GOLD MINE or COAL PIT !!

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

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

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

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

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

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

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

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

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

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

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

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

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

SHOWSTOPPERS 14

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

QUESTIONS? BE BRAVE! 36

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

GOLD MINE or COAL PIT !!