Tag Archive for loan products

Ranking the Top 10 States for Small Business Lending

Small businesses create more jobs than any other industry sector. In fact, over half of Americans either own their business or work for a startup, and two of every three jobs made available in the country every year are possible because of small business. Enacting any needed future regulation at the federal level – vs. a patchwork of state­by­state regulations – is the best way to make sure small businesses are in a position to continue creating the jobs America needs.

A majority of small business owners seek loans of less than $250,000 in order to start or grow their business. Unfortunately, after the market crash of 2008, most traditional lenders moved upstream to target loan sizes greater than $1 million. The result created a void in small loan funding that left many small businesses without access to capital.

In order to fill this funding gap, various online marketplaces have sought to create innovative underwriting platforms and technologies to provide working capital, making it possible for small businesses to find the funding they need – even at the smaller loan sizes that vanished from the landscape. As a marketplace that works to match business owners to a variety of lenders and loan products, Lendio utilized our lending data* from April 2015 to April 2016 to identify the top ten states for small business lending.

The top ten states for small business lending are:

  1. Vermont ?
  2. California ?
  3. Utah ?
  4. Washington ?
  5. New Hampshire ?
  6. Texas ?
  7. Florida ?
  8. Georgia ?
  9. Colorado ?
  10. Hawaii

Among the top five states, the average loan size ranged from $14,500 in Vermont to $39,000 in Utah. The approval ratio for loans ranged from 52 percent in California to 68 percent in Vermont, compared to [33 percent] to [34 percent] at large banks in each state, according to the 2015 Small Business Credit Survey (SBCS).

In a recent survey of small business owners who secured capital from a lender on Lendio’s platform, entrepreneurs told us they used the working capital to increase their marketing efforts, pay their employees, purchase needed inventory and equipment, and hire additional employees. This capital is what entrepreneurs need to help grow their small business, ultimately supporting our economy.

In general, specific states have not been concerned with marketplace lending, viewing it as a beneficial technology involving many of the same steps as traditional lending with statutes and regulations adequately protecting borrowers from risk. However, marketplace lending is subject to various federal/state regulations and licensing authorities are increasingly turning their attention to the small business side as the sector continues to grow. Such requirements may have a significant impact since each lender must either obtain a required license or qualify for a federal or state­specific exemption.

Licenses are typically granted on a state­by­state basis and the requirements vary. In some states, the licensing process is fairly simple and straightforward. However, in other states it is quite complex and the process can take months.

Known for being the eighth largest economy in the world, California came in at number two on our list of Best States for Small Business Lending. As reported by the Office of Advocacy at the US Small Business Administration, 99.2% or $3.7 million of the total commerce in California is generated by small companies and start­ups. These businesses employ close to half of the workforce, or in other words, 6.7 million are working in this sector alone in the state.

For Most Payday Loan Borrowers, the Math Doesn’t Add Up

Gordon Martinez was a high school band teacher who just needed a quick $500 loan between jobs.

I had a family I had a wife, three step-daughters and to make ends meet, I took out my most prized possession which was $8,000 tuba and I went to a pawn shop and got a $500 secured loan, he said.

And for me [that] was the first introduction to predatory loan products, you know, said Martinez. The illusion is, its easy money.

LPC: Negative global yields positive for US leveraged loans

NEW YORK, June 16 Investors grappling with
trillions of dollars of negative-yielding bonds in Europe and
Japan are seen increasingly seeking US leveraged loans for
higher returns, similar to their push into corporate debt,
portfolio managers said.

Yields are negative on a record share of global debt, and
could slide further if the UK votes on June 23 to exit the
European Union.

With the European Central Bank muscling in as one of the
biggest buyers of European corporate bonds, pressuring yields
down, investors have even more reason to cross into US markets
looking for alternatives.

We are definitely seeing interest in credit from European
and Japanese investors right now, across the credit spectrum –
from high yield to loans – as they look to deploy capital at
more attractive yields, said Jonathan DeSimone, managing
director at Bain Capital Credit.

That reach will increasingly extend to loans as well as
bonds issued by low-rated US companies, the managers said.

We havent seen tangible evidence of European buying yet in
the loan market, but its a definite possibility because clearly
the world is on a quest for yield given where rates are globally
in Europe and in Japan, an investor said.

The value of government bonds yielding less than zero hit a
record high $8.3 trillion with Europes share rising, according
to JP Morgan, even before benchmark 10-year German borrowing
costs went negative on June 14 for the first time.

The ECB coming in and buying corporate bonds will continue
to bring rates down, the investor said. The German bund went
negative, and certainly if there is a Brexit then rates in the
continent are likely to go even more negative.

JP Morgan said Japan accounted for almost two-thirds of the
bonds trading with negative yields, Reuters reported.

Japanese investors have been buyers of US leveraged loan
products, especially the most senior parts of Collateralized
Loan Obligation funds, and are also seen stepping up

US leveraged loan yields overall average about 5.6
percent, Thomson Reuters LPC data shows.

Yields averaged 5.3 percent for BB-rated US companies,
ranked among the highest in the so-called junk bond space,
according to Bank of America Merrill Lynch.


Mutual funds also offer higher returns than many overseas
investors can get on domestic bonds. US leveraged loan funds
returned 4.13 percent, while high-yield funds returned 5.73
percent, this year through June 14, according to Lipper. US
corporate debt funds rated BBB, which are low rated
investment-grade funds, returned 6.78 percent.

Yields on safe-haven US Treasury debt, meantime, hit
four-year lows earlier on Thursday. Ten-year notes yielded about
1.6 percent in mid-afternoon trading.

Regardless of the Brexit vote outcome, market volatility is
expected to persist globally, driven by factors including anemic
global growth and the looming US presidential election.

Volatility will put a ceiling on investment overall. And low
US interest rates could keep overseas investors favoring
high-yield US bonds over leveraged loans until the Federal
Reserve does raise interest rates.

Leveraged loan rates are pegged to floating rates, and many
investors have been reticent to load up before the Fed resumes
the rate hiking it started last December.

Theres still a preference for high-yield bonds rather than
loans because of the perceived liquidity in the high-yield
market and with the Fed on hold loans are just not as
attractive, said Kevin Lyons, head of credit and fixed income
for hedge funds at Aberdeen Asset Management.

The Fed on Wednesday kept rates unchanged, but signaled it
still plans two rate hikes before year-end and now sees three
hikes annually starting next year. The December 2015 rate
increase was the first in nearly a decade.

(Reporting by Lynn Adler; Editing By Michelle Sierra and Jon

Economy Task Force Calls for Financial Free Market Solutions

House Speaker Paul Ryan (R-Wis.) and House Republicans this week released their third policy blueprint. The proposal calls for overhauling the regulatory system and lays out a number of financial solutions to help all Americans better obtain financial independence. Over the past seven years, unelected bureaucrats have run rampant over, making unilateral decisions over products and services one better left up to consumers and investors.

Speaker Ryan blueprints many problems, and also proposes commonsense, conservative solutions to halt the Obama takeover of basic financial services. Most importantly, these solutions all ensure that decision-making power is placed back with American families and small businesses.

Obamacare for your retirement

The Department of Labor recently released the “fiduciary rule,” a regulation that will clamp down on the financial advice available to 401(k) and IRA users. The 1000+ page rule creates a “best interest” standard that is so broad and lack clarity that they are open to wide interpretation. Some economists have even warned the standard is an “open-ended obligation with seemingly no bounds.” This rule is projected to leave up to 7 million IRA holders being unable to receive investment advice, and 300,000 to 400,000 fewer IRAs being opened yearly.

To address the fiduciary rule, the blueprint calls for securing American’s retirement and investment choices, as well as censuring the DoL’s fiduciary rule and to directing the SEC to regulate this area as it is required to under federal law. These measures will put American families and small businesses back in charge of making their retirement decisions and reel in Obama’s executive overreach.

Lack of consumer choice

The Dodd-Frank Act has eliminated consumer choice and empowered regulators broad authority to control consumer behavior. Since the passage of the legislation, the number of banks offering free checking has dropped from 75 to 39 percent. Additionally, the law created the Consumer Financial Protection Bureau (CFPB), which has the authority to outlaw a product or service if the director finds it “unfair” or “abusive”.

The proposal recommends reforming the CFBP in three ways. First, turn the CFPB into a five member, bipartisan stand-alone agency. Second, create and institute an Inspector General for the CFBP. Third, bring transparency and accountability to the CFBP by creating a budget and restoring congressional oversight, so that money is not squandered by this unregulated agency. These are important reforms to restore consumer choice and not allow the Obama administration to inefficiently and unfairly act.

Credit unions and small banks are being phased out

Dodd-Frank has also squeezed credit unions and brought on roughly $2.8 billion in regulatory compliance costs. Inevitably, these costs are passed onto the consumer through higher prices or diminished credit availability. Today, credit unions are forced to dedicate one in every four employees to comply with mind-numbing regulations.

To stop banks and credit unions from being squeezed out, the GOP blueprint proposes providing immediate relief to the community banks and credit unions. It suggests enabling regulators to tailor regulations to align with the size and business model of a bank or credit union and raising the consolidated assets threshold to allow more small banks to access capital for new loan products and making loans. Both of these solutions will help small businesses regain control from the dictatorial regulations and executive overreach.

Mortgage applications fall 2.4% despite lowest rates in a year

Applications to refinance a home loan, which are more rate-sensitive, didnt get a lift either, falling 1 percent, seasonally adjusted, from the previous week. However, they are nearly 52 percent higher than a year ago, when interest rates were higher.

Markets reacted to the weaker than anticipated job market report by recalibrating their expectations regarding the Feds next move. Additionally, global investors concerned about the potential for Brexit and its implications have once again led to a flight to safety, driving down Treasury yields, said Michael Fratantoni, chief economist for the MBA. As a result, conventional mortgage rates dropped to their lowest levels since 2015 last week, while FHA rates dipped to their lowest level since 2013.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased 3.79 percent, from 3.83 percent, with points decreasing to 0.32 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio loans.

Homebuyers today are more concerned about credit availability than they are about current interest rates. Rates have been expected to rise for the past year, but every move up is countered by some force pushing them back down. While lenders have started to introduce some new, low down-payment loan products, overall underwriting standards are not expected to ease. A new survey of lenders by Fannie Mae found as much.

Key survey sentiment indicators suggest that lenders remain cautiously optimistic in their market outlook, said Doug Duncan, senior vice president and chief economist at Fannie Mae. Additionally, the trend toward easing of credit standards appears to be tapering off, as the vast majority of lenders, around 90 percent, reported plans to keep their credit standards about the same. The survey was conducted before the recent May jobs report, and the weaker reported job gains might potentially temper this optimism.

Greystone Provides $14 Million in Fannie Mae Financing for Acquisition of Orlando Apartment Community

NEW YORK, June 15, 2016 (GLOBE NEWSWIRE) — Greystone, a real estate lending, investment and advisory company, today announced it has provided a $14,018,000 Fannie Mae Delegated Underwriting and Servicing (DUS®) loan to finance the acquisition of a 184-unit apartment community in Orlando, FL. The loan was originated by Andrew Ellis of Greystone’s Rockville, MD office on behalf of Mahesh Desai and Hiren Patel, Key Principals of Atlantic Multifamily 12.

The 15-year fixed rate loan for Cadence Crossing includes a 30-year amortization and is interest-only for the first five years of the term. Cadence Crossing comprises 19 two-story apartment buildings with one-, two- and three-bedroom units and multiple amenities. The East Orlando property is located in close proximity to Disney World, Universal Studios, Downtown Orlando and Orlando International Airport.

Market fundamentals in Orlando remain strong for multifamily acquisitions, and we are thrilled to have closed our sixth loan with our loyal borrowers as they continue to expand their portfolio, said Joe Mosley, Executive Managing Director and head of Agency lending at Greystone.

“My group has completed many acquisitions across multiple states during the past few years and Greystone has never failed to impress us. Greystone consistently offers us innovative long-term financing alternatives, which often include fantastic interest-only features, and then meets our demanding timelines for accelerated closings,” said Mahesh Desai, a Key Principal of Atlantic Multifamily 12.

He added, “Andrew Ellis is an important contributor to the Atlantic Multifamily team. His personal involvement typically starts at the earliest stages of identifying and evaluating acquisition targets and continues through to post-closing mortgage servicing. Andrew and his team always work tirelessly to meet our aggressive financing needs.”

Greystone provides mortgage finance solutions across multiple platforms, including FHA, Fannie Mae, Freddie Mac, USDA, CMBS, bridge, mezzanine and other proprietary loan programs.

About Greystone
Greystone is a real estate lending, investment and advisory company with an established reputation as a leader in multifamily and healthcare finance, having ranked as a top FHA and Fannie Mae lender in these sectors. Our range of services includes commercial lending across a variety of platforms such as Fannie Mae, Freddie Mac, CMBS, FHA, USDA, bridge and proprietary loan products. Loans are offered through Greystone Servicing Corporation, Inc., Greystone Funding Corporation and/or other Greystone affiliates. For more information, visit www.greyco.com.

Karen Marotta

Another View: Rules would help payday loan consumers, who need the products

The following editorial appeared in The Washington Post:

In an ideal world, American households would be immune from the financial vicissitudes that can oblige them to meet cash crises by borrowing small amounts at high interest. In the real world, 46 percent of households lack the ready funds to meet an unexpected $400 expense, according to a recent Federal Reserve study; and about 4 percent of that group told the Fed they would cope using a payday loan or similar option. A significant percentage of payday borrowers may, in turn, find themselves paying off old small-dollar loans with new ones, creating a crushing burden of debt. Hence this policy question: how to preserve realistic credit options while minimizing the potential for abuse and exploitation.

Ever since its inception in 2010, the Consumer Financial Protection Bureau has had in its sights the nation#x2019;s estimated 20,000 payday lenders, which do business in 36 states and online. Now the CFPB has unveiled a proposed regulation that would radically change the payday lending business model #x2014; or, the industry complains, destroy it. Similar to an outline the bureau sketched a year ago, the proposed rule requires the kind of expensive, ability-to-pay underwriting that payday lenders characteristically avoid. Their business model mitigates the inherently high risk of default by charging high fees and interest and, often, #x201c;churning#x201d; accounts.

The rule has been attacked not only by the payday lending industry but also by consumer groups such as the Center for Responsible Lending, which says the CFPB would allow too many revolving loans, albeit under what the bureau says are tighter restrictions. Probably the most complex critique has come from the Pew Charitable Trusts small-dollar loans project, which argues that the CFPB has failed to encourage commercial banks to offer relatively consumer-friendly alternative loan products.

Pew#x2019;s point is that most payday borrowers have checking accounts (indeed, payday lenders often insist on access to those accounts to guarantee payment) and that banks are therefore well-positioned to serve such customers with small-dollar loans at considerably lower costs than the existing payday industry. Specifically, Pew proposed a standard whereby loan payments would be limited to 5 percent of a borrower#x2019;s monthly income. This would have enabled banks to offer a $500 loan for five months at a total cost of $125 in fees and interest, compared with $750 for an equivalent loan from a payday lender.

This might have the advantage of simplicity as compared with the CFPB#x2019;s 1,300-plus-page proposed rule #x2014; but opponents have said the Pew proposal isn#x2019;t backed by sufficient empirical evidence, a fair enough point since, by definition, it#x2019;s a new idea. Fortunately, the CFPB also declined to rule out the idea and has said it#x2019;s willing to consider comments and data in support of it between now and a September deadline.

SolarCity (SCTY) Gains as Analysts Sing Praises of New Loan Program

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SolarCity (NASDAQ: SCTY) is gaining sharply Monday (+6%) amid a couple bullish analyst notes.

First, Credit Suisse analyst P. Jobin revisited the controversial topic of loan vs. lease economics after recent market data suggested a continued consumer shift from PPAs/leases towards loans.

We conclude that there are genuine advantages to both homeowners and the residential solar development companies from this transition, although ultimate value creation could be half the potential value realized under the leasing model; further, diminishing entry barriers from widespread access to financing products could erode the thesis of continued industry share consolidation, Jobin said. The risks that are ultimately shifted off of leasing companies, and the higher upfront cash generation of the third-party loan model, however, likely offsets the lower potential margin profile, in our view.

Jobin added that loan products offer a more compelling and simpler value proposition to homeowners: SolarCity announced during Q1 earnings (and again by press release last week) a loan product with rates as low as 2.99% for 10-year and 4.99% for 20- year loans through a third-party financing provider (ie, a company such as Mosaic). We calculate that for a typical customer in California, first year utility bill savings can be ~$261 for a solar PPA and slightly better with $272/yr savings with the loan, but with the loan becoming more advantaged over time as payments are fixed (not escalating) for 20 years. With the potential for 30% more realized savings than from a solar lease by year 5, coupled with the simple proposition that the consumer will own the system free clear after 10 or 20 years and generate free power, we expect the transition to loans will continue.

Meanwhile, in a note late Friday from Deutsche Bank, analyst Vishal Shah, said they walked away from management meetings incrementally more confident that SCTY remains on track to achieve its cost and cash flow break even target set for the year end.

While it is too early to figure out the sales momentum of the newly introduced loan product (which would be required to achieve the high end of FY16 installation guidance), initial feedback (from few weeks of data) has been very positive. We also believe the company is making good progress in securing financing required to achieve 2016 installation targets. Maintain Buy, $32 price target.

Sunlight Financial Continues to Add Industry Veterans to Executive Team

Financial, a leading provider of financing for the residential solar
market, today announced the appointment of Timothy Parsons as Chief
Operating Officer and Barry Edinburg as Chief Financial Officer.

Parsons, an 18-year veteran of the consumer lending industry, joins
Sunlight from Citigroup where he was the Chief Risk Officer of the $15
billion Sears retail finance portfolio, underwriting 7 million
point-of-sale credit decisions annually. Parsons prior experience
managing risk in the unsecured lending, credit card, and small business
lending sectors at institutions such as JP Morgan Chase and Bank of
America will further Sunlights position as the most sophisticated
lender in the rapidly growing solar industry.

“I am thrilled to join Sunlight as we provide our channel partners with
the best products nationwide,” said Parsons.

Edinburg, a former executive at Kilowatt Financial and Fortress
Investment Group, joins Sunlight from Spruce Finance where he was the
Chief Financial Officer. Edinburgs deep capital markets experience will
allow Sunlight to expand and further diversify its sources of capital.
At Spruce (and its predecessor), Edinburg was responsible for all
finance, accounting and capital markets activities.

Edinburg said, Its an exciting time to join this impressive team. I
look forward to supporting Sunlights rapid growth by building upon the
$300 million in funding that Sunlight has already raised.

Sunlight has established itself as the preferred lender for top-tier
residential solar installers and sales platforms nationwide. These hires
will further Sunlights risk management discipline and enable continued
access to institutional funding in the capital markets.

“We are delighted to welcome Tim and Barry to our team,” said Matthew
Potere, CEO of Sunlight. “Tim’s deep consumer lending experience and
Barrys capital markets expertise will fuel Sunlights continued
growth.” Both Parsons and Edinburg will report directly to the CEO.


Sunlight Financial provides consumers with loans to finance the
installation of residential rooftop solar systems through its
partnerships with market-leading installers and solar sales platforms.
Sunlights broad suite of loan products provide homeowners with
efficient access to capital at the point-of-sale, allowing them to own a
solar system and save money on utility bills. For more information,
please visit www.sunlightfinancial.com.

CFPB Plan Will Halt Traditional Lenders’ Small-Dollar Loan Progress

The burden of proposed federal rules on small-dollar loans is a key factor in determining whether banks and credit unions innovate and offer alternatives to payday loans. But the importance of flexibility from regulators in spurring development of small-dollar loan products is not just academic. Short-term credit solutions already in the marketplace likely wouldnt have made it out of the design stage in a harsher regulatory environment.

The payday lending abuses regulators are targeting present traditional lenders with a clear opportunity. Using new technology, banks and credit unions can help people tackle lifes financial emergencies with short-term, small-dollar loans at reasonable rates. However, meeting this need is at risk under the Consumer Financial Protection Bureaus well-meaning but too restrictive draft rules on small-dollar lending.

The reasons people need access to such loans include everything from an unexpected car repair to cash-only purchases to tooth trouble. Mission-driven financial institutions such as WSECU think about these consumers a lot. Our goal is to care for members who need convenient access to money when other options arent available.

Regulators clearly have these borrowers on their minds too. The CFPB thought about those consumers to the tune of 1,300 pages of specific, restrictive proposed rules on small-dollar lending. The bureau isnt alone. The US Treasury also recently offered its take on what it says are needed system changes, calling for greater transparency in marketplace and online lending.

While we applaud the intention to curb the abuses of bad lenders, unfortunately, the rules as proposed by the CFPB may also have the unintended effect of driving away consumer-friendly financial institutions that provide better alternatives.These could include institutions doing great work with underserved communities like Shreveport Federal Credit Union in Louisiana or San Franciscos Northeast Community Federal Credit Union, both of which offer payday loan alternatives that would be at risk given the compliance pressures of the draft rules.

The proposed rules are too complex, too prescriptive and will stifle the very innovation needed to serve this market. If enacted as written, they will drive up costs for borrowers and may scare off good lenders who might enter the market.

WSECU and its wholly-owned subsidiary, Q-Cash Financial, have been offering small-dollar, short-term loans for more than a decade. Now on a path of growth, Q-Cash recently began serving three new institutions. Interest is being tempered with some concern; one credit union that expressed interested in partnering on short-term lending recently dropped out of the pipeline following the release of the proposed rules.

It was no small effort for WSECU to jump into this area of financial services. The need was clear enough. More than 10 years ago, we began noticing members leaving our branches for storefront payday lenders to get quick cash. On paydays, members stood at our teller lines requesting cashiers checks made out to known payday lenders. Obviously, there was something the credit union wasnt delivering that consumers needed and used.

So WSECU began offering an alternative to payday loans. In the case of Q-Cash, it took WSECU years of development and it took years of not making any money. The margin was small and the overhead was high not a profitable ratio. It was only through a process of try, then iterate, and then try again, that the credit union was able to develop Q-Cash into what it is now: an automated underwriting solution that funds loans in six clicks and 60 seconds. Technology allowed WSECU to meet the goal of serving members who demanded speed and convenience.

Leveraging technology is a critical component in making small-dollar loans profitable for the lender. And banks and credit unions are really at the nexus of this opportunity. Sure, there are plenty of fintech companies ready to make a go at quick consumer lending, but they will likely never have the reach or the credibility of products offered by traditional financial institutions.

The CFPBs approach risks discouraging traditional lenders from entering the market rather than encouraging innovation.

Simple and flexible rules work better than strict and prescriptive regulations in fostering innovation needed to meet consumer demand for value, speed and ease. The CFPBs proposal would stifle innovation and inhibit fresh solutions from being tried and tested. Under these conditions, with the cost of compliance so great, the lenders the CFPB would like to see offer better options than payday lenders simply wont be willing to experiment in this space. Why?

The draft rules require a laundry list of added manual processes including verifications, projections and determinations of all sorts. They call for reports, restrictions and refunds of fees under certain conditions. For Q-Cash, these demands to add manual processes will reduce efficiencies that come from automation, restrict flexibility and increase overhead costs. Thats not a win for consumers.

Market flexibility allowed our institution to reduce costs and improve access to cash for a segment of borrowers that have true needs and few reasonably priced options. Now, were on our way to providing these loans to more consumers because were able to use technology to scale the products after years of iteration. Q-Cash is in talks with additional US and international financial institutions about partnerships.

If the CFPB proposal had been in place when we initially designed Q-Cash, it is unlikely that we would have been able to get the product off the ground. The same is likely true for other traditional financial institutions with products currently in the marketplace.

During the comment period on the CFPB proposal, the industry has the chance to communicate the message that banks and credit unions stand ready to serve the small-dollar loan market but need the flexibility to make it happen.

Lets collaborate to develop better choices for consumers through innovation, not overly prescriptive regulation. Otherwise, there will be very few choices at all for people in need of short-term loans.

Kevin Foster-Keddie is president and chief executive of Olympia, Wash.-based WSECU. Its subsidiary, Q-Cash Financial, offers a cloud-based lending solution for small-dollar, short-term consumer loans. Foster-Keddie also serves as chair of the Consumer Financial Protection Bureaus Credit Union Advisory Council.