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GOLD MINE or COAL PIT !!

Go Direct Gold Training. GOLD MINE or COAL PIT !!. PRESENTED BY GAYLE COPELAND Managing Director at Dollars at Work Pty. Ltd. 1. Go Direct Gold Training. It used to be SOoooo easy to get a loan! WHAT HAPPENED? 2010: ASIC DECREED THAT ALL FINANCE SERVICE PROVIDERS MUST BE LICENSED. 2.

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GOLD MINE or COAL PIT !!

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  1. Go Direct Gold Training GOLD MINEor COAL PIT!! PRESENTED BY GAYLE COPELANDManaging Director at Dollars at Work Pty. Ltd. 1

  2. Go Direct Gold Training It used to be SOooooeasy to get a loan! WHAT HAPPENED? • 2010: ASIC DECREED THAT ALL FINANCE SERVICE PROVIDERS MUST BE LICENSED 2

  3. 25,000 APPLIED5,600 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

  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

  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? FORGETTHE BANKS 5

  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

  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

  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

  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

  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 bank’s valuation • THE BANK’S OBJECTIVE is no longer simply to make huge profits through carefree lending. Rather, it is to control the amount they could potentially lose. 10

  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

  12. PUTTING THE CART BEFORE THE HORSE • Trying to put a loan proposal together with no real knowledge of the client’s 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

  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

  14. SHOWSTOPPERS 14

  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

  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

  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

  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

  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

  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

  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

  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

  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

  24. NINE LOANS NINE REASONS WHY YOUR CLIENT MAY BE REJECTED BY ANY LENDER 24

  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

  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

  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

  28. 4: LONG-TERM ILLNESS / ACCIDENT • You are not informed and don’t 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

  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

  30. 6: BUSINESS FAILURE • Client’s 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

  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

  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 don’t 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

  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

  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

  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

  36. QUESTIONS? BE BRAVE! 36

  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 that’s more convenient for you 37

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