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Software appropriate for the private-money industry should provide all the documents that must be sent to escrow. These include:
The appropriate promissory note for fixed, step or ARM loans;
The mortgage or deed of trust;
The arbitration agreement;
The agreement to procure lender or loan-commission agreement;
The capacity-to-repay disclosure; the oral disclosure; and
Other pertinent documents to protect the mortgage broker and private investors.
The software also should prepare documents specifically for private-money transactions for commercial and construction loans, from rehabs to complete ground-up construction projects. In addition, it should be able to handle all types of loans, from non-owner-occupied, commercial, construction, step or adjustable-rate mortgages for private-money loans.
Loan-servicing software also should automatically calculate payments received from the borrower and distributed to the investors via checks or direct deposits. Some software can offer online viewing for your borrowers' and investors' accounts via your Web site, as well.
Another important feature to look for is the software's ability to maintain trust-fund balances for each subsidiary ledger, as well as each borrower, investor and servicer, and third-party-payable parties.
Trust accounting is not the same as general-ledger accounting. Trust-fund accounting is the only way to manage funds received and disbursed to individual accounts.
The software should also handle escrows, underlying loans and loan expenses, insurance and lien tracking, and maturity notices. In addition, it should have many portfolio-management and trust-accounting-management reports.
Earning more money
Upon the loan recording, mortgage brokers likely will receive a larger commission than they would as a normal originating broker. In addition, if they also are the funder, they likely would service the loan on behalf of the investors, as well. As such, the income potential for entering the private-lending world is huge.
Private-money brokers who service the loans they fund also can profit from servicing fees, participation in the late charges and prepayment penalties with the investors, and collecting other miscellaneous fees, such as demand for payoff fees, beneficiary statements and reconveyance fees. For example, on a $2.5 million loan with 10 investors, a broker-turned-private-lender who also services the loan could potentially earn more than $100,000.
Further, the loan-servicing residual income will increase with every loan you make and service in-house. It will result in additional income with potential for growth and earnings, thus getting you through the difficult economy while also helping your clients land funds for their deals.
Timi Pereira is
president and CEO of Goldenomega.net, a provider of cutting-edge software, technology and consulting for the lending and construction industries. The company has been specializing in software for the private-money industry since 1988. Goldenomega.net offers the unit-usage model for startup companies at affordable pricing. Reach Pereira at (916) 939-7083, ext. 203, or firstname.lastname@example.org.
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