Commercial Loans and Fun Blog

You should never-ever submit a commercial loan package to a commercial real estate lender without at least one picture of the subject property.

On Tuesday, I released an important blog article about how to use C-Loans.com to create a handsome PDF of your commercial loan package.  This commercial loan origination software is 100% free.  Even if you don't find the perfect lender for your deal, you walk away from your four minutes of sweating and slaving (not!) with a professional PDF that you can easily blast out to thirty banks.

Using our new free commercial loan software, you can easily upload pictures of the property to your commercial loan application.  These pictures serve to accomplish four things:

1. Pictures show the lender that this is a serious commercial loan application.  Borrowers and brokers who are just poking around seldom bother with pictures.
   
   
2. Pictures also show that the borrower or broker is not a complete newbie.  Only an intellectually-challenged mortgage broker would ever submit a commercial loan application without at least one picture of the property.
   
   
3. If the property is attractive - or if the picture was taken on a sunny day with lots of blue sky - commercial lenders will swarm all over your deal.  We sell trust deed investments to about a thousand private investors by email, and we always include three pictures of the underlying property.  I can tell you that blue sky really sells.  Deals with pictures taken on an overcast day tend to linger unsold.  Hence the securities law term, "blue sky".
   
   
4. Pictures also greatly help to explain the property.  For example, you might have have a real estate office on the street, with several apartment units behind it, plus 60 mini-storage units in the very back.  A picture is worth a thousand words.  Here several pictures would really help.

"But George, I am a New Jersey commercial loan broker, and my commercial property is in Alabama.  How on earth can I get pictures?"

You can always ask the borrower to send you some pictures; but I would wait until the borrower has gotten the ball rolling by sending you an old financial statement, a rent roll, and his actual income and expenses on the property.

Asking for pictures right up-front might cause the borrower to procrastinate and, in the meantime, entertain competing offers.  In other words, you will lose the deal to a competitor.  I would wait to ask for pictures until after the borrower has sent you a package.  Let's make him work a little and commit to working only with you, before asking him to fetch the broomstick of the Wicked Witch of the West.

One way you might handle this is to ask him whether he has ever sent pictures by email or text.  If he stammers and stutters, you should resolve to get your pictures another way.

The easiest way to get pictures of your commercial property is to simply google the address of the property.

Google has now photographed at least 90% of the standing commercial properties in America.  When you google the property, you can almost always find one picture of the property.  Guys, there really is no excuse - other than laziness or a desire to remain poor - for not including a picture of the property in every one of your commercial loan packages. 

Get commercial loan leads for less than the cost of two cups of coffee.

Now Google went to a lot of expensive work to photograph those 30 million commercial properties, and they would prefer if people didn't just steal their pictures.  You and I are only using the picture - not to mass market the property - but rather to just show our commercial loan to twenty of so lenders.  Using their picture is really not taking any money out of the hands of Google.

But Google doesn't make it easy to download their pictures.  You can't right-click on a picture and download it to your desktop.  Google has programmed their pictures so they cannot be downloaded.

What I discovered personally this week is that you can simply take a screen shot of the picture and save the screen shot to your desktop.  Voila!

To take a screen shot on my Mac, I simply hit Command-Shift-4 at the same time, hold down my moose, and drag the curser from the upper-left to the lower-right.  When I release my mouse, the screen shot of the property picture saves to my desktop. 

I am often asked, "Where can I get some commercial loan origination software?"  This sounds like an intelligent question.  After all, there are dozens of vendors who sell similar software for residential mortgage loan originations.

In real life, however, commercial loan origination software makes little sense.  First of all, there is no such thing as a Uniform Commercial Loan Application - similar to the FNMA 1003 residential loan application - used by thousands of commercial lenders across the country.  Every commercial lender in the country uses its own commercial loan application.

Secondly, in real life, most commercial lenders don't ask the borrower to fill out a commercial loan application until the commercial loan has essentially been pre-approved.  What?  Huh?

Yup.  Completing a commercial loan application is one of the last steps in the commercial loan closing process.  Remember, commercial real estate loans are based primarily on the property's cash flow, the value of the property, and the strength of the tenants.

The borrower himself is surprisingly unimportant - as long as he has good credit, he has some liquidity, and his net worth is larger than the loan amount.  See the Net-Worth-to-Loan-Size Ratio.

When a commercial loan officer for a bank is reviewing a commercial loan package, he might spend ninety minutes studying the appraisal and reviewing the leases.  He then might spend only three minutes scanning the borrower's financial statement to verify that the borrower has some liquidity (cash and marketable securities) and a net worth at least as large as the loan amount.

The commercial lender will NOT pour over the borrower's budget to analyze his top and bottom debt ratios.  A quick, three-minute scan is all he will do.  "Frankly, my dear, I don't give a hoot."

During the commercial loan application process, the bank's commercial real estate loan officer will typically ask for an old financial statement, as well as the actual income and expenses of the property and the leases.  Right before he takes the deal to Loan Committee, and only after he has essentially pre-approved the deal, will he ask the borrower to complete an updated financial statement on the bank's forms.

Get dozens of commercial loan referrals for the cost of two cups of coffee.

Marsha-Marsha-Marsha.  Property-property-property.  It's all about the property.  Therefore, in order to close commercial real estate loans, a commercial loan broker needs software that showcases the property, not the borrower.

Now the good news.  Please take a gander below:

This is page one of a four-page Executive Loan Summary of a commercial loan application prepared as a PDF.  The software automatically computes the Loan-to-Value Ratio, the Debt Service Coverage Ratio, and if the deal is a construction loan, the Loan-to-Cost Ratio.  Armed with this attractive and concise summary, you can quickly submit your commercial loan application to dozens of banks to find the one in the mood to lend today.

Open and view a sample PDF of a commercial loan.

Remember, folks, banks and credit unions make the vast majority of all commercial loans today, and banks are extremely fickle.  One day a bank is moody, fickle, and impossible to satisfy.  Three weeks later that same impossible bank is making crumby commercial loans like a drunken sailor.

The key to success as a commercial loan broker is to find out which bank - because of excessive liquidity - is making commercial loans like a drunken sailor today.  

And once you have a beautiful PDF of your deal, submitting your commercial loan to dozens of commercial lenders is easy.  You just blast out an email to 12 banks, maybe six at a time, and include this beautiful PDF in the email.

So where do you go to get access to this wonderful software?  How much does it cost?  You will find this software on C-Loans.com, and the cost is... get ready... it's expensive... ready?  Nuthin', honey.  The cost is zip-zero-zilch.

"But, George, I have been to C-Loans.com before, and I don't remember ever seeing it." 

When you visited C-Loans.com, you probably got distracted by the enticing blue call-to-action ("CTA") buttons on our home page offering a free commercial loan placement kit or a free list of 200 commercial lenders.  (The buttons below are not live.)

Because you probably got distracted buy these CTA buttons, you may have never actually entered a commercial loan into the six-step C-Loans System:

Had you done so, you could have placed a checkmark next to six lenders and pressed, "Submit".  Within minutes, hungry commercial lenders would have been contacting you with offers.

After submitting your commercial loan to six banks, you are given a chance to make your C-Loans app into a PDF:

Voila!  It's that simple.  Now you have a PDF of your commercial loan package that showcases the property.  There was no cost, and perhaps a C-Loans lender will make you an offer that you cannot refuse.

There are additional benefits to submitting your commercial loan through the six-step C-Loans System.  You also get to choose TWO of the following gifts.  (1) Income Property Underwriting Manual; (2) Commercial Mortgage Marketing Course; (3) Fee Agreement prepared by an attorney (me); and (4) The Blackburne List of 750 commercial lenders.

After you have submitted your commercial loan using the six-step C-Loans System, you can click on the purple call-to-action button below to collect your thank-you gifts.

A lot of you guys are missing out on a wonderful land rush.  If you introduce us to a new bank or credit union, and we later convince that bank to join C-Loans.com, we will pay you a 20% referral fee on the first three closings for us by that bank.  

You don't have to make the sale.  Just send an email to the commercial real estate loan officer at a bank or credit union, "Hey, Steve, have you heard about C-Loans.com?  They send you carefully filtered commercial loan applications.  It costs nothing to join.  There is no monthly fee.  You simply bump up your normal loan fee from 1.0 point to 1.375 points, and after the close, C-Loans sends you an invoice for their 37.5 bp. software licensing fee."

Then please just send us the contact information for the banker, and we'll continuously tempt him with attractive real deals.  Eventually he will see the perfect deal, and he will join so he can work the lead.  Arnold Taylor of Northeastern Funding Group now has 145 banks that have joined C-Loans.com, and other brokers have brought in bankers as well.  Each of them will, in time, enjoy some huge referral fees.

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Handel was a famous German composer.

Almost done.  Because banks and credit unions have been joining C-Loans in droves, we have over 200 new commercial lenders.  You need to come check them out.  When you submit a commercial loan using C-Loans.com, the system limits you to just six submissions at a time.  I now want you to come back to C-Loans, log back in, and put a check mark next to six more lenders, for a total of 12.

Remember, banks are extremely fickle.  One day a bank is impossible to satisfy.  Three weeks later, that same impossible bank is making crumby commercial loans like a drunken sailor.  The key to success as a commercial loan broker is to find out which bank - because of excessive liquidity - is making commercial loans like a drunken sailor TODAY.

So please come back to C-Loans and start using this wonderful commercial loan origination software to make yourself a handsome PDF of your deal.  Our software also teaches you what information you need to collect - for example, pictures of the property - in order to create the ideal Executive Loan Summary.

Then, after you have submitted your deal to 12 banks, be sure to contact us for your free rewards - a choice of TWO from (1) an Income Property Underwriting Manual; (2) a Commercial Mortgage Marketing Course; (3) a Fee Agreement; and (4) a copy of The Blackburne List of commercial lenders.

In the past two weeks, North Korea conducted an intermediate range missile test, and then it conducted another test the next day.  Trump reassured us that it was no big deal.  His agreement with Kim was not to test ballistic missiles, not intermediate range missiles.  Then the Russians tested a hypersonic missile, and it was a disaster.  More on this later.

Next the U.S. withdrew from the 1987 Intermediate-Range Nuclear Forces (INF) Treaty, claiming that Russia had been violating for years.  Then the U.S. took a modified Navy Tomahawk missile and tested it from a ground based launcher.  The missile successfully hit a target 500 miles away.

Then the Chinese tested a new carrier-killer hypersonic missile, a missile that will be impossible to shoot down because it can change directions during flight.  This missile might be operational within one year.  This is why I worry that Elon Musk's new military satellite array will not be operational in time to prevent World War III.

Then the North Koreans tested another missile.  Three days ago the Iranians successfully tested a surface-to-air missile that they had constructed themselves.  So each of the countries in the enemy Axis - China, Russia, North Korea, and Iran - all tested missiles in the past two weeks.

World War III will not be a nuclear exchange because such an exchange would create a nuclear winter so complete and long-lasting that all but a handful of people on Earth would starve to death.  Instead, World War III will be a missile war, with these missiles having the ability to slam into targets with near-absolute precision.  I read an article this week about an intermediate range missile test that landed within mere yards of the target.

The United States is two-years behind the Russians in the development of hypersonic missiles, so we could easily lose World War III.

You might be tempted to think that this war really won't affect you.  You would be wrong.  Russia is developing nuclear-powered hypersonic missiles that have a virtually limitless range.  They can also fly in a constantly changing flight pattern that is nearly impossible to shoot down.  Therefore, if you think you are safe from a conventional bomb attack in your condo overlooking Lake Michigan in Chicago, think again.

The entire city of Chicago will not be destroyed.  Remember, these nuclear-powered hypersonic missiles are NOT nuclear bombs.  These missiles will use conventional warheads.  No one will use nukes in the coming war.  

These conventional missiles, however, will be able to fly all the way from Siberia - launched from a mobile launcher that changes location daily -  right into the huge railroad hub at Union Station.  Much of the train and truck traffic in the U.S. may be brought to a halt in the first few days of the war, as Russian missiles slam into railway hubs and bridges all across the country.  How are you going to get food?  How is your daughter going to get her asthma medicine or her insulin?  

There will be no gasoline or natural gas either.  For environmental reasons, we only have a limited number of oil refineries in the U.S.  It will be an easy thing for the Russians to take out our oil refineries and natural gas pipelines.  Folks, this war will affect everyone from the very first day.

Get dozens of commercial loan referrals for the cost of two cups of coffee.

Russia has not yet perfected its nuclear-powered hypersonic missiles.  They tried to test the missile a week ago outside of Arkangel, a Russia city way to the north on the White Sea.  Something went wrong.  There was an explosion.  Five Russian scientists were killed, and a nearby town was evacuated due to a radiation spike.  Fortunately, the Russians are not yet ready for war.  I wonder whether CIA agents sabotaged that Russian missile test?

How many of you are old enough to remember Mad Magazine, with Alfred E. Newman?  In every edition, there was always a hilarious cartoon about Spy versus Spy.

This cartoon series was based on historical events.  In the years leading up to World War I, many well-read people in Britain and Europe could also feel the Winds of War blowing.  The British and the Germans were engaged in an arms race to determine which could develop the largest dreadnoughts.

A dreadnought was an early battleship, named after the first of its type, the British ship, H.M.S. Dreadnaught, built in 1906.  Please remember that this was before the age of dive bombers and torpedo planes, so the dreadnoughts clearly ruled the seas.  Whoever controlled the sea could cut off the enemy's flow of oil and food - the lifeblood of a country at war.

The Germans were rapidly building their own larger and larger dreadnoughts.  The larger the dreadnaught, the larger the guns it could carry.  A dreadnaught with one-inch larger (diameter) guns could sink an enemy dreadnaught before it could even come into range.  The designs of such a ship could literally determine the outcome of the coming war.

H.M.S. Dreadnaught (1906)

Each country sent out its legion of spies to the shipyards of the other, trying to seal the dreadnaught building plans of the other.  Knives flashed in the dark.  Spies disappeared.  British spies won that contest, and the British controlled the seas during World War I.

According to John Bolton this week, President Trump's National Security Advisor, the Russians stole much of our technology to develop their more advanced hypersonic missiles.  Clearly the Russians and Chinese are winning today's spy war.

Putin was the first to suddenly realize that no one is going to use nukes in the coming world war.  It would mean the extinction of mankind.  Putin therefore set out to develop and build an arsenal of conventional hypersonic missiles with the longest range.  He clearly hasn't perfected nuclear-powered hypersonic missiles, but he is well on his way.  The Chinese also realized years ago that missiles will determine the outcome of World War III.  The enemy Axis of China, Russia, North Korea and Iran is now testing missiles like crazy.  Missiles, missile everywhere,

So make no mistake.  The danger of another World War is very, very real.  The Winds of war are blowing.  On Friday, for the first time, President Trump referred to China's President Xi as an enemy.  The Dow fell 623 points.

Do you see the gold call-to-action button above that talks about earning three huge referral fees?  Let's suppose you have buddy at the bank who makes commercial loans.  Tell him about C-Loans.com.  It's free to join.  No monthly fee.  If he never closes a deal, it doesn't cost him a cent.  If he does close a deal, he simply increases his normal loan fee from 1 point to 1.375 points.  After the close, we send him an invoice for our 37.5 bp. (0.375 point) software licensing fee.  

It doesn't matter if he says yes.  Just ask him his minimum commercial loan, his maximum commercial loan, and his lending area.  Then send this info to Tom Blackburne at tommy@blackburne.com.  Tom will then code you as the referral source.

C-Loans.com will then tempt your guy with commercial loan applications that fit his requirements exactly.  Folks, 95% of these bankers are eventually joining C-Loans because banks and credit unions are desperate to close high-yielding commercial loans right now.  You will earn a 12.5 bp. fee on the first three deals closed by this banker.  One of our brokers, Arnold Taylor, has added 125 new banks to C-Loans.com is the past 45 days!

Nineteen men and women get together every week for breakfast or lunch.  Included in the group is a -

1. Residential real estate saleswoman
2. Residential mortgage agent
3. CPA or accountant
4. Handyman
5. Real estate attorney
6. Commercial real estate appraiser
7. Fix and flip specialist
8. Owner of a flooring business
9. Owner of as water damage restoration business
10. Commercial real estate broker
11. Residential real estate appraiser
12. General contractor
13. Owner of a moving company
14. Painting contractor
15. Roofing contractor
16. Probate or tax attorney
17. Estate planner or life insurance agent
18. Owner of a property management company
19. You - a commercial loan broker.

Several times a week each of you says to a client, "As it turns out, I know a very good real estate agent (or a commercial loan broker or a handyman).  Would you mind if I gave your name and number to him, so he can contact you?"

Then each member of your group takes out his cell phone, opens up the Cheddar Stacks app, and, in just 45 seconds, sends the lead to his fellow group member.

At lunch, you guys share additional leads, and talk about replacements for the attorney or flooring contractor, who is not sending leads or who is not even showing up for meetings.  Cheddar Stacks makes identifying the hang-dog quitters easy.

What does Cheddar Stacks cost?  It's free at first, and then, after it has proven it's worth, there is a token fee every month.  And guys, compared to paying for Google Adwords, direct mail, or internet display ads for commercial loan leads, the cost of Cheddar Stacks is trivial.  Pocket change.  Two coffees from Starbucks.

It is critical that you learn this lesson about originating commercial loans.  A commercial loan lead that that you get by referral is worth THIRTY leads generated by your own advertising.  

Why?  When you advertise for leads, you get shoppers.  The problem with shoppers is that there is always a bigger liar down the street.  "Oh, yes, I can get you a 2% commercial loan that is fixed for 100 years.  And my commercial lender will lend up to 130% loan-to-value."

Referrals, on the other hand, tend to trust you.  They put themselves into your good, honest hands, and they follow your advice.  So I say again, "A commercial loan lead that that you get by referral is worth THIRTY leads generated by your own advertising."

Okay, you're interested.  Who wouldn't be?  For the cost of a couple of coffees each month, you can get three or four good referrals per month?  This is a no-brainer.

Each of you should already to be pushing your real estate investor clients to refinance their commercial properties.  Banks are making new permanent commercial loans at just 4.5% today; but your clients better hurry.  A recession is coming, and when it hits, banks are likely to get vey conservative about debt service coverage and loan-to-value ratios.  If your client moves right now to refinance, he should be able to get a new commercial loan of 75% loan-to-value.  You can find hundreds of the most aggressive credit unions and banks by using C-Loans.com. 

One of my favorite scenes from any movie was from Ghostbusters II.  Now, remember, FORTY years ago, Sigourney Weaver was smokin' hot.  A demon had possessed her body, and she was writhing on the bed in a very seductive manner.  Tending to her was Bill Murray, of classic Saturday Night Live fame (also Caddy Shack).  The demon utters, "Do you want this body?"  Bill Murray turns to the audience and says, "Is this a trick question?"  Hahahaha!   

So, do you want referral commercial loan leads?  "Is this a trick question?"  There are some propositions that do not need to be oversold.  Simply click here.

Here's the problem.  The winds of war are blowing, and China thinks that it can win.  By the way, this cool image to the right is from The Sun newspaper in the U.K.  I am far from the only guy who is worried about this.

World War III won't be a nuclear war, for the reasons I outlined in a blog article I wrote ten days ago.  It will be a war fought with surface-to-sea intermediate range missiles, and our aircraft carriers are at great risk.  If Russia joins on the side of China, which is increasingly likely, Russia will almost certainly use hypersonic conventional missiles that can fly at up to 15 times the speed of sound.

North Korea and Iran would likely join the two former communist superpowers.  North Korea would probably try to seize South Korea, and the Iranians would probably try to seize Saudi Arabia.  Did you notice that the North Koreans tested their intermediate range conventional missiles this week?  Twice.

Imagine the war beginning with Russia launching intermediate range conventional hypersonic missiles (no nukes) at U.S. and German military bases, airports, anti-aircraft batteries, our own missile batteries, bridges, power plants, pipelines, ports, and munitions depots.  

Because these new hypersonic missiles are so fast, they will strike before the U.S. and our allies can react.  The war in Europe could effectively be over in the first week.

Germany's military is a paper tiger.  The Germans spend less than 1.5% of their GDP on defense, and they depend on the U.S. for their defense.  The Germans are so anti-war that they even refused this month to provide ships for the international flotilla being assembled to protect vital oil tankers from Iranian attacks in the Persian Gulf.    

Why would Russia do this?  Putin wants to go down in history as the man who returned Russia to its former glory.  After victory, Russia would probably seize the Ukraine and the three Baltic states of Estonia, Latvia, and Lithuania.

China wants Taiwan back.  Economic relations between the U.S. and China have deteriorated so far that China has less and less to lose if it moves to seize Taiwan.  Yes, the United States is China's best customer, but did you know that we only buy 20% of their exports?  They could survive without our business.

To take back Taiwan, the Chinese military will have to storm the beaches of Taiwan.  Did you know that the Chinese Navy has more ships than the U.S. - something like 305 to our 287?  These Chinese ships are not sandpans either.  These are modern warships, though typically smaller than ours.  China just launched it second aircraft carrier this week, and they constructed this one themselves.

Their landing craft will have to endure withering fire from the U.S. 7th Fleet; but U.S. naval power is centered on our aircraft carriers, which could be sitting ducks for Chinese surface-to-sea missiles.  Sure, our cruisers will shoot down a ton of incoming missiles; but they are likely to be overwhelmed by the sheer volume of Chinese missiles, directed on target by Chinese military satellites.  Billion-dollar aircraft carriers are likely to be taken out by storms of mere million-dollar missiles.

It is interesting to note that hypersonic missiles travel so fast that they hardly need a warhead to sink a carrier.  They would strike with so much kinetic energy that the speed of the strike would be enough.

But finally there is hope.   A Naval spokesman this week praised the accomplishments of Elon Musk and Space X.  

Less than two months ago, Space X rocket opened its payload doors and rolled out 60 refrigerator-sized communications satellites.  Each successfully took up position in geosynchronous orbit around the world.  Each is connected and capable of relaying high-speed internet messages.  The network is called Spacelink, and it will eventually be comprised of 12,000 interconnected satellites, costing a total of $10 billion.  When completed, everyone on earth will have access to cheap, high-speed internet service.

The U.S. military now wants a similar satellite network.  If it can be completed before World War III starts, the U.S. can pull back its Navy all the way back to Midway Island, 4,000 miles from the Straights of Taiwan.  Incoming Chinese missiles could then be easily spotted from space and targeted for destruction.  U.S. intermediate-range missiles could then target Chinese ports, railway lines, anti-aircraft batteries, missile batteries, factories, bridges, power plants, communication hubs, and the like.  In other words, we win World War III.

You might be tempted to think, "Oh, well.  What do I care if the Chinese take Taiwan, the Russians take back much of their former empire, the North Koreans unite the Korean Peninsula, and the Iranians take the Saudi Arabian oil fields?  We have plenty of oil here in the U.S."

The Russians are working right now on nuclear hypersonic missiles with an unlimited range.  They will be able to hit middle America from middle Russia.  Imagine your life if every bridge, power plant, port, dam, oil refinery, airport, railroad yard, and cell tower in America is smashed in a one-year missile campaign.  We would all starve.  

By the way, the Russians are not ready yet.  One of their nuclear-powered hypersonic missiles (conventional warhead) exploded this week, killing seven scientists, releasing radiation, and forcing a nearby Russian town to evacuate.  (Source:  Bloomberg and the New York Times)  I wonder if the CIA was responsible?

The big question is whether Elon Musk and Space X can complete this new military satellite network in time.  The winds of war are blowing.

It's Time to Renew Your Continuing Education Hours, Folks

The ten largest economies include (1) the United States; (2) China; (3) Japan; (4) Germany; (5) United Kingdom; (6) India; (7) France; (8) Italy; (9) Brazil; and (10) Canada.  I was personally surprised to see that the economies of both Brazil and Canada made the top ten.  

Most of these economies are shrinking in population, and this is extremely deflationary.

Why is a shrinking population deflationary?  In order for the money supply of a modern economy to grow, its banks need to make new loans.  In order to make new loans, banks need borrowers.  If the number of potential borrowers is shrinking, eventually the country's money supply - and hence inflation - will shrink.

Why is deflation so bad?  A little bit of deflation is not terrible.  It makes the dollars of working Americans go further.  For example, if the price of a new bike for your kid falls from $70 to $62 over two years, that is surely not a bad thing.

But there is a dark side to deflation.  For one thing, deflation makes it harder to make the loan payments on your existing debt.  For example, if your mortgage payments are fixed at $2,000 per month, and the prevailing wage rate is falling at 2% per year, you could be in for a world of hurt if you have to change jobs and accept a new one at the lower wage rate.

The second problem is that deflation slows an economy because people postpone their purchases.  For example, why buy a new car for $50,000 this year when the price will probably fall to $46,000 next year?  Why not just postpone your purchase until next year?  If enough Americans delay their purchases of a new car, the automotive industry will soon tank and tens of thousands of workers will be laid off.

Lastly, significant deflation usually comes with a contracting economy, layoffs, falling demand, and job insecurity.  Deflation can easily become self-feeding.  

This is so important that I am going to say it again.  Deflation can easily become self-feeding.  A modern economy can quickly cycle down the drain.

So the cycle goes as follows:  

People stop having children.  The number of potential borrowers shrinks.  As the number of potential borrowers shrinks, banks make fewer loans.  The money supply then contracts, and a wave of deflation sweeps the country.  As deflation washes over a country, it becomes harder for borrowers to raise the dough to make their loan payments.  As more borrowers start to default, the banks get frightened and stop lending; but they keep gathering in their loan payments.  Because the Multiplier Effect works in reverse at the rate of 20:1, for every $1,000 received in loan payments that is not immediately recycled back out into a new loan, a whopping $20,000 get sucked out of the country's money supply.

Then you REALLY have deflation, like we had in 2008, when at least four trillion dollars was destroyed.  Yes, money can be destroyed.  How else do you think the Fed could have injected $4 trillion into the economy without creating horrible hyperinflation?  

The U.S. used to be the one shining star in terms of population growth.  Most of this population growth came from immigration.  The U.S. birth rate is not large enough to replace itself.  With the U.S. now preventing migration from the south, the population of the U.S. will soon start to decline.

Even China, which has lifted its One Child Policy, is shrinking.  The cost of education is high in China, so the typical Chinese family is saying, “Naw, no thanks.  One child is enough.”

Adding to this deflationary trend is the graying of each of the top ten economies.  Over a billion retired folks across the modern world are saying, “I’m done.  Take my life’s savings and give me an income.”

The problem is that there is FAR too much savings, too little growth potential, and not enough workers to do all of the work.  The young people are saying, through their lack of loan demand, “We don’t need your stinky money, old man and old lady.  We’ve got more than enough money to do what we want.”

There is too much saving retirement chasing too few borrowers.  Therefore, the price (interest rates) must come down.

Grasp this concept:  There is now almost $11 TRILLION dollars invested in bonds, CD’s and business loans with a negative yield.   Most of this is in Europe and Japan.  Did you know that in Europe you now have to pay your bank to accept your deposits?!

Investors in Europe and Japan are so desperate for yield that they are snapping up U.S. Treasury securities.  Did you know that the yield on the U.S. ten-year bond dropped from 2.03% yesterday to just 1.88% yesterday?!!!  The ten-year U.S. bond yield may drop below 1% within the next 18 months - maybe even within one year.

I don't want the world.  I just want to refinance every commercial building in America with a lower interest rate.  Is that too much to ask?  :-)

Reward For Entering a New Commercial Loan Into C-Loans:

If you submit your commercial loan to six of our banks, you get to choose two of following gifts. (1) Income Property Underwriting Manual ($199 retail); (2) Loan Broker Fee Agreement ($199 retail); (3) Commercial Mortgage Marketing Course ($199 retail); and (4) The Blackburne List of 750 Commercial Lenders ($79 retail).

Before calling us, please click on this link, which totally explains the offer.  Basically you enter your deal into the six-step C-Loans System (not just filling out a form to get a freebie), you put a checkmark next to six lenders, and you then press Submit.  Finally you send an email to Tom Blackburne and tell him which two of the above gifts that you want.

If you have used C-Loans.com in the past, you are going to be amazed at the huge number of hungry new commercial lenders.

Be Sure to Create a Free PDF of Your Commercial Loan Application

After submitting your commercial loan application to six of our banks, be sure to look for a button that reads, "Create a PDF".  It takes just one click, and then you can download to your desktop a beautiful summary of your deal.  Then you can take this PDF and submit it to dozens of your own banks.

First a correction.  A few days ago, I wrote a blog article about how deflation is sweeping the world.  In that article, I mentioned that deposit rates in Germany are slightly positive.  I am pretty sure that this statement was wrong.

Listening to Bloomberg today, I just discovered that the yield on ten-yield German bunds is a negative 0.46%.  The world is deflating so fast that this yield fell by a full 0.02% in a single day.  That's a pretty big move.  No wonder the Fed is trying to get ahead of deflation in America.

I couldn't find the current yield on bank C.D.'s in Germany right now, but they simply must be negative because German banks are making hundreds of billions of dollars in commercial loans to large German businesses at a negative interest rate.

Holy crappola!  Is this a wild and crazy world or what?  This negative yield means that if you want the safety of loaning money to the German government, you have to pay the German government almost one-half of one percent per year for the privilege.

Now on to Today's Training:

The Debt Yield Ratio is different from the Debt Service Coverage Ratio.  

The Debt Service Coverage Ratio is a financial ratio, used when making commercial real estate loans, designed to determine if the property generates more than enough net income (typically 1.25x) to make the loan payments on the proposed loan.

The Debt Yield Ratio, in contrast, is a financial ratio, used when making commercial loans, designed to make sure that the amount of the new commercial loan never gets too large in relation to the net income thrown off by the property - no matter how low interest rates get.  This latter point is critical.  

In the lead-up to the financial crisis in 2008, conduits brought amazingly low interest rates on commercial loans to prime commercial real estate.  Because interest rates were so low (in comparison to prior years) in 2005, 2006, and 2007 that investors were able to achieve historically sky-high loan-to-value ratios, sometimes as high as 80% loan-to-value!

Because the buyers of commercial real estate could now buy trophy properties with 80% leverage, thousands of wealthy investors poured into the trophy commercial real estate market.  Up-up-up went prices.  Down-down-down went cap rates.  The property valuations and the size of the loans against them went crazy.

Bam!  Then the Great Recession struck.

Down-down-down went the values of trophy commercial real estate.  Borrowers defaulted on their huge CMBS loans.  The bonds backed by commercial mortgage-backed securities (IOU's backed by huge pools of commercial real estate loans) took horrendous losses.

After taking horrendous losses, the buyers of commercial mortgage-backed securities lost their appetite for these bonds. In 2009, the CMBS industry contracted almost out of existence.  Dozens of conduit lenders (specialized mortgage companies originating commercial loans destined for securitization) closed their doors.  It was a bloodbath.  An entire industry - the conduit industry - was almost wiped off the face of the earth.

Finally - slowly - the appetite of CMBS buyers returned, but they were determined to never again invest in bonds backed by commercial loans that were far too large in comparison to the amount of net income being generated by underlying the property.

The result was the creation of the Debt Yield Ratio.  At first, a conduit could not originate a CMBS loan with a debt yield of less than 10%.  This kept most conduit loans at less than 60% loan-to-value.

Why would any borrower be content with a $7 million loan against his office building if the loan-to-value ratio was only 58%?  The answer was that the conduits were the only lenders making non-recourse commercial loans.  

Okay, life companies were also making non-recourse commercial loans, but their properties had to be breathtakingly beautiful.  Conduits, on the other hand, would make large, non-recourse, commercial loans on average-looking commercial properties.

The new wave of CMBS loans performed spectacularly in 2011, 2012, and thereafter, so the appetite of CMBS investors became ravenous.  More and more exceptions to the 10% minimum Debt Yield Ratio were made until 9% became the norm.

I am sure that conduit Debt Yield Ratios have fallen below 9%.  Does anyone out there work for a conduit?  What are conduit Debt Yields today?

This article was triggered by the rate sheet of a money center bank.  Now this bank is a portfolio lender, rather than a conduit lender, but they recently publicized a minimum Debt Yield Ratio of 5% for apartments, 6% for commercial, and 8% for multifamily.  Wow.  The market is truly ravenous for commercial loans.

Receive a Billion Dollar Yacht  - Just For Entering a Commercial Loan into the C-Loans System and Submitting It to Six Lenders.

Really... I am full of beans.  Haha!  But you do get a wonderful assortment of goodies, just for submitting your commercial loan to six of our lenders.

First of all, if you submit your commercial loan to six of our banks, you get to choose two of following gifts.  (1) Income Property Underwriting Manual ($199 retail); (2) Loan Broker Fee Agreement ($199 retail); (3) Commercial Mortgage Marketing Course ($199 retail); and (4) The Blackburne List of 750 Commercial Lenders ($79 retail).

Next, after submitting your commercial loan to six of our banks, you can create a gorgeous PDF of your loan package that you can use to submit your deal to dozens of your own banks.  Look for a button at the very end of the six-step process that says, "Create a PDF."

Lastly, you get to see the 150 new banks that we have added to C-Loans.com in the past three weeks.  Oh, my goodness.  Hungry banks are joining C-Loans in droves.

Remember, Commercial Mortgage Mania is now in full swing.  This will be the greatest turkey shoot of your life.  You should make more money as a commercial mortgage broker in the next six months than you have ever made in your life; so get out there, find some commercial property owner, offer him a 4.75% new first mortgage on his office building, and put some cash in his pockets.

Seriously, if you meet anyone who owns a commercial property, tell them, "I can lower your interest rate to 4.75% fixed, lower your monthly payments, and put tons of cash in your pocket."  

Prices and interest rates across the entire world are declining.  This could be wonderful news for those of us in the commercial loan business.

Before I explain, I want to bring you up to date on a blog article that I wrote last week postulating that a world war with China and Russia may be brewing.  This was a pretty important article, and I urge you to read it first.

In that article I commented, "It seems to me that the behavior of China recently is that of a belligerent who thinks that he can win."

No sooner had I finished this article than a joint air exercise between Russia and China so threatened South Korean and Japanese airspace on Thursday that the Japanese and South Korean jets had to fire two looooong bursts of 20 mm cannons to drive them off.  In the meantime, the Russians and Chinese mapped and measured both South Korean and Japanese jet fighter launch areas.  

Please be sure to note the scary term, joint air exercise.  Russia and China are now practicing for a war against us.  Holy crappola.

In a recent article in Atlantic Magazine, a military analyst disclosed that in recent war games simulating a great-power conflict in which the United States fights Russia and China, the United States “gets its ass handed to it.”

Now on to deflation.  It's hard for most people to understand even the possibility of deflation.  The money supply can only grow, right?

In a future article, I will explain why deflation is as powerful as gravity, and why it is a constant threat to capitalism.  For now, however, please accept the fact that the horrible deflation we experienced in 2008 could easily happen again.  

Even now modest deflation is occurring in most first-world countries, except the U.S. -- including Germany, Japan, England, France, Sweden, Holland, and Denmark.  This deflation is producing some bizarre situations.

The amount of bonds in the world that have a negative yield continues to rise, making a fresh swing high this month, and now sits at a U.S. dollar equivalent of $10.5 trillion.

This debt pile consists mainly of sovereign bonds from Japan and European countries.  In a sense, the deflation which Japan experienced in the 1990s and noughties, has now spread...to Europe in the noughties and 2010s.  By the way, the term, noughties, is a British one that means the decade from 2000 to 2009.

At first glance, bonds with a negative yield make no sense.   Why would a rational person ever lend money to someone and pay them for the privilege of doing so???  The reason why a rational person might lend money at a negative interest is because that person expects the prices of the stuff they can buy with that money (goods and services) to fall even further.  In other words, the lending person has sizable deflationary expectations.

Can't the government just "print money like crazy" to create inflation and positive interest rates?  Japan has tried this since 1989.  Recently the Japanese Central Bank got inflation up to the rip-roaring rate of 1% last year - only to now see it fall towards zero again.

The fact is that negative-yielding bonds and bank loans in Japan and Europe are likely to continue is because the banks can make a profit lending money at a negative interest rate.  At a negative interest rate?  What the fruitcake?

Yup.  In Europe, depositors sometimes have to pay the bank something like 0.5% annual interest to keep their money on deposit with the bank.  If the bank can loan the money out to a strong company at a negative annual interest rate of just 0.1%, the bank still picks up a 0.4% annual gross profit on the spread.  (Note:  Deposit rates in Germany are slightly positive today.)

Are you ready?  Get ready for it.  Mortgage rates in Denmark briefly went negative last year.  You take out a mortgage to buy a house, and the bank gives you a loan at a negative interest rate.  Go figure, huh?

This Could Be Wonderful for the Commercial Loan Business:

I promised you earlier some good news about commercial loans.  Do you remember refinance-mania?  This was largely a residential mortgage phenomena.  Well, because interest rates have fallen so far recently, hundreds of billions of dollars in bank commercial loans are about to be refinanced by smart commercial loan brokers and hungry banks.

Interest rates in Japan and Europe are about 1.5% lower than in the United States, so U.S. Treasuries are skyrocketing in price right now, as Japanese and European investors, desperate for a positive yield, are snapping them up.  This will lead to falling commercial loan rates from banks and an absolute bonanza for commercial loan brokers.

Hot snot, this is gonna be good!  :-)

It's time to renew our NMLS hours.

Gwendoline Christie played Brienne of Tarth in Game of Thrones

C-Loans Just Added Hundreds of New Commercial Lenders:

Since we started paying mortgage brokers a fee to convince their favorite banks to join C-Loans.com, we have been adding new banks like crazy.

One mortgage broker alone, Arnold Taylor, has added over 50 banks.  He has probably won the race against you as to a half-dozen of your favorite bankers.  The first commercial loan broker to register a bank with us wins, and if you don't tell us about a particular bank, I can almost guarantee you that some other commercial loan broker will.  There is no profit in delay.  

My son, Tom, and I, for the past two weeks, have been constantly adding new banks to the C-Loans System.  Heavens, my back aches so much and my eyes have gotten so weary from leaning over a computer screen and adding all of these new lenders who are hungry for commercial loans.

We're Now Paying Commercial Loan Brokers to Add Real-Life Commercial Loans (Not Just Lenders) to C-Loans As Well: 

In order to convince you to come bank to C-Loans.com, to see all of our hungry new lenders, and to submit some new commercial loan applications, I am going to entice you some wonderful free stuff.  

Please pick two:

1. The Blackburne List of 750 Commercial Lenders ($39.95).
   
   
2. How to Market For Commercial Loans.  It's only $199... but you may be broke. (You get the PowerPoint to my famous course, which teaches you everything.)
   
   
3. Our mortgage broker fee agreement ($199) has probably been tested in more actual courtroom cases than any other. Remember, I am an attorney.  (You get the fee agreement itself, not the 60-minutes of video training contained in our fee collection course.)
   
   
4. Our Income Property Underwriting Manual ($199) can upgrade a real estate broker or a residential loan agent into a commercial loan broker in a single afternoon.  (You get the manual itself, not the five-hours of video underwriting training.)

We here at C-Loans will give you TWO of the above freebies, just for entering a bona fide commercial loan into C-Loans and submitting it to six lenders.

Submitting a loan to C-Loans.com is NOT the act of filling out a lead form in order to get some freebie, like a free list of 200 commercial lenders or our free commercial loan placement kit.

Submitting a commercial loan to C-Loans.com is a six-step process that ends with you putting a checkmark next to six commercial lenders and then pressing "Submit".


How To Get Your Freebies:

After going through the six-step process - putting a checkmark next to six lenders and then submitting your deal - please email my son, Tom Blackburne, the General Manager of C-Loans, Inc., and tell him which two of the above gifts you want.  Please make the subject line, "I Completed a C-Loans Application."

Don't have time to work commercial loans?

Click the above button and bookmark our lead input form.

U.S law is based primarily on English common law.  Common law is the part of English law that is derived from custom and judicial precedent, rather than from statutes.  An example of common law is a ruling that some judge made, in an old case more than two-hundred years ago, that says that people have a duty to read contracts.

Common law is often contrasted with statutory law, which is the body of laws enacted by Congress, the various state legislatures, and other law-making bodies and which are actually spelled out in some book of statutes.  In Penal Code 187, California law defines "murder" as "the unlawful killing of a human being or fetus with malice aforethought."

Under English common law, the longest that real estate could be leased for was 99 years.

If your lawyer made a mistake and wrote a real estate lease for 100-years, after the execution (signing) of the lease by both parties, the lessee could immediately go to court and have the judge declare that the lease was an actual sale of the property.  The intended land lessor would be a given a mortgage for the amount of his land lease payments, and title to the property would pass to the intended land lessee.  

How could this possibly matter?  Imagine leasing out a piece of land for 100-years, and then a wave of hyperinflation struck.  The intended land lessee could simply hand you a check for 100-years worth of payments (possibly just enough to buy a cup of coffee) and keep title to the property, free and clear of the mortgage, for himself.

Les Agisim, the most successful commercial loan broker on C-Loans (55 closings), has used this video training program to train two-dozen new commercial loan agents.

Although U.S. courts always show great deference towards English common law, the various state legislatures are not bound by them.

Some U.S. states have passed state laws that say the longest period that you can lease real estate for in their state is only 40 years.  Other U.S. states have passed laws that say that you can lease real estate for as long as the parties would like.  Other states have kept the 99-year common law limit.

Different Subject:

I want to give you some free stuff.  Pick two:

1. The Blackburne List of 750 Commercial Lenders ($39.95).
   
   
2. How to Market For Commercial Loans?  It's only $199... but you're broke.  (You get the PowerPoint to my famous course, which teaches you everything.)
   
   
3. Been screwed out of too many loan fees?  Our mortgage broker fee agreement ($199) has probably been tested in more actual courtroom cases than any other.  Remember, I am an attorney.  (You get the fee agreement itself, not the 60-minutes of video training contained in our fee collection course.)
   
   
4. Our Income Property Underwriting Manual ($199) can make a real estate broker or residential loan agent into a commercial loan broker in a single afternoon.  (You get the manual itself, not the five-hours of video underwriting training.)

We here at C-Loans.com will give you TWO of the above freebies, just for entering a bona fide commercial loan into C-Loans and submitting it to six lenders.

Attention All Brain Surgeons:

Submitting a loan to C-Loans.com is NOT the act of filling out a lead form in order to get some freebie, like a free list of 200 commercial lenders or our free commercial loan placement kit.

Submitting a commercial loan to C-Loans.com is a six-step process that ends with you putting a checkmark next to six commercial lenders and then pressing "Submit". 

How To Get Your Freebies:

After going through the six-step process - putting a checkmark next to six lenders and then submitting your deal - please email me, Tom Blackburne, and tell me which two of the above gifts you want.  Please make the subject line, "I Completed a C-Loans Application."  Atta-boy!

If You Are a Commercial Loan Broker, Be SURE To Do This:

Mortgage brokers are rushing to get their favorite bankers signed up on C-Loans.com, and thereby earn 20% of our fee on the first three loans closed by their bank.  One mortgage broker, Arnold Taylor, has added almost 30 banks to C-Loans in the past two weeks alone.  Arnold will be earning big fees from this for years.

It's very easy.  Just call your favorite banker and explain that C-Loans delivers carefully screened commercial real estate loans that perfectly fit his preferences.  The bank merely has to bump its normal loan fee from 1.0 point to 1.375 points in order to cover our software licensing fee.  Next please email to your banker our Commercial Lending Preferences form.  Finally send an email to Tom Blackburne and register the banker with him.  We'll close the sale.

The price of gold shot up sharply this week, and then it quickly fell back down.  It is wise to always keep an eye on the price of gold because it is a harbinger of danger.

The word harbinger is an interesting word that means a person or thing that announces or signals the approach of another.  Synonyms include:  herald, sign, indicator, indication, signal, prelude, portent, omen, augury, forewarning, presage, and announcer.  In the old days, the harbinger was the advance guy who went ahead to find lodgings for his noble and his retinue.

The lovely wife go the BIGGEST kick out of the above meme.  Haha!

I was discussing gold's recent price swings with my son, Tom, and he replied, "Gold may be going up because of inflation."  Maybe.  Maybe not.

The reality is that gold is NOT a great hedge against inflation.  Let me explain.

It's true that gold usually increases in value as inflation increases, and many investors think they need to buy gold when inflation is raging.  The problem with gold, however, is that it does not generate income.  

Stocks (equities) and real estate also increase in value when inflation rages, plus stocks and real estate generate income.  Stocks pay dividends, and real estate throws off positive cash flow.

And it's not as if gold increases much more in value, during inflation, than stocks and real estate.  Suppose gold went up 10% during periods of painful inflation, but stocks and real estate only went up 5%.  Then it might make sense to buy gold as an inflation hedge.  But nope, this doesn't happen in real life.  The three asset classes (stocks, real estate, and gold) pretty much go up together in lock step.

Therefore it makes little sense to buy gold during periods of inflation.  You are giving up dividends and net rental income.  

Gold really shines, however, during periods of deflation.  There is an important concept that I want you to truly understand and commit to permanent memory:  Gold cannot default.

Suppose a huge earthquake, The Big One, leaves much of Southern California in ruins.  Bridges collapse.  California factories that supply vital parts to the rest of the country crumble to the ground, bringing much of the nation's industrial production to a screeching halt.  The U.S. economy contracts sharply, and the financial markets implode.

Almost one-hundred S&P 500 companies file for bankruptcy, many never to emerge again.  Their stock and debenture prices fall to almost zero.

Interest rates on commercial paper skyrocket to loan shark levels.  Commercial paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities.  Issuing commercial paper is slightly cheaper than borrowing from a bank, so many of our larger corporations issue commercial paper instead.

The State of California defaults on its bonds, followed by hundreds of municipalities across the country.  Most municipal bonds, even those issued by solvent cities, fall 85% in value, as investors panic.

Nobody wants paper investment instruments anymore - stocks, commercial paper, corporate bonds, municipal bonds, or even state bonds - for fear the issuer will go bankrupt or default.  Investors flee to U.S. Treasuries, cash, and ... gold.

Why gold?  Because gold is not the debt of another.  One more time.  Gold is not the debt of another.  Gold cannot default!

Everyone should own a handful of one-ounce gold coins, Maple Leaf's or Kruggerrands, and they should keep them in their Go Bags, along with some actual cash.  A Go Bag (also known as a Bug-Out Bag) is an emergency-preparedness bag that you pack in advance, but you hope you will never need.  Your emergency kit should be self-contained in one small or medium-sized bag and should contain enough nonperishable food and potable water for you and your family to last several days.

Even during a history-book-level of crash, like the The Big One finally demolishing California, gold funds may not fare as well as you might think.  The reason why is because such an event will cause a panic, and in a panic, everything is for sale.

Reminder:

There is a different gold rush going on.  Mortgage brokers are rushing to get their favorite bankers signed up on C-Loans.com, and thereby earn 20% of our fee on the first three loans closed by their bank.  One mortgage broker, Arnold Taylor, has added almost 30 banks to C-Loans in the past two weeks alone.  Arnold will be earning big fees from this for years.

It's very easy. Just call your favorite banker and explain that C-Loans delivers carefully screened commercial real estate loans that perfectly fit his preferences.  The bank merely has to bump its normal loan fee from 1.0 point to 1.375 points in order to cover our software licensing fee.  Next please email to your banker our Commercial Lending Preferences form.  Finally send an email to Tom Blackburne and register the banker with him.  We'll close the sale.

It's a gold rush.  It's a land rush.  Settlers are whipping their horses and driving their Calistoga wagons like crazy to be the first to register their bankers.  But you MUST call your banker first and make the verbal offer.  It doesn't matter if he says yes at the moment.  Just get your banker registered with us, along with your best understanding of his commercial lending programs.

And if you haven't used C-Loans.com recently, you will be thrilled with all of our new commercial lenders, including a dozen new hungry credit unions lending nationwide.  I love-love-love credit unions for commercial loans because they are so aggressive and forgiving.