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1 Go Direct Gold Training Slide 2 It used to be SOoooo easy to get a loan! WHAT HAPPENED? 2010: ASIC DECREED THAT ALL FINANCE SERVICE PROVIDERS MUST BE LICENSED 2 Slide 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 Slide 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 Slide 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 Slide 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 Slide 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 Slide 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 Slide 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 Slide 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 banks valuation THE BANKS OBJECTIVE is no longer simply to make huge profits through carefree lending. Rather, it is to control the amount they could potentially lose. 10 Slide 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 Slide 12 PUTTING THE CART BEFORE THE HORSE Trying to put a loan proposal together with no real knowledge of the clients 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 Slide 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 Slide 14 SHOWSTOPPERS 14 Slide 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 Slide 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 Slide 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 Slide 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 Slide 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 Slide 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 Slide 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 Slide 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 Slide 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 Slide 24 24 Slide 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 Slide 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 Slide 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 Slide 28 4: LONG-TERM ILLNESS / ACCIDENT You are not informed and dont 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 Slide 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 Slide 30 6: BUSINESS FAILURE Clients 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 Slide 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 Slide 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 dont 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 Slide 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 Slide 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 Slide 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 Slide 36 36 Slide 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 thats more convenient for you 37