Illinois could be first state to regulate online small business loans

ILLINOIS NEWS NETWORK

Illinois could become the first state in the country to regulate online loans to small businesses.

Business loans done over the Internet are likely to have little to no oversight regarding how they are presented to the lendee. State Sen. Jacqueline Collins (D-Chicago) and a group of bipartisan state and city of Chicago officials want to create some ground rules for the online outlets that Collins said are largely good companies but can stray into deceptive habits.

All we’re trying to do is help those responsible lenders, but also create some oversight to those who are moving in the direction of being predatory, Collins said.

The Small Business Lending Act of 2016 would require the online companies to register with the Illinois Department of Financial and Professional Regulation as well as always list their interest rate in annual increments. Collins said monthly or even daily interest rates, which are currently offered, can fool businesses into agreeing to rates she described as gouging.

The measure would make online loan outlets limit the number of late fees and early termination fees they are able to impose.

There’s a lack of uniformity among small business loan offers and it makes it difficult to compare loans and to fully understand the terms of the loan, Collins said.

Collins said opponents to the legislation have, surprisingly, included larger banking corporations. She believes they are providing the money for some of the online loans. Opponents say the state should let the federal government handle the regulation of online loan outlets. Collins discounts that idea, saying it could take a decade before anything happens.

That could be five years. That could be ten years, Collins said. Why should that preclude us on the state level from dealing with a problem that exists in the state of Illinois?

Collins said she plans on presenting the bill once the General Assembly reconvenes this November. State Sen. Karen McConnaughay (R-St. Charles) is a co-sponsor of the bill. Collins said the idea for the legislation originated with Chicago Treasurer Kurt Summers.

Canadians not afraid to venture outside the big banks for financial products, EY survey finds

Nearly one-third of Canadians have gone outside their banks in the past year for a financial services product or service, according to a new survey from EY.

Add those who plan to “in the near future” and the figure climbs to more than 50 per cent, signaling the potential threat of rivals including upstart financial technology firms to key business lines within Canada’s banks.

“To stay relevant, especially as financial technology companies, or fintechs, are taking a piece of the market, traditional banks need to build on their strengths — including brand, trust and community presence,” said Paul Battista, financial services advisory leader at EY, the global consultancy formerly known as Ernst amp; Young.

He also urged Canada’s big banks to make investments that will allow them to offer “a superior customer experience,” an attribute the research suggests is a key driver inthe move to alternative providers.

9 Tips to Feel Confident Buying a Home

Broker Melissa Frank Lutz of Douglas Elliman Real Estate knows a thing or two about real estate. Here, she offers up some sound advice whether youre buying, selling, or thinking about either.

What are the biggest mistakes buyers and sellers make in todays market?

Id say the biggest mistake I see my buyers make is not moving on the home they initially align with the most, they feel something better will come along but inevitably they continue to compare every home to the one that got away.As for sellers on the other side of the table, they often feel a bidding war will be provoked or a considerably higher offer will come in and want to wait it out, but usually the best offer comes sooner rather than later which is why I always educate my sellers on the comps so we are prepared to negotiate when the offers come in.

How much should a seller stage their home before putting it on the market?

I believe staging is one of the most important things a seller can do to get the best possible price, whether that be hiring a professional stager or not, staging is a must.It goes beyond removingclutter, it is really about making the home as appealing as possible to the buyers and letting them walk in and feel like they want to live there.

Were heading into winter, should a seller stay off the market until better weather?

I work with my sellers to advise them in what makes the most sense based on their individual situation and needs. In some cases it clearly makes more sense to wait until the spring. That said, there are often instances, particularly if inventory is low, that listing in winter has its advantages.

What projects would you recommend starting and completing before putting a home on the market?

It really depends on the individual situation. We need to assess exactly how much money it is going to cost and whether that will come back to them. Painting is a no brainer buteach situation does require its own assessment.

Is it a buyer or a sellers market right now?

Its a good time to be a buyer, rates are low and there is a lot of choice.

What are some of the hottest towns to buy inWestchester right now?

I have a strong mix of buyers who insist on a short commute to the city, in which case Larchmont, Rye,Scarsdale, and Edgemont have been high on buyers lists this year. I also have a lot of buyers looking for a mix between a good commute and more property when Chappaqua, Bedford, and Katonah have been high on my buyers lists as well.

What are some things to consider before putting your home on the market or buying here in Westchester?

Westchester has so much to offer, I work with my buyers to educate them on all the different towns to consider. For many the commute to NYC and top schools are the highest considerations so Ibegin there. For sellers I prefer to time the market to what works best for their situation as well as guiding them on what time of year is best to sell their home.

Predominantly who are your clients these days: empty nesters oryoung couplesmoving from the city?Why do you think this area is so attractive to these buyers?

I may be in a unique situation having grown up in Westchester but worked in New York City Real Estate for overten years prior to transitioning here. My clients often relate to my story, they are oftengoing through the similar journey of looking for a quality of life change away fromthe city. I work witha lot of weekenders as well ashandle relocations for a few very large corporations, working with them to find homes for their employees moving from all over the world. This past year my clients moved to Westchester from Dubai, Hong Kong, London, and Australia to name a few.

What are some of your best real estate tips for buyers and sellers today?

When you are dealing with someones home it is in many cases a persons most valuable asset. At the same time it is also a place that has tremendous emotions attached to it. We put all of our hopes desires and reflections of ourselves into what we want our home to be.It is hard to see clearly through all these conflicting issues. My advice is to seek out someone that you trust, someone that can help navigate all the obstacles so that the process informs them in such a way that makes them feel confident in the decisions ahead.

Square Capital Starts Offering Loans More Broadly

Its not surprising that Square is expanding its lending program beyond just the millions of businesses who use Squares point of sale hardware. New customers will only continue to grow the already burgeoning business. In the second quarter of 2016, Square extended nearly 34,000 business loans totaling $189 million, an increase of 123% year over year and 23% from the previous quarter in 2016. Revenue from Square Capital, and the company’s other software services, was up 130% to $30 million from the same quarter in 2015 and up 25% from the previous quarter in 2016.

The small business lending market will likely also get more competitive for Square as American Express is set to debut a new lending arm later this year.

The goal is to serve all 30 million small businesses in the US with Square Capital, Reses said.

Why a starter home is one of the worst mistakes a new homebuyer can make

Ben Carlson,
CFA.
Courtesy of Ben
Carlson

In February,
I bought a starter home.

So when I came across
a blog post on A Wealth of Common Sense by Ben Carlson of
Ritholtz Wealth Management calling buying a starter home one of
the worst moves you can make financially as a younger person, I
gulped.

And then I had to know more.

Carlson further explained his take on the phone. A starter home,
he says, is any home you dont plan on staying in for the long
term.

Carlson, whos a married homeowner in his mid-30s, as well as a
CFA Charterholder, watched many of his friends follow the
traditional path:
get married, buy a home for the time being,
have kids, upgrade to a bigger, more permanent home. However,
he saw that these starter homes were more expensive than the
buyers planned, from making improvements up-front to extricating
themselves from the property later.

When he ran the numbers, he realized that, generally, starter
homes just dont make sense. For one thing, the bulk of your

mortgage payments in those first years go directly to
interest payments, meaning you havent built much equity by the
time you trade up.

The median house price is roughly $200,000, he told me, and
for the sake of argument, lets say you dont put anything down.
If you stayed there for five years with a 4% interest rate on a
30-year fixed mortgage, two-thirds of your payments go to
interest costs alone. You dont build up a ton of equity.

He said that the break-even point for a home tends to be between
five and seven years, depending on where you live. If youre in
the house for less than that time, you sink money into closing
costs, property taxes, improvements, and even realtor fees when
its time to sell.

If youre going to buy a house, buy something youre going to
stay in for seven to 10 years, he said. Otherwise, those costs
are going to eat up most of your equity.

Shutterstock

But, I pleaded with him, I live in the New York
metro area. Arent there exceptions to this rule?

Turns out there are, and Im not the only one who was dying to
hear him say it. After that blog post went up, readers from major
cities like New York, San Francisco, and Philadelphia reached out
to say theyd done the math and, in fact, buying a starter home
made more financial sense than continuing to rent.

I think the break-even point is a little shorter, Carlson said.
I think there are always caveats, always. And I have had people
say theyre going to hold onto the starter home and rent it out
when they leave. Theres a lot of nuance to it — theres always
personal situations that intervene. Real estate is probably much
different in New York City than it is in the rural Midwest, so I
think there has to be some give and take there with the local
market.

Carlson isnt against buying a home overall. In fact, hes
strongly in favor of it — if its somewhere you intend to stay
for at least a decade. Until then, though, dont look down on
renting.

I think for young people, renting is underrated, he said. When
youre young, renting gives you more options. People say they
dont want to pay someone elses mortgage, but I think especially
when youre young and not tied down, it gives you the ability to
pick up and move to another city for a job — a little leeway. A
house is much more expensive than people think. Its more than
just a mortgage.

Buying a home is cheaper than renting — especially in Houston

Saving for homeownership is no easy feat, but the financial benefits typically outweigh the initial cutbacks. With todays high rental costs and low interest rates, prospective buyers might consider exercising their savings funds sooner rather than later. According to a new study from Trulia, buying a home is currently 37.7 percent cheaper than renting from a national perspective.

Over the past year, the national average interest rate dropped from 3.9 to 3.7 percent. And despite the fact that current low interest rates are likely to rise toward the end of the year, not every renter is rushing to gather a down payment. The chief deterrent is rising home prices, which grew 5.9 percent over the last year compared to a softer 3.5 percent jump in rent prices.

Although prices dissuade many would-be buyers, purchasing a home offers the best deal seen since 2012. In each of the top 100 metros, buying is more cost-effective than renting, ranging between a 20 and 50 percent difference in long-term costs. To ease your concerns regarding mortgage rates, the Federal Open Market Committee (FOMC), commonly known as the Fed, would have to at least double rates for the scale to tip in favor of renting. On every front, buying makes the most sense especially in the South.

Regionally, the South offers the greatest financial benefit of homeownership with eight out of the top 10 best buying metros, including Houston.

Houstons median home value this fall is $176,513, while the median rent is $1,575 per month, which means buying homes in Houston is 52.9 percent cheaper than renting them. In order for the financials to shift in favor of renting, the median home price in Houstonmust reach $405,980,while interest rates would have to rise to 14.2 percent. Although neither scenario is likely to occur soon, home prices have a much shorter distance to go compared to the massive hike interest rates must make to tip the scale.

San Antonio is just shy of the top 10 metros where buying is cheaper than renting, at a 50 percent cost difference benefiting homeownership. The median San Antonio home costs $155,273, compared to a median rent of $1,350 per month. In order for buying to become less advantageous than renting in San Antonio, home prices would have to jump to a median $336,942, while interest rates would have to rise to 13.3 percent.

Buying a home in Fort Worth costs a median $174,171, while renting costs $1,450 per month, making homeownership 46.4 percent less expensive than leasing. Buying would only become less advantageous if home prices rose to $346,600 or interest rates jumped to 12.3 percent.

Although Dallas homes share a slightly more expensive median of $215,053, buying is still 47.4 percent cheaper than the median apartment cost of $1,650 per month. Residential real estate prices in Dallas would have to jump to $434,407 in order for homeownership to be more expensive. Meanwhile, interest rates would have to increase to 11.9 percent for this move to occur.

Austin is one of Texas pricier metros, with a median home value of $258,297 and a median rent of $1,700 per month. Nonetheless, buying a home in Austin is over 40 percent cheaper than renting. In order for renting to economically outweigh buying, home prices would need to go up to a median $452,020 and interest rates would have to jump to 9.7 percent.

If homeownership is on the horizon but you havent quite amassed a 20 percent down payment and closing costs, dont fear. Interest rates have a long way to go before they tip the scales toward renting. Keep in mind, however, that shifts in home prices could have the greatest impact given the current market. Planning to delay in the hopes of a market slowdown might hurt more than help, especially with home prices climbing nationally.