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.