowenstein captures is not just the high risk, profit hungry mindset of the 1990’s and 2000’s Wall Street banks and lenders. He also reveals the basis of Wall Street greed. Exotic mortgage backed securities packaged for sale to high worth and institutional investors. He provides insight by recapping the events that led to corporate bankruptcy and wall street brokerage failures. He goes behind the scenes with Federal Reserve Governors, Treasury Secretaries and CEO’s of long time stalwart Wall Street investment firms and provides a frightening disregard for conservative principles and basic common risk reward analysis.

Before we all rush to judgment and blame solely corporate and government greed, we also need to look at the demand for these products by consumers. As Lowenstein writes:

“The business (subprime mortgages) took off in states, like California, where housing was least affordable. Subprime catered, if not to the poor, then at least to the emergent middle class, the striving middle, and the upwardly covetous middle.”

” Eager Lenders such as Countrywide and New Century were hailed as suburban Johnny Appleseeds, planting mortgages in every backyard. ”

In the end, Lowenstein has provided us if nothing else, a fantastic work to provide future generations with historical perspective. His book is well written and, easy to read and although his timelines jump around as he changes perspectives, it is easy to follow.

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Listen to Interview on Predatory Lending with NAACP VP of Economic Programs From July 5 Economic Perspectives

Posted by Hopeton on July 3, 2010

The interview with Monique Morris, the Vice President for Economic Programs for the National Association for the Advancement of Colored People (NAACP) from the July 5 edition of Economic Perspectives on KAZI 88.7 FM is now available.  To listen click here: Monique Morris Interview.

Monique Morris

Morris discussed the NAACP’s strategy to combat predatory lending.  Since 2007, the NAACP has filed lawsuits against more than a dozen of the largest financial institutions alleging violations of the Fair Housing and Equal Credit Opportunity Acts and racial discrimination. She also provided an overview of the NAACP’s 101st National Convention being held in Kansas City, Missouri, July 11 – 15.

Morris has nearly 20 years of professional and volunteer experience as a scholar advocate in the areas of civil rights and social justice. Prior to joining the NAACP, Morris was the Director of Research and Senior Research Fellow at the Thelton E. Henderson Center for Social Justice at the University of California, Berkeley School of Law.

Morris is the author of the paper, Countering Discrimination in Mortgage Lending: An NAACP Guide to Fair Lending, and the principal author of the NAACP’s 2009 white paper, Year One: Toward Safe Communities, Good Schools, and a Fair Chance for All Americans, which was featured in the New York Times. Her paper, Discrimination and Lending in America: A Summary of the Disparate Impact of Subprime Lending on African Americans (NAACP), was featured for Congressman Al Green’s (D-TX) brain trust at the 2009 Congressional Black Caucus and was the focus of her presentation to the National Conference of Black Mayor’s 35th Annual Convention.

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Wall Street Reform & Consumer Protection Act Focus of June 28 Economic Perspectives

Posted by Hopeton on June 27, 2010

Nancy Zirkin, executive vice president of The Leadership Conference on Civil and Human Rights and a key strategist for Americans for Financial Reform, will discuss the new Wall Street Reform and Consumer Protection Act on the June 28 edition of Economic Perspectives on KAZI 88.7 FM, 5:30 p.m. – 5:45 p.m.  Listen live online at kazifm.org.

The Leadership Conference on Civil and Human Rights is a coalition charged by its diverse membership of more than 200 national organizations to promote and protect the civil and human rights of all persons in the United States.

Americans for Financial Reform is a coalition of national and state organizations that have joined together to fix the financial sector and make sure it’s working for all Americans.  Members include the AARP, AFL-CIO, NAACP, National Association of Investment Professionals,  National Urban League, and many others.

Enclosed below are highlights of the Wall Street Reform legislation provided by the press office of the U.S. House of Representatives Committee on Financial Services.

HIGHLIGHTS OF THE LEGISLATION

Consumer Protections with Authority and Independence: Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.

Ends Too Big to Fail Bailouts: Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.

Advance Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.

Transparency & Accountability for Exotic Instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated — including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and golden parachutes.

Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.

Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of American families and businesses.

Posted in Banking, Credit, financial literacy | Tagged: , | Leave a Comment »

House Committee Approves Legislation to Boost Small Business Lending

Posted by Hopeton on May 19, 2010

Today, the House Financial Services Committee approved key legislation designed to boost bank lending to small businesses struggling to gain access to credit due to the financial crisis. H.R. 5297, the Small Business Lending Fund Act, will establish a $30 billion fund to boost lending to small businesses looking to hire and expand their operations by providing additional capital to community banks.  The program is completely separate from TARP and mandates accountability and oversight by Congress, the GAO, and the Treasury Department’s Inspector General.  The committee also adopted several bipartisan amendments today to strengthen the bill and defeated numerous amendments by Republicans designed to defeat the measure.  The bill calls for the capital to be repaid by community banks over time.

In addition, the committee approved an amendment introduced by Rep. Gary Peters (D-MI) that will provide federal funding for state lending programs that use small amounts of public resources to generate substantial private bank financing. Such programs are designed to address many of the reasons banks are having trouble increasing lending to small businesses, including lenders’ desire to hold greater reserves against certain loans and concerns about collateral shortfalls on the part of borrowers.

H.R. 5297 was approved by a vote of 42-23 and now moves to the House floor for consideration. To view all the amendments considered today, click here.

“Small businesses create two in every three jobs in this country.  Helping them innovate and grow has to be our top priority,” said Rep. Peters.  “States are already engaged in extremely effective efforts to promote small business lending, and strengthening these efforts will create jobs across the country.”

“Small businesses are responsible for the majority of new jobs in the United States, but every day I hear from small business owners who still aren’t able to borrow.  Job creation is our top priority, and we need to ensure that the businesses creating those jobs are able to invest and grow.  This legislation is going to make it easier for small businesses in Cincinnati and across the country access the resources they need and continue on the path toward recovery,” said Rep. Steve Driehaus (D-OH).

“I have always championed the notion that small business success equals American success. Small businesses are truly the backbone of our economy and when I’ve met with small business owners they tell me stories about how lack of access to capital is crippling their growth.  This bill will help create access to capital and spur prosperity in central Ohio and in communities throughout the nation,” Rep. Mary Jo Kilroy (D-OH) said.

“The small businesses that drive our local economies rely on community banks for affordable capital,” said Rep. Melissa Bean (D-IL). “While stability has returned to large financial institutions, we need this fund to help our local banks, which remain challenged in their efforts to expand loans to our job-creating businesses.”

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