Category — Loans

The small business community is welcoming President Obama’s speech announcing the Recovery Act . The Small Business Administration (SBA) is immediately implementing two key provisions of the Recovery Act:

• temporarily eliminating certain loan fees
• temporarily raising guarantee levels on some of its loans.

These steps will provide lenders with the security they need in order to start lending again to the millions of small business owners desperately in need of capital.  Fees previously ranged from 2-3.75 % of the total loan package.

There are also some policy changes which will allow the Treasury to intervene on the secondary market to purchase SBA guaranteed loans.  This will help unfreeze the secondary markets for small business lending.

The Recovery Act allows the SBA to guarantee lenders up to 90% of loans instead of 75-85%. This makes it more appealing for local banks to use the guarantee because it lessens the risk. Now go out and jumpstart the economy.

Hyundai offers their Assurance program, where if you buy or lease a Hyundai vehicle and lose your income in the next year, you can return it. They have recently expanded on that program to include 3 months of free payments before returning it in case it’s a short stint of income loss. Well, Toll Brothers must have seen the advertisement because they are offering a similar deal.

Toll Brothers, a Pennsylvania-based real estate developer, is offering hard-times mortgage insurance to first-time home buyers. If the buyer loses their job, the developer will make the mortgage payments for up to one year at all of their luxury condo developments in New York City. The annual cost of the insurance is free for the first year, but 3% of the monthly mortgage payment after that. They’ll do anything to sell these things after a 40% drop in sales in the 4th quarter. While two of their completed condos are mostly occupied, they have no contracts signed for their newest project and were in the process of expanding their two completed projects. Ugh!

I don’t think I’d invest in the insurance company that’s offering this plan, but criticism of the insurance industry is a whole other post. What about the real estate taxes, monthly condo fee, and utilities? I doubt they cover that and there’s no way I could keep up those payments either if I lost my job.

I saw this post on FreeMoneyFinance for a chance to win $100 from LendingClub. LendingClub is a peer-to-peer (P2P) or social lending website. It brings together buyers and sellers of notes and the people or small businesses who need the loans. The lenders get a fixed return, while the institution behind the website handles the vetting process, maintenance, and overhead. Prosper is another P2P lending institution and the oldest in the US. Loans are issued to a specific borrower, so if they default, the lender eats it, as they are unsecured. The institutions work with collection agencies to recover as much as possible in those cases. Prosper is accepting new borrowers, but not accepting new lenders. They are in a quiet period and registering with the SEC. LendingClub has already filed with the SEC and reopened for new lenders back in October 2008. Hopefully, they are more closely regulated than the investment banks currently in crisis.

It seems a little puzzling why people would borrow like this. If you are in the top tier of credit rating and income level, you qualify for their lowest rate of 7.37% fixed. Wouldn’t these people have other means to borrow, like 0% credit cards, and have enough savings? I mean the maximum loan they issue is $25,000. That’s nothing for a Wall Street Baller like myself. Sorry, bad joke. Also, the maximum debt-to-income ratio is 25%. This rules me out as a potential borrower, along with a bunch of other people out there. Forget about me qualifying as a lender. You need at least $70k annual income and $70k net worth or have $250k net worth. From My Dashboard, you can see what my net worth is.

For those with lower credit scores, but still above their minimum score of 660, the interest rates increase to the 13-20+% range. Even my broke self talked my lenders down to a maximun rate of 15% on all my credit cards (most of them are 9.99%). The majority of their loans are in the B grade of 10.95%-12.21%. I’ll pass, but I will enter to win $100, so go leave a comment on FreeMoneyFinance for your chance.