The Prescription for Pain Induced by Financial Intermediaries

The reality:

Since the financial crisis of 2008, those who have applied for mortgages or other loans from the traditional financial intermediaries such as banks, mortgage companies, credit unions etc., regardless of their credit, have experienced a painful, time consuming and expensive process.

It is not that these institutions do not wish to make loans, it is just that they cannot provide a sound credit response to an individual borrower’s need and qualifications.   Hannah Rounds cites in her recent article (http://www.magnifymoney.com/blog/mortgage/u-s-mortgage-market-statistics-2017), several reasons for this reality. These include the disappearance of private securitization market (a minuscule .07%), leaving only the government, credit scores and down-payment requirements. The latter missing from millennials due to student debt and leveraged balance sheets, which increases the price of homes and regulatory induced costs.

 

This has led to alternative sources of funding, generally referred to as “peer to peer”.

Unfortunately, these are very expensive and inflexible, as they too are controlled by government regulations and market dictate.

Is there a cure? Yes! That leaves us one traditional alternative:

Loans from family or friends.

These non-intermediary and self-directed loans can be cooperatively structured to meet the wishes and capabilities of each party, devoid of regulatory or market constraints. This includes the ability to set a mutually amenable interest rate or term, the capability to modify or forgive the loan, etc. But how to account for these loans?

 

The technology solution to end “back of envelope documentation “would be LoanKin, a company that has been in in operation for seven years. This software as a service company allows related parties to self-approve the terms of a loan and securely create their own platform of record on line. This includes documentation tracking, lifetime payment processing, customer service, etc. at a fraction of the time and the cost that it takes to just apply for a loan from the bank.

Solution To Millennials Challenged With First Time Home Buying Due To Overwhelming Student Loans

The Problem!

Over leveraged millennials are in a financial straight jacket!!

It’s not the money it’s the “Money

Today any casual reading of the financial press complains about the delaying impact of student loan debt, headaches around first time home purchases, inability to qualify for traditional funding, etc.

The National Association of REALTORS® (NAR) claim that 83% of millennials are delaying their home-buying plans by a median seven years as a result of their student loan debt. See the report here:

http://rismedia.com/2017/09/19/college-debt-is-postponing-homeownership-how-long

Over the 40 years that I have been in the financial business, I have seen both sides of the coin when it comes to younger generations (millennials) obtaining finances for their first home. On one side of the coin I have seen those struggling to qualify for loans due to high debt to income ratio, lack of savings and strict financial intermediary regulatory, credit and document requirements on first time home purchases, education, marriage, starting a new business, career changes etc.   On the other hand, I have seen families take out money from trust, inheritance and other family funds and lend the money to their children at an agreed upon rate giving them a leg up and great head start on their future.“, states LoanKin Founder, Emile Coulon.

This leads us to the solution.

The Solution 

While these problems are not new and have historically been resolved by the generosity and trust of family and friends through transfers of wealth in the form of loans, rather than gifts.

Family assistance has given many millennials with limited work history a way to not get buried in debt before they can make a way for themselves.  This advantage helps them not only have a roof over their heads that is not their parent’s house, but it also helps them not make hasty decisions in life that are influenced by the influence of overwhelming bills.

WHY LoanKin?

Arguably, today traditional lending institutions are conflicted, leaving credit-worthy borrowers applications for funding legitimate investment opportunities for life events — education, starting a business, buying a home, etc. unrequited.

In my forty years in finance, there has seldom been a period where so many deserving borrowers have been rejected by the traditional sources of funding despite the staggering amount of liquidity in the system. The old adage that money burns a hole in the bankers’ pockets is — at least for the moment — suspended.

This reality has a number of obvious and oft cited reasons: penance for past excesses, capital adequacy, the intrusive role of regulators, and the explosion of compliance regulation.

Whatever the reasons, the lack of credit for those who are deserving is creating a significant sea anchor on the economy, and idling human capital that would be the engine for tomorrow’s growth.

Thus LoanKin, a company designed to allow the individual the benefit of Cloud technology that eliminates the expense of the middle man and provides control over the investments they design.

LoanKin, a low-cost, automated, flexible administrative process that provides a platform of record where borrowers and lenders can customize their own lending arrangement. You determine the credit worthiness, the terms and conditions, and modify the loan when events dictate.

I believe and hope that LoanKin will allow worthy borrowers and lenders to realize their goals and bypass the institutional constraints present today. This ability and willingness to take reasoned risks has been the backbone of growth in this country.