How to Create a WordPress Blog For Your Internet Business Opportunity

A blog is a type of website maintained by means of regular entries of commentary, descriptions of events, graphics and or video. A blog is a very simple method for promoting your individual internet business opportunity with practical and valuable content; content that can be applied to any business whether online or offline.

The written content you post on your blog is referred to as a “blog post.” Your blog posts can show up in the search engine results of Google for specific keywords that are in your posts. For example, if you wrote a blog post about “the difference between top tier direct sales and MLM,” your blog could show up in Google’s results when someone searches for “top tier direct sales”. Blog post entries are generally displayed in reverse-chronological order.

Blogs provide commentary on a particular subject or can function as more personal online diary. A typical blog combines text, images, and links to other blogs, web pages, and other media related to its topic. The ability for readers to leave comments is an important element of many blogs. Most blogs are generally text, although most will also include photographs and videos. Micro blogging is another type of blogging, featuring very short posts.

The following list provides some incredible statistics and the significance of a blog for today’s internet marketer.

Blogosphere Stats
133,000,000 – Number of blogs indexed by Technorati since 2002
346,000,000 – number of people globally who read blogs (COM Score March 2008)
900,000 – Average number of blog posts in a 24 hour period
There are many different types of blogs, differing not only in the type of content, but also in the way that content is delivered or written. The following are only a few examples:

Personal Blogs
The personal, traditional blog is the most common form of blog. It is an ongoing diary or commentary by an individual. Few personal blogs rise to fame but some personal blogs quickly acquire a widespread following. Microblogging is form of a personal blog which is extremely detailed and seeks to capture a moment in time. Sites such as Twitter and Facebook allow bloggers to share thoughts instantaneously with friends and family and are much faster than e-mailing or writing.

Corporate and Organizational Blogs
A blog can be private or it can be for utilized for business purposes. Blogs used for marketing, branding or public relations purposes are called corporate blogs. Similar blogs for clubs and societies are called club blogs, group blogs, etc.; typically used to inform members and interested parties of club and member activities.

By Interest
Some blogs focus on a specific subject, such as political blogs, travel blogs, house blogs, fashion blogs, education blogs, music blogs, legal blogs, etc. Two common types of genre blogs are art blogs and music blogs.

By Media Type
A blog comprising videos is called a vlog, one comprising links is called a linklog, a site containing a portfolio of sketches is called a sketchblog or one comprising photos is called a photoblog. Blogs with shorter posts and mixed media types are called tumblelogs.

A blog is primarily a website that allows you to quickly and easily add fresh content whenever you wish. Blogs are easy to publish (you only need to know how to type, easy to find (your audience can easily find your content), social (a great way to build a presence in the online community), viral (your blog posts can be virally distributed), and easy to link to and from. Blogs do require frequent and ongoing maintenance as the addition of fresh content – writing, photos, video, etc. – is necessary in order for a blog to remain effective. The content should be relevant, informative, thought provoking, etc…

There are many different blogging platforms. If you are new to blogging WordPress.com is a very simple platform for ease of setup. WordPress provides flexibility, tutorials and support and you can easily migrate your content from one blogging platform to another should you choose to switch platforms in the future. Do be aware WordPress.com can place ads on your website. However, this can be avoided if you choose to use WordPress.org By paying for you hosting, which is very minimal in cost, you gain total control of all your content without unsolicited advertisements. And most importantly you avoid the risk of never being suspended.

Now the following are a few basic action steps to start you blogging experience:

1. Sign up for a WordPress Account
2. Select a theme
3. Select a hosting account (this can be done at a late time)
4. Write Your First Blog Post

Easy Ways to Get Blog Post Ideas:
• Write down 5 things you learned today, and post it on your blog.
• When you learn something new, post it on your blog.
• When you do something fun, post it on your blog.
• When you make a video, post it on your blog.
• When you take new pictures, post them on your blog along with a description of what you did.
• When you have a strong opinion about something, post it on your blog.
• When you submit a new article or press release, post the link with a brief summary on your blog.
• If you have the solution to a common problem in the industry, make a blog post.

5. “Ping” It
When you “ping” your blog you are notifying the search engines that you have new content on your blog.
• Step One: Go to Pingomatic.com
• Step Two: Enter the name and the URL of your blog.
• Step Three: Click all blog services to Ping.
• Step Four: Make sure you ping every time you update your blog with new content.

6. Manage Comments
Comments are good; it means you have active readers. Make a point to respond to your readers who take the time to leave a comment. If someone makes a general comment you can always respond with “Thanks for your comments. They are valued.” If you disagree with a comment one of your readers let them know WHY you disagree. Don’t be defensive or confrontational. Be open to joining the conversation and supporting your opinion in a rational effective manner. Remember, you want to give your readers a reason to regularly return to your blog.

You are now on your way to becoming a professional blogger. Here are several basic tips and tricks.

• Don’t ever plagiarize. If you are quoting content from another source be sure to cite your references and include any appropriate links.
• Always be yourself and be original.
• Share your opinions.
• Avoid clichés.
• Provide Fresh Content
• Provide real content, not just sales’ pitches. Your blog posts should not sound like sales’ pitches. You should be sharing valuable thoughts, ideas, and opinions with your readers. As a general rule in blogging and in marketing in general, you want to provide 80% content for every 20% sales pitches.
• Engage in meaningful dialogue with your readers through comments. Your audience will increase as your readers share your blog with their circle of influence and they’ll be more likely to do this if you take the time to acknowledge their interest in your blog.
• When sharing your opinions, consider framing your thoughts in such a way where you acknowledge that you could be wrong. If you come across as being close-minded to new ideas or other viewpoints you run the risk of turning your readers off. However, if you pose your opinions from a “here’s what I’m thinking right now” perspective, you could encourage some healthy debate in your comments. With that said, some of the most successful blogs are highly controversial and unapologetically opinionated.
• Check out other blogs. Examine other blogger’s styles and discover what you like and what you don’t like.

The following are several more advanced suggestions:

1. Blogging Etiquette
When you include a link to another site in your blog post WordPress will automatically “ping” that site letting them know you just linked to them. If both blogs are on the same platform you should see a reference to your trackback link in their comments section. When someone links to your blog you should always go check out their blog and then leave a thoughtful, intelligent comment on their blog. Include your blog’s URL with your name in the comment and this will not only foster two-way communication between you and the other blogger, but will also encourage their readers to also check out your blog.

2. Submit Your Blogs to Web 2.0 Sites
You can get ranks to specific keyword posts with the keyword by submitting your post to all the Web 2.0 sites with a service called Socialmarker.com. After you input your title, URL, descriptions and your username and password to each site, Socialmarker will submit your post to 20 to 30 Web 2.0 sites for you with one-button simplicity.

3. Optimize Your Blog for Search Engines
If you have a post that you want to push up in the search engine results you will want to have your keywords in the title of your post, in the first paragraph and in the closing or concluding paragraph.
A simple trick to include your keyword or keyword phrase in your title is to create a title such as “How to find/do (insert keyword)”.

As you become proficient with blogging you might want to consider advertising on your own blog. To accomplish this you will have to setup a self hosted blog i.e. WordPress.org. This will allow to place your own text or banner ads on your site or to take advantage of an advertising network such as Google AdSense. A self-hosted WordPress.org site will also provide you with much more flexibility with the layout, design and advertising options on your blog.

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15 Famous Blogs From America!

As a young American living in this beautiful country, I am proud of that. Should be! Everybody else from different countries should feel the same way. Proud for a country that has stood up for human rights and its people, even though they really haven’t followed through lately.

This part, I am not proud of. Some things that have been said by the US and actions that were taken really hasn’t helped its reputation and others around the world. But anyways, enough talk of politics in this article!

The internet is a very big place. It has grown at a fast rate since the 90’s. And to classify blogs or websites being from a certain region or country is quite utterly stupid. I mean someone from Siberia in an igloo can access any blog that will be presented here.

I mean it’s like trying to separate the American sand from the rest of the world. Sand is sand and differentiate between the two is ridiculous!

This article is talking about blogs that are wicked famous and somewhat strange, created from the United States. I just found it curios to find out those blogs that have a “funny” smell to them. I actually find them very interesting. Makes you read, even if ” ‘liking’ is not on your mind at the moment.”

This article is not really the type on, “Hey, let’s learn something new today!” Or, “Let me brush my memory and clean those focals on that particular topic” so-to-speak.

Everybody likes a laugh here and there.

If things would be so serious, damn.

Don’t really know how this world would run. Let us go out from the norm and caste and enjoy the blogs being featured here.

1. The Onion

This has been put at the number one spot. Like legit this is pure American stupidity! But it’s actually funny. A blog that produces articles which makes fun of anything unusual that has happened in this country and around the world.

They have videos on YouTube that has fooled, by the millions. I have been fooled by a video talking about how Justin Bieber was found dead. But I found out that it was a fictional story. lol

2. Fail Blog

A “fail” blog. Did it fail as a blog? Naw. These kinds of blogs are really humorous! I mean it’s really fun to look through the blog and see hilarious articles and headlines. Like I was going through and some of these headlines is what I read, “Changing a Tire FAIL”, “Nothing is responding”, What happens in Vegas disturbs me greatly”, and “Yo-Yo Skills Win”.

It was founded in 2008 and was bought a little later by the Cheezburger Network. I took this excerpt from Wikipedia on how it became popular.

Fail Blog “really started to take off when the financial industry decided to – ahem – fail.”

3. PEREZ HILTON

Seems like a too sunny day over at this blog. Love it though! Especially the header and design of it! Pink Yo! This blogger is one famous blogger. Everybody in the blogging world has heard about him and his name!

Get this. He said this about blogging, “because it seemed easy.” I guess it is in a way, but to make it grow is like trying to count the number hairs on your head! Not to easy, eh?

His blog talks about all the latest celebrity news and gossip surrounding it, which has caused some intense controversy in that world. But still, pretty sick blog there, Perez.

4. The Daily Beast

A political blog. Not quite a fan, but hey “it’s time to make some of the politicians!” Anyhow they don’t really do anything!

I guess it is similar to Perez’s blog. This time it surrounds itself in the world of politics.

5. Mashable

Hey. I know that one! Dude? How is this a strange one? It really didn’t add this one to make fun of! I really enjoy this blog since it is similar in what it presents to my blog.

I added Mashable because they have worked so hard to produce amazing content with a humorous tongue within it! It deserved to be here! They talk about all the news of Social media,

“but also covers news and developments in mobile, entertainment, online video, business, web development, technology, memes and gadgets.” – Wikipedia

Check it out! You will love it!

6. Brain Pickings

Haha love the logo. Toothpicks being pulled out of the man’s head. Another blog that I ain’t familiar with. From what I see, it seems to be a blog that helps us learn something new in the world or tickle our mind with an amazing feat! Creative stuff there!

7. Laughing Squid

Similar to the blog that we just saw above us. Creative people like myself can surely learn form these two. So I don’t be lazy, I went the about page to get exactly what this blog is all about.

“Laughing Squid features interesting art, culture & technology from around the web.” That’s all we need to know!

8. Pink Sith

That header! Is that Darth Vader with boobs! Go to admit, that is the first time I saw Darth Vader changed to somewhat of a lady! It’s pretty cool anyhow!

This blog is written and owned by Elvira with articles written on makeup and cosmetics. Ladies?

9. TreeHugger

No! This blog is not about the environment or the fact yo hug some trees! No! The name also caught my eye. That tells me to say this.

Have an interesting and unique name to your website. It’s a crazy psychological technique that can lure visitors to your site. It always gets me. A creative name always has me wondering what the site is all about.

“TreeHugger is the leading media outlet dedicated to driving sustainability mainstream.”

10. Boing Boing

A quite familiar blog to some of you, since is was established in 2000. What was interesting, I read that Boing Boing was first a magazine. Then it transitioned to a website, then to finally a blog.

Boing Boing seems to talk about interesting news everyday and apparently science with corruption? Don’t know.

11. OMG Facts

OMG! Did I just add this site to the list? Haha yea! Just a blog that talks about random things and OMG incidents.

Alike to the Fail Blog at the beginning.

12. The-F-Word.org

Supposedly, this blog to read for are the ladies. Don’t believe me! Just look at the image above at the title.

Where it says. “Food. Fat.” and Feminism! Told you it was for the ladies. Haha I am just playin’ with you guys. I was stumped at the beginning when I found this blog.

Looking at the name, how could you go wrong? But I was wrong and so were you. It’s ok!

13. Social Media Examiner

The “world’s largest online social media magazine”. I like the design on this blog with a safari theme.

Very well done on presenting a blog about tools you can use and tutorials to help maximize your success in the Social media world.

14. Sweep Tight

A site that makes you want to sweep your house right now! From here it makes you. But if you go straight to the blog, that might change.

Makes you kinda sleepy. The name of this blog is again the reason for the addition to this list.

15. Copyblogger

Last but definitely not the least is, the Copyblogger. Everyone in here has to know this blog! Kept this for the last because it is my favorite blog to read.

As a blogger, reading should be a daily habit. Form reading is where a ton fo inspiration lies.

Brian Clark has inspired me and his work is sometimes my inspiration.

The Conclusion

All these blogs are great! Not one of them is better than the other. Each blog has a meaning to it and a meaning to its readers.

Maybe one day your blog will be featured in an article like this, with the help of some top WordPress plugins.

Take any blog you have seen here and read it more often. Everyone of them will have a unique purpose in your goal and ideas.

Commercial Loan Packaging Part 1 – The Art of Securing a Commercial Loan

After too many years of seeing poor loan package after poor loan package when reviewing commercial real estate loan requests, if a borrower is nice enough to even send one, we thought it would be good to outline what makes a good commercial loan package. It is amazing that someone who is out in the market looking for a $25 million loan or a $10 million equity investment does not put the time and effort or spend the money to put together a presentation for potential lenders. Is the first impression you want to give to a potential capital source that you can’t or won’t put together a presentation in an orderly fashion?

For most commercial real estate developers, most of what you’ll read will be common sense. For others, it maybe a wakeup call that, in today’s lending environment, you need every advantage when competing for capital against the thousands of other borrowers out there.

For this tutorial, a commercial loan package can mean many things: an executive summary used to secure a joint venture partner or a loan package used to secure debt from a local bank. In addition, the term lender is interchangeable with equity investor, joint venture partner, preferred equity investor, bank, etc.

To start, it is important to note what is NOT a commercial loan package. A commercial loan package is not the following:

  • A marketing brochure. The brochure you give to potential renters in your office space or buyers of your condominiums should not be the same materials you use to obtain financing. Yes, it can be provided as supplemental material but should not be the sole information presented to your lender. Everyone loves the 20 pages of color renderings of your project; but at the end of the day, a decision to lend will not be based on that. Keep the loan package from looking like a marketing brochure.
  • Ten scanned PDF files with blurry material. One of the best ways to get in favor with a lender is to make their job as easy as possible. Presenting them with multiple documents in no order only makes their job more difficult. In addition, badly scanned materials that are hard to read will only take them more time to go through your material. If possible, get originals or retype the information. Making their jobs easier can only help in your approval process.
  • 1,000 pages of material. Yes, the three appraisals, two market studies, title report and last ten years of tax returns are important to closing a loan. However, when you’re first presenting your loan to your lender, supply them with only the critical information needed to get an approval for a term sheet or conditional commitment. Take the time to summarize the appraisals, market studies or other information to highlight the important points in each. This will only save your lender time when they are reviewing your file which could only lead to a faster approval.

Now that you know what doesn’t make a good commercial loan package, let’s review a few things that make a good commercial loan package: A good commercial loan package should be the following:

  • One document. Ok, you may need more than one document if you have important exhibits that you can’t combine in one document. If you have a program like Adobe Acrobat, combine the documents into one PDF that someone can easily download and share with colleagues. Use software like Microsoft Word to write your package then convert it to a PDF file for a clean, professional look.
  • Have a Table of Contents. Nothing makes a document easier to read than having a table of contents that outlines what’s in the document. Make it as easy as possible for the reader to find your pro forma, bio and marketing information. This will also help you keep relevant information together in one section.
  • Have original Excel files. As hard as it may be for a borrower to believe, a lender might not use the same exact pro forma assumptions as you have. Provide your lender with editable Excel files so they can easily manipulate the information. If some of your data is produced through other software, try to have the information exported to an Excel file rather than a PDF. This will save your lender from having to retype information.

Now you know the general framework for a good commercial loan package. Future articles will discuss the different parts of a good commercial loan package in more detail.

Commercial Loan Modifications – What Are They and Why Now?

What is a commercial loan modification?

It has been said that there is nothing new under the Sun and as far as Commercial Loan Modifications go that is true. For years, since the invention of Commercial Mortgages, there have been Commercial Loan Modifications. In the good old days “modifications” were called workouts and addressed the same issues that a modification does.

Commercial loan modifications can be crafted in a number of guises and could include; a reduction of the face rate of the mortgage, it could include changing the index, fixing the rate, or changing the margin used in the loan.

A commercial modification could also include a change in the term of the loan more specifically the amortization period of the loan. Lenders learned a valuable and expensive lesson in the 1970’s and early 1980’s about long term lending specifically sometimes it doesn’t work. In the 1960’s and 1970’s lenders were given to lending on a long term basis typically for 30 years. The problem that arose is if you have money out at say 5% for 30 years and the interest rate environment changes to 21% the Lender is upside down.

In that scenario the Lender is borrowing money at 105, 15% or even as high as 20% but collecting at 5% that creates a problem. Banks are in the business of borrowing money (via CD’s, Annuities, and Savings Accounts) and lending it a profit. That profit is the “margin” or the spread between what they pay on the CD’s and what they can charge the consumer of capital (Borrower).

In the 1970’s the banks got caught with long term low interest loans in a rapidly rising interest rate environment turning each of those long term loans into a losing proposition for the Lender. Enter the “Balloon Mortgage” it’s the best of both worlds, lower payments based on long term amortization with a Balloon payment due in 5, 7, or 10 years typically.

The problem today is that there is no capital market for commercial loans. Anyone with a Balloon coming due in the near future will have an extremely difficult time refinancing. The fact that there is little in the way of lending going on, and a nearly 40% decline in values since 2007 Lenders have drastically lowered their LTV’s and the problem becomes evident.

Another possibility is to lengthen the term of the loan, making the amortization period longer thereby lower the payment granting some relief to the borrower. In some cases loans that were cast using a 20 year amortization are being modified to a 25, 30 or in some cases 42 year amortization schedules.
This may reduce the payment just enough to make it manageable for the borrower and to return the loan to a performing status.

Frequently, lenders are given to charging fees for late payments, events of default, impounds, force placed insurance, and Lender ordered appraisals and more. Think of the wisdom in that practice, the Borrower, already cash strapped is struggling to make his or her payment they may even be severely in arrears. The Lender compounds the situation by adding additional “junk” fees that constitute additional profit to the Lender but increase the amount of the default and could raise the debt service substantially.
These are Borrowers who are having difficulty enough meeting the monthly obligation so the Lender makes a bad situation worse.

Here is a “dirty little secret” the Lenders don’t want anybody to know, they may be illegally (fraudulently) charging those fees when not legally entitled to them. There are instances, particularly here in Florida, where the Servicer isn’t even empowered to collect the payments let alone additional fees.

An additional step in modification process could involve some level of “Forbearance” where the principal and interest payments are halted for a period of time; this is usually tied to a specific event like reaching a certain number of tenants or a specific income goal. In this scenario the unpaid payments could be forgiven but will most likely be “tacked” onto the back of the loan.

During the period of typical forbearance the Borrower is usually plowing all the cash flow back into the property in the form of tenant improvements or lease concessions. The idea being once the property performance improves the Borrower will resume making some level of payments.

The Lender and Borrower could also agree to an interest only payment in which the Borrower pays a minimum payment based on a stipulated interest rate and the principal balance remains unchanged. The Borrower again gets the benefit of a lower payment which could make all the difference between hangings on or a messy foreclosure.

In closing the Borrower and the Lender could agree to just about anything from forbearance to a participation mortgage from a principal reduction to a recasting of the entire loan. The bottom line is that any change of the terms of the original note and mortgage is a “modification”.

Why now?

There is an enormous crisis brewing in America and the World in the Commercial Mortgage business, this crisis is twice the size of the United States’ annual Federal Budget, four times the size of the Residential crisis. According to a recent Business Week article total outstanding debt totals $6.4 TRILLION that’s $21,333.33 for every man, woman, and child in the United States of American.

By most estimates the Commercial Investment Market has lost 40% of its overall value since the peak in 2007. That loss is an average and is an “across the board” number. Since real estate is a local phenomenon that loss can be and is greater in some areas of the country and less in others. Some property types have been hit hardest while others have escaped unscathed.

The challenge for Borrowers and Lenders alike is establishing a value for a particular piece of property in the context of today’s market. There are many factors to be considered including income; occupancy, expenses, location, future prospects, employment, and the overall economy.

There are major differences between the values of an office building in the Washington DC area versus an office building located in Detroit Michigan. Apartment values in New York and Manhattan have not suffered as much as Miami Beach Florida.

Add to that the fact that between 2010 and 2012 there are estimated to be $1.4 Trillion dollars worth of Commercial Mortgages scheduled to Balloon, in a market that has seen the biggest retreat in capital in the history of the country. Put simply lenders aren’t willing to lend, and if they are it is at levels and prices that make no sense in the face of the capital requirements of most Borrowers.

As an example a Borrower bought a $10,000,000 office building, put $2,500,000 down and mortgaged the balance of $7,500,000. The building has since lost 40% of its original value so it’s worth about $6,000,000 the original Lender is owed $7,500,000. The Borrower tries to find a replacement Lender and the only offers they can get are at a 50% LTV based on today’s value or roughly $3,000,000 with personal guarantees and hefty fees and costs.

There is more news according to the Urban Land Institute’s Emerging Trends Report for 2010 the markets aren’t expected to recover until 2020. That means that prices, capital, and property will all converge nearly 10 years from today. That’s quite a while for a recovery no matter how you view it.

The Federal Government recognizes there is a crisis looming in the Commercial Mortgage Market in fact there is no paucity of Politico’s willing to weigh in on the subject. In fact it’s probably easier to name who has not weighed in on it Christopher Dodd, Sheila Bair, Ben Bernanke, our president most of the cabinet, congress, and senate have all opined on the state of the commercial mortgage and real estate markets.

The FED has stated that probably the only way to stabilize the market is to engage in some form of modifications and workouts. The FDIC even issued a white paper that set forth at least 12 different scenarios under which a bank could modify a loan and still has it pass the Examiners intent gaze.

The consensus across the board is “Extend and Pretend” keep the loans in place, in the field, and off the Lenders books. Remember to the Lenders, particularly Banks a foreclosure and possession is a liability and not an asset. Banks have to “reserve” cash for an anticipated loss as a result of taking back a property. If a bank takes enough properties back the bank itself becomes illiquid and is subject to seizure by the FDIC and liquidation.

Benefits to the borrower.

Obviously, the Buyer would love to stay in possession of the property and continue to own and operate the building. The Buyer/Borrower has spent good time, money, energy, and effort to manage and maintain the property the and last thing they want is to be dispossessed.

Because the loan modification process takes place outside the court system there are no Judgments or Law Suits filed. The modification process is a process of offer and compromise by and between the Borrower and the Lender usually with a facilitator (consultant) acting as a neutral third party whose task it is to bridge the gap between the two. The Consultants job is to care…but not that much about the outcome so as to remain neutral and objective.

The Borrower remains in possession and gets to enjoy the benefit of continued cash flow, albeit at a reduced rate. This is particularly important to a Borrower who derives the majority of their personal income from the operations of the property.

If a Borrower uses the property as his or her primary business address it could be quite costly to relocate especially if the property has been extensively adapted for the Borrowers use. Adding to those costs are the costs associated with moving, relocating machinery, utilities, upgrading basic systems (i.e. electric, water, sewer, gas) the removal or installation of docks, roll-up doors not to mention all the downtime associated with the act of moving itself.

There is also the prospect of business interruption and the defection of employees who get wind of the foreclosure or if they object to the move.

Traditionally, real estate markets tend to double in value every 7-10 years. If we are not presently at the bottom of a real estate cycle we sure are close that means that ultimately the markets will recover and start to trend upwards. The ULI report suggested stability in 2020 that means a recovery sometime will begin between now and 2020’s stabilized market.

If the Borrower can somehow manage to hold on through the current crisis he or she may eventually be made whole. In plain English they may be able to sell for more than they have in the property generating a profit. By staying in title the Borrower can still take advantage of the favorable tax treatment available through cost recovery (depreciation) capital gains treatment, and possibly a 1031 Tax Deferred exchange.
The other surprise avoided is the taxation associated with “debt forgiveness” what most people don’t understand is when a property is surrendered via a “deed in lieu of foreclosure” that is not the end of the story. Depending on the amount of “forgiveness” there could be drastic, adverse tax consequences. The Borrower ends up owing taxes on money they never received or benefited from.

Another issue that is probably the most problematic is the “Deficiency Judgment”. The deficiency judgment arises when the proceeds of the foreclosure sale are not sufficient to liquidate (payoff) all or a portion of the mortgage, fees, penalties, court costs, taxes and any special assessments. The Lender will then seek a deficiency judgment and attempt to enforce those rights by seizing and selling any and all assets of the Borrower they can find including personal property, bank accounts, retirement accounts, and other real estate owned by the Borrower.

Benefits to the Lender.

The Lender can benefit from a modification in a number of ways. First, since it is a non-judicial process the Lender does not incur the huge fees associated with a foreclosure. There is no need for discovery, depositions, court reporters, filing fees, and the all important billable hour. Since it is a relatively simple process the Lender can bring counsel in at the end of the process saving time and money.

Because a modification is an “offer and compromise” the process is not subject to the vagaries of the court system. There is no need to get on the docket since there is no hearing process. The wait to get your “day in court” could be measured in years depending on your jurisdiction whereas a typical proposal is presented within weeks.

Since the process is a non-judicial process there are no court costs, no waiting to file responses, no complaints, and no lost pleadings the Consultant produces the proposal, gets the Borrowers approval to present it and the Lender is provided a copy.

As mentioned above in the Buyer/Borrower benefits section the Lender could be made whole as well. If the Lender elects to foreclose and sell in today’s market they are guaranteed at least a 40% loss. The loss severity discussed earlier coupled with the fact that capital is not available means that the Lender is looking for a “cash” buyer, and cash commands a deep discount.

The income will probably have dropped due to increase vacancy (the problem that precipitated the foreclosure and the mass exodus after the tenants become aware of the suit) a possible rent strike by the tenants that stay, and the need for concessions to attract new tenants. The Lenders loss could substantially higher (60%, 70% or more).

If the Lender and Borrower can come to some kind of agreement and prevent that loss when the market does return to normal the Borrower and Lender could agree to sell and or refinance and both are made whole.

Lenders and Banks are in the business of lending money not managing commercial real estate. They are not equipped to manage real estate and despite the brave face they put on they have to hire local management, often it’s not who they want it’s who they can get and of course results vary greatly.

Lenders aren’t equipped to make or manage repairs, tenant improvements, or day to day maintenance of a property. These items can be the difference between success and foreclosure sale. In a recent case a Borrower who owns a building directly adjacent to a building that a lender has taken back. The Lender’s building is 100% vacant and has been that way for 3 years since the shell was completed. The Lender has instructed its broker to “poach” as many tenants as possible from the adjacent fully tenanted building as he can.

One reason that hasn’t worked is the Lender is unwilling or unable to do the tenant requested build out. The Lender is also unwilling to sign a lease for longer than one year pending a presumed sale.
By keeping the Borrower in place the Lender has one point of contact to deal with especially when it comes to collections. Imagine the difficulty of collecting rent from 300 apartment dwellers from across the country.

Keep in mind that as soon as the Tenants become aware of the foreclosure 50% or more will go on a rent strike further depressing the income stream and causing even greater collection problems.
Examiners like performing loans, whether a bank is Federally Chartered or State Chartered Examiners like to see piles of performing loans. The Examiners don’t care at what rate or level just so long as they are performing in some form or fashion.

In that White Paper I mentioned earlier the FDIC offered 12 or so different ways to make a non-performing loan a performing loan. The most creative was to split the loan into two pieces one that works and one that doesn’t the Lender only has to recognize the smaller non-performing portion for regulatory purposes despite the fact it is part of a much bigger loan, creative eh?

Because there is no loss the Lender doesn’t have to post a Loan Loss reserve thereby preserving the Lenders capital and possibly a few jobs in the bargain. If the Lender has cash they remain solvent and as long as they don’t reach a level that panics regulators the Lender stays open and everybody keeps their jobs.

By modifying a loan the Lender eliminates the uncertainty associated with a protracted marketing campaign. In today’s market how long could it take to identify a potential buyer or buyers? Then once you have some suspects you need to qualify them to make them prospect. Not everyone will have the cash necessary to buy, and most certainly will not have the credit and credibility.

The prospects will make the usual low-ball offers and it may take months to bridge the gap between the Lenders aspirations and the Buyers expectations. Many transactions will unravel in due diligence and the Lender can expect be re-traded at least once or twice. The broker should expect a fee haircut. That whole process is eliminated by keeping the Borrower in place.

By remaining out of the chain of Title the Lender avoids all the “what if’s” associated with ownership. What if we get hit by a Hurricane, earth quake, Tornado, Tsunami? What if the area is down zoned, the major employer closes shop and leaves town (GM). What if the market worsens, changes, or just goes away. What if there is a fire, flood, civil unrest, all of these can and have happened just think about California, Hawaii or most recently Chile, China, Haiti.

Lenders and Banks are very cautious and protective of their image in the community. They don’t want to be seen as an evil empire wiping out the small guy. Locally, there is a Lender that made it a point to lend to houses of worship…imagine foreclosing on one of those. Imagine the Ill will that would create in the community especially among the members of the congregation.

Bottom line, Lenders don’t want the property they want the money the further into this crisis we get the more reality apparent that will become.