- Summary
- Companies
- Law Firms
- Retailer has closed all stores after failing to hit revenue targets
- Christmas Tree Shops reached a deal to pay more than $1 million to employees who worked during store closures
Reaction to a recent decision by Fannie Mae to not go forward with a proposed title-waiver pilot is drawing both praise and pushback from stakeholders in the space.
The government-sponsored enterprise first floated a potential program this spring that would have waived title insurance requirements on some loans sold to it in the secondary market.
Along with fellow GSE Freddie Mac, Fannie Mae has actively looked for solutions to address affordability and widen homeownership opportunities across the country. Among several developments emerging in the past several months are new underwriting guidelines as well as decisions by both Fannie Mae and Freddie Mac to allow the use of attorney-opinion letters in lieu of title insurance in limited cases. But the suggestion of waiving insurance requirements altogether drew criticism and challenges from the title industry.
Upon learning of Fannie Mae’s decision to not move the proposal forward, the American Land Title Association lauded the outcome.
“This is a significant achievement to protect consumers, lenders and the housing finance system, and showcases the benefits of our products, industry and your business,” the trade group said in a message to its members last week.
“We will also continue to collaborate with Fannie Mae and Freddie Mac to deliver innovative and cost-effective title insurance products and solutions that best protect lenders and consumers,” ALTA stated.
Providers of attorney-opinion alternatives also came forward this week to clarify that the end of the title-waiver pilot had no connection to the products they offer.
“Certain title alternatives, such as the attorney opinion letter (AOL), have been deemed acceptable alternatives to title insurance by agencies and investors,” said Stacy Mestayer, chief compliance officer at Voxtur Analytics, in a statement sent to National Mortgage News.
“Importantly, the recent reports related to halting title waiver initiatives has no impact on existing agency approvals of title alternatives, including Fannie Mae’s approval of AOLs,” she said.
Harsher words came from Theodore Sprink, founder of iTitle Transfer and a former executive at insurers Fidelity National and First American Financial. A frequent critic of ALTA, Sprink alleged the trade group “fabricated the title waiver ‘pilot’ program,” in multiple LinkedIn posts.
“ALTA created a solution in search of a problem,” he wrote, adding the waiver program had “nothing to do with AOLs as an alternative to costly and unnecessary title insurance.”
Fannie Mae’s title-waiver proposal emerged as both GSEs were tasked with introducing equitable housing plans in late 2021 to help close homeownership and disparity gaps. Subsequently, both Fannie Mae and Freddie Mac took a closer look at alternatives to title insurance, such as attorney-opinion letters, which they began accepting last year.
The use of AOLs, similarly, has drawn its share of critics from within the title industry. But the GSEs’ announcement it would begin to consider them also drew increased interest from major industry names, such as United Wholesale Mortgage, in providing such options at the tail end of 2022.
Adding further fuel to recent title industry discussions was a recent blog post by mortgage banking consultant Rob Chrisman, who highlighted an article claiming less than 5% of money collected from title insurance premiums went to claims, “the rest of it going to fat profits.” ALTA and mortgage industry lawyers attempted to refute the findings in following days.
In 2022, the title industry collected approximately $21 billion off of premiums based on mortgage volume totaling $2.25 trillion, ALTA reported. Insurers also paid $596.1 million in claims last year, representing an increase of 25% from 2021.
In the second quarter, five publicly-traded title insurers reported profits, recovering from a lackluster start to the year. But only two saw their profits increase on an annual basis as mortgage originations slowed substantially.
Source: nationalmortgagenews.com
Aug 16 (Reuters) – A U.S. judge on Wednesday converted Christmas Tree Shops’ bankruptcy to a Chapter 7 liquidation, saying a court-appointed trustee should take over the bargain retail chain’s wind-down and address doubts about unpaid employee wages.
Christmas Tree Shops filed for bankruptcy in May, hoping to keep most of its stores open while addressing its debt. But the company pivoted to a full liquidation in July after its store closing sales failed to meet revenue targets and Christmas Tree Shops defaulted on a $45 million bankruptcy loan.
During a hearing before U.S. Bankruptcy Judge Thomas Horan in Wilmington, Delaware, a lawyer for Christmas Tree Shops, Harold Murphy of Murphy & King, traded barbs with an attorney for bankruptcy lender and store liquidator, Hilco Global.
Murphy said that Hilco’s store-closing sales missed revenue targets by $14 million. Hilco counsel Gregg Galardi of Ropes & Gray countered that the retailer’s management exceeded its loan budget and told employees they would receive bonuses that Hilco never agreed to fund.
“Its clear to me that there’s been a complete breakdown,” Horan said when converting the case.
Horan convinced the two sides to reach a partial deal on employee wages, with Hilco affiliate ReStore Capital agreeing to pay $1.17 million to store-level employees who worked during the company’s going-out-of-business sales.
Hilco had initially argued it should not pay any more than it had budgeted in the bankruptcy loan, saying it did not trust Christmas Tree Shops’ calculation of employee wages. But Horan threatened to withhold fees from bankruptcy lawyers and professionals if any low-level employees went unpaid.
“This case is not going to be run on the backs of employees, that’s just unacceptable,” Horan said.
The agreement does not address wages for employees who worked at Christmas Tree Shops’ headquarters or wage claims filed by 250 workers who were laid off when the company went bankrupt.
A Chapter 7 trustee will address those claims, Horan said, adding “we’re not going to forget about the home-office employees.”
The Middleborough, Massachusetts-based company had 82 stores when it filed for bankruptcy, focused on selling home decor and seasonal decoration products.
The case is Christmas Tree Shops LLC, U.S. Bankruptcy Court for the District of Delaware, No. 23-10576
For Christmas Tree Shops: Harold Murphy of Murphy & King
For Hilco: Gregg Galardi of Ropes & Gray
For the unsecured creditors committee: Matthew Ward of Womble Bond Dickinson
Read more:
Retailer Christmas Tree Shops files for Chapter 11 bankruptcy
Bed Bath & Beyond files for bankruptcy protection, begins liquidation sale
Reporting by Dietrich Knauth
Our Standards: The Thomson Reuters Trust Principles.
Source: reuters.com
If you or someone you know has dealt with a collection agency, you know how trying it can be. Debt collection agencies have a long history of harassment and illegal practices. Can a collection agency report to a credit bureau without notifying you? The answer might not be that simple. Knowing illegal debt collection practices can help identify when you’re being treated unfairly.
The Fair Debt Collection Practices Act is a federal law that protects consumers against certain unfair collection practices. It applies to only external or third-party debt collectors and only for personal debts. It does not come into play for creditors collecting their own debts. State laws may provide additional protection.
In its annual report to Congress about debt collection complaints, the Consumer Financial Protection Bureau described collection complaints received by the Federal Trade Commission (FTC).
In 2019, the FTC received 75,200 complaints about debt collectors—down from 84,500 in 2018. A complaint does not mean a law has been broken, and some complaints may result from overseas debt collection scammers who harass consumers.
If the FTC finds the complaint to be valid, the agency can ban parties from participating in debt collection. The FTC keeps an up-to-date list of all prohibited parties.
A collection account can significantly affect credit score. If you’ve been contacted by a collector and are worried your credit is being hurt, it might be a good idea to check your credit scores to see if anything has changed.
Every year the FTC releases a report discussing the six main types of debt collection complaints from consumers. Understanding these complaints gives you a better idea of your rights as a consumer. If you’ve experienced any of these types of actions from a debt collection agency, you can report them to the FTC.
Before we delve in, a quick note: keep in mind that state laws can vary. So whenever we mention the law, we’re specifically referring to the Fair Debt Collection Practices Act (FDCPA).
Percentage of complaints: 45% in 2019
The law: If you don’t think the debt belongs to you, you can send a request in writing within 30 days of receiving the initial notice that you want verification of the debt. You can also request that the debt collector no longer contact you. You may consider making the request in writing so you have proof of the request
Often, this issue arises after identity theft occurs. That’s why it’s essential to keep an eye on your credit report, so you can spot these issues early.
Percentage of complaints: 18% in 2019
The law: Within five days of initially contacting you, the collector must send written notice of the debt and include:
You can file a complaint with the FTC if you believe the debt collector never sent written notice. Most individuals complaining about written notifications (65%) say they didn’t receive adequate information to identify and confirm their ownership of the debt. Additionally, some individuals (30%) complain that their written notice never included their right to dispute the debt.
Percentage of complaints: 12% in 2019
The law: Collectors are not allowed to call repeatedly just to harass you. However, there is no specific number of calls specified in the FDCPA limiting calls they can make within a given period. That’s for the courts to decide. If you think a debt collector is calling too often, start keeping a record of the time of the call and any messages left. Collectors also may not call before 8 a.m. or after 9 p.m. unless you’ve given them permission or at times you’ve told them are inconvenient.
The majority of complaints surrounding communication tactics are about repeated phone calls (55%), foul or abusive language (12%) or calls outside of the allotted times (5%).
Percentage of complaints: 12% in 2019
The law: Collectors can’t threaten a lawsuit, criminal prosecution, wage garnishment, jail time, or a poor credit rating unless they have the legal authority to do so and intend to do so.
The most common complaints in this category in 2019were:
These threats are often in violation of the FDCPA. Usually, collectors must take you to court and win before they can take these kinds of actions—if they even have the right in the first place.
Percentage of complaints: 11% in 2019
The law: Collectors can’t use false statements or representations to try to force consumers to cooperate, including:
These claims are in violation of the FDCPA to make if they are untrue. Sometimes, collectors may be allowed to make a claim if they have taken the consumer to court and received a court-approved judgment.
In 2019, the majority of complaints in this category were for:
Percentage of complaints: 3% in 2019
The law: Collectors can call third parties such as family members, neighbors, friends, or co-workers only once to locate the debtor. When they do, they are not allowed to reveal the debt.. They can only make contact again under specific circumstances.
In 2019, the majority of complaints in this category were for debt collectors who contacted:
The federal Fair Debt Collection Practices Act (FDCPA) limits what debt collectors can do and say when attempting to collect a debt. This law covers mortgages, credit cards, medical debts, and any other debt for personal, family, or household purposes.
Unfortunately, the FDCPA doesn’t cover business debt or debt that is owed to the original creditor rather than a collection agency.
As stated earlier, time and place, harassment, and representation are all factored into this federal act. Debt collectors cannot contact you in an unusual place or at a time they know is inconvenient.
Additionally, if collectors are aware you have sought legal representation for the matter, they must immediately stop direct communication with you and, instead, contact your attorney, except for a few exceptions.
Many people ask, “If a debt is sold to another company do I have to pay?” Once your debt is transferred, you owe the money to the current company rather than the original creditor. However, the new collector must still adhere to all the regular debt collection laws. In addition, the company cannot add interest you didn’t agree to or change any other terms of your original contract.
So, when does this happen? Can collection agencies buy from other collection agencies? Yes. Once your debt crosses a threshold that indicates it’s less likely to be paid, your original creditor will send it to a collection agency. After some time, the collection agency might sell your debt to a debt buyer.
If you do choose to pay off your debt, always make sure you pay the party currently holding your debt.
Another federal law is the Fair Credit Reporting Act. It covers certain financial aspects, including debt being collected and reported on your credit report.
This law protects consumers from unfair, deceptive, or abusive acts or practices by collection agencies or creditors.
If you think a debt collector or collection agency has broken the law while trying to collect a debt, you can:
Whenever you’re dealing with debt, it’s smart to review your credit reports for accuracy, because errors can unnecessarily damage your credit standing. Should the worst case happen, there are ways to dispute credit report errors.
If you’re ready to improve your credit score, you can begin the process of credit repair. Debt sent to a collections agency doesn’t have to ruin your financial life—you can work to fix your credit report with credit repair. ExtraCredit is offering an exclusive discount to one of the leaders in credit repair, so sign up today.
Source: credit.com
Things are continuing to heat up in Zillow Group’s legal battle with discount brokerage REX Homes, as the September 18, 2023, trial date looms ever closer.
On Friday, Judge Thomas Zilly, the U.S. District Court judge in Seattle overseeing the lawsuit, issued a minute order denying in part and deferring in part Zillow’s motion for summary judgement in the case.
In mid-June, the three parties involved in the suit, Zillow, REX and the National Association of Realtors (NAR), all filed motions for summary judgment on at least some issues, if not the entire lawsuit.
Three of REX’s claims Zillow filed motions for summary judgement on were denied by Zilly, while Zillow’s motion for summary judgement on REX’s antitrust claim was deferred.
Originally filed by REX in March 2021, the lawsuit alleges that changes made to Zillow’s website “unfairly hides certain listings, shrinking their exposure and diminishing competition among real estate brokers.”
Two months prior, in January 2021, Zillow began moving homes out of its initial search results for sellers who chose not to use agents adhering to the NAR and local multiple listing service (MLS) practices.
In January 2022, NAR filed a countersuit claiming that REX uses false advertising and misleading claims to deceive consumers in violation of the Lanham Act, but the countersuit was dismissed in late April 2022.
In mid-May 2022, REX ceased its brokerage operations.
Since then, REX, Zillow and NAR have gone back and forth with filing various motions to compel during the discovery phase of the trial.
In his minute order filed on Friday, Zilly denied Zillow’s motion for summary judgement on REX’s Lanham Act claim, REX’s claim for unfair and deceptive trade practices and REX’s defamation claim.
In regards to REX’s Lanham Act claim, Zillow contended that REX cannot prove that the allegedly false statements in question were made in “commercial advertising or promotion,” and that REX cannot establish injury or damages. However, Zilly felt that Zillow had not demonstrated that REX is unable to satisfy the test for commercial advertising or promotion.
In its motion for summary judgement, Zillow also claimed that REX’s unfair or deceptive trade practices claim should fail if the Lanham Act claim fails. However, according to Zilly’s order, REX has pleaded “both the “unfair” and “deceptive” prongs” of a consumer protection act (CPA) violation.
“Zillow has not demonstrated that it is entitled to judgment as a matter of law with respect to REX’s CPA claim,” Zilly wrote.
Finally, Zillow’s motion for summary judgement on REX’s defamation claim also was also denied. In the motion, Zillow argued that REX’s defamation claim fails as a matter of law as REX cannot prove damages, however, during oral arguments REX noted that it only seeks nominal damages. Zilly denied the motion as he felt that given the record on this claim, “the Court cannot determine as a matter of law whether REX can prove the actual malice necessary to be entitled to nominal or presumed damages.”
NAR and REX also filed motions for summary judgement on the case in June, but rulings have not yet been issued.
“We continue to maintain the claims made in REX’s lawsuit are without merit. REX chose to use Zillow’s services to advertise their for-sale properties on Zillow – for free. Zillow has consistently advocated for outdated rules to be changed to allow the broader display of all listings on all platforms, including For Sale By Owner and listings from other companies like REX. Zillow’s business decisions were squarely focused on improving the data on our site and the experience for customers,” Will Lemke, Zillow’s corporate communications manager, wrote in an email. “We hope the court sees this suit for what it is: REX seized upon Zillow’s website design change to hide its own business failings.”
NAR also believes its side will succeed in the lawsuit.
“While NAR was not a party in Zillow’s filing, we still believe the law is on our side and we remain confident we will ultimately prevail,” Mantill Williams, NAR’s vice president of communications, wrote in an email. “NAR guidelines and local broker marketplaces create highly competitive markets, empower small businesses and ensure equitable home ownership opportunities, superior customer service and greater cost options for all buyers and sellers”
Lawyers for REX did not offer comment on the ruling at this time.
Source: housingwire.com
Robert Kiyosaki, Robert Allen, and Loral Langemeier would have you believe that in order to get rich all you need to do is throw your money into real estate, sit back, and let the profits come. It’s not that simple. There’s risk involved. You have to know what you’re doing.
Jon forwarded a link to what he calls “a personal finance trainwreck”. He writes: “If this guy is for real (and there appears to be some suspicion about that) then, wow. Unbelievable.” Casey at iamfacingforeclosure.com thought he could make a killing at real estate. He wanted to reach Financial Independence quickly.
I’m a 24-year-old aspiring real estate investor from Sacramento, California. After going to few seminars I bought eight houses in eight months across four states with no money down. I fixed and sold two and then ran out of cash. I am now facing foreclosure on
sixfive houses. I’m learning my lessons, finding solutions and blogging about it.
Casey’s story is fascinating. Here’s a young man who read Kiyosaki and Allen, and who is trying to find riches by following their advice. He’s trying to make money quickly, and is struggling, but is willing to share the gory details. In one entry, Casey writes that he and his wife are running out of money. They’ve been living on credit cards, which are now maxed out. He’s afraid he might have to get a job.
I can’t just do a job. I do not want to give up my dream of financial independence. If I get a full-time job, I will continue doing my business and investing on the side. Finding time to do both will be hard (tried it before many times). If I must do that, I will. But it will probably take much longer to reach my goals.
An hourly job has limited earnings potential. Getting a 3% raise every year is not my idea of upwardly mobile. Making $25/hour writing code seems like a waste of time when I can sell a real estate contract for $5,000 after doing 5 hours of work = that’s $1000/hour!
So if I can work really hard for one month and find just 2 deals, I can make $10,000. That’s much better return on my time.
Casey received many responses (the comments are the best part of the site), some helpful, some angry, some flabbergasted. Some are all of these at once.
You’ve just nailed the difference between fantasy and reality. […] You are in the process of learning the difference between GAMBLING and INVESTING. Everything you’ve done so far has been gambling. Investing requires that one balance the risk with the rewards, diversify, and be dedicated. Some investments will fail, but a wise investor won’t have too much tied up in any single thing (like real estate purchased on a guru-drunken binge). Investments are made with money that one could stand to lose. Investing is not done by leveraging oneself up to the eyeballs and beyond, hoping for a miracle.
You can see television interviews with Casey (choose “House Flipper Part One” or “House Flipper Part Two” from the menu in the middle of the page). His story is also featured in two articles from the San Francisco Chronicle:
Langemeier, Kiyosaki, and Allen are inspirational. Some of their ideas may even be useful. (Prlinkbiz — who I’m sure will have something to say about this entry — is a huge Kiyosaki fan, and seems to be making his principles work for her.) But these folks preach that their methods are sure-fire ways to wealth and success. They overpromise in an attempt to sell books and seminars. Langemeier says she’s created 200 millionaires, and that she can make one out of anybody. Yet I can find no independent evidence that this has occurred. I’m not saying that it hasn’t happened, but I’m skeptical.
The only sure-fire way to wealth and success is to spend less than you earn, to save the difference, and to invest that savings for growth.
Casey stopped by Get Rich Slowly yesterday and had this to say:
I don’t see why a person CANNOT get rich quick… but still do it in an honest and safe way. Whenever you hear “Get Rich Quick” you think somethhing bad.
And yes, if you read my story, it DOES sound like i’m just a big screw-up. AND YES.. I did do some stuff that I am NOT proud of (liar loans). However, I am learning my lessons and hoping to make a comeback.
I am determined to find a way to make an honest buck in real estate in a down market. My mentor “Rich Dad” did it. It took him only about 10 years. Now he has 20K+/mo in PASSIVE income from REAL ESTATE.
Is 10 years too quick? What about 5 years?
That’s an interesting question. How quick is too quick?
It’s not impossible to get rich quickly — the day before I wrote about Casey, I shared advice on how to handle sudden wealth — but it’s dangerous to focus on quick wealth as a goal. I’m convinced that people get rich quickly by chance, not by intention. If get rich quick schemes worked, more people would do them. You’d read and hear documented tales of success. But they don’t work. They’re mostly scams designed to transfer money from saps like Casey into the hands of others.
My advice for Casey is this:
If you have a burning passion to make these sorts of plans succeed, then pursue them with only a portion of your finances. Follow tried and true personal finance wisdom with most of your money. Take 90% of what you earn, and do the boring stuff with it: pay off debt, start an emergency fund, invest for retirement. You are so young right now, that if you would invest just $5000 each year until you’re 50, you could retire then as a millionaire. (Assuming 10% returns.) This is with almost no risk. Why try to get rich all at once? Why not ride it out?
If you’re dead-set on trying to get rich quickly, then don’t use all of your capital to do so. Do the safe stuff with 90% of your money. Save the remaining 10% to make real estate purchases. If you strike it rich, great. But if you don’t, then at least you haven’t mortgaged your future. This isn’t ideal for most people, but you have the drive and desire, so it gives you something to play with. But this means that you’ll have to work in order to meet your goals.
I don’t want to kick Casey’s dreams. Dreams are good, and I think people should pursue them with gusto. Too many people make a practice of telling others why their plans won’t work instead of lending support. But when your dreams are at odds with reality, you need to re-evaluate.
Casey Serin of I Am Facing Foreclosure held a two-hour conference call to take questions from readers and to explain his situation. I didn’t hear the call, but I did read the entire transcript (part one, part two).
For those of you unfamiliar with him, Casey Serin is the Napoleon Dynamite of real estate investing. He took real estate seminars from Russ Whitney and read books by Carleton Sheets. He bought into the “get rich quick” mentality. In October, the San Francisco Gate wrote:
After spending a year and upward of $15,000 (borrowed on credit cards) going to real estate seminars and buying home education courses from everyone from Russ Whitney to Bruce Norris and, of course, the aforementioned Robert “Rich Dad, Poor Dad” Kiyosaki, Serin embarked on his brilliant career as a real estate flopper, er, flipper. “I wanted to move toward financial independence,” he told me by phone from his home in Sacramento, referring to “passive income,” a key tenet of the “Rich Dad, Poor Dad” scriptures (“Don’t work for money, allow money to work for you”).
Most people take these seminars and read these books but never do anything. Serin heeded the advice of these gurus. In his own words, he “bought 8 houses in 8 months in 4 states with no money down looking to fix ‘n flip.” He bought these houses between October 2005 and May 2006, after the U.S. real estate market had already begun to decline. He ended up $2.2 million in debt, and he’s been blogging about it ever since.
Serin’s story bugs a lot of people. He made many mistakes. He lied on his loan applications (and continues to rationalize this by saying it’s “industry standard policy”). He exhibits no regret. He continues to live a normal (even lavish) lifestyle despite being deep in debt. He refuses to pay anything on his debt because he doesn’t think it’ll make any difference. He refuses to take a job. He doesn’t take any action to improve his situation. He seems to be a publicity whore. Despite his failures, he believes that he can still get rich quick in real estate if he only finds some sweet deals.
I don’t get angry at Serin. I just think he’s dumb. He continues to pursue a way of life that is just not tenable. He’s trying to bypass the “hard work” portion of the American Dream. I consider his story a stark counterpoint to my message of “get rich slowly”. (Trivia: Casey went to high school with Ramit of I Will Teach You to Be Rich. The former tried to get rich quickly and failed. The latter teaches sensible entrepreneurship and personal finance advice, and has succeeded.)
As I said, I read the entire transcript of Serin’s two-hour conference call. It’s an amazing glimpse into the mind of a young man who wants wealth now. Since I know most people don’t have the time to wade through the entire thing, I’ve culled the best parts to share here.
The first thing that strikes you when reading Serin’s stuff is that he doesn’t seem to have learned his lesson. He’s two million dollars in debt, but he’s still convinced that there’s a quick fix for this mess.
Besides real estate, I’m also looking at other opportunities. With this exposure I’ve had, I’ve made a lot of interesting contacts in different industries, not just real estate. I’m talking with a gentleman in Southern California who’s a silver broker, for example. The silver and gold and precious metal market right now is on the rise, and whenever there’s turbulence, or any kind of a war, or anything crazy with the economy, that’s a good place to put your money. I’m definitely looking at that. I’m looking at stocks, but individual stocks, not mutual funds — the performers, the companies that are about to take off, that you’re able to make some money; for example, with penny stocks.
I want to mail Serin a box of personal finance books. I want to send him Dave Ramsey, Your Money or Your Life, the words of John Bogle. I want him to read real personal finance advice that works. But I’m afraid the books would go unread. (Does anyone have his address or know how to get it? Maybe I really will send him some personal finance books.)
At times Serin seems to have learned something. Regarding “no money down” deals, he says:
If I was putting my own cash down, I would have been a lot more careful. That’s what happens when you have a real down payment. Anybody out there who’s looking to do a no money down deal, I say, you have to be careful. Don’t treat the no money down as just a free deal for you.
But other times it seems he hasn’t learned a thing:
I love those no doc loans, they’re the best because you’re never stating anything so no one can ever go back and say you were lying on your application.
One caller tried to explain the concept of “buy low, sell high” to Serin, but he didn’t want to hear it.
CS: Well, you know, if you’re going to do flipping in a down market, here’s the biggest thing. Buying is going to be easy. There’s tons of people giving houses away, including myself. You come to me; I’ll give you my houses away. Just take them over, or whatever; save me from foreclosure. So, buying is not going to be the hard part. Selling is the tough part. You have to get really good at selling your properties, and in a down market, you probably don’t want to buy anything that’s not a first-time-buyer home.
[…]
SC2K2: I just can’t handle how brainwashed you’ve been by all those seminars.
CS: Oh, yeah?
SC2K2: The way you make money in a down market, is you wait for the prices to bottom; you buy in paying very little; and then you sell when they’ve gone way up. Yeah, your Rich Dad probably —
CS: That’s the long-term strategy. Are you saying you can’t do quick flips on the way down?
SC2K2: You know, Casey, there’s no way you would be able to handle quick flips.
Serin isn’t interested in a long-term strategy. He wants his money now. He doesn’t see that this is precisely where he’s going wrong. While he’s focused on quick riches, he’s neglecting basic personal finance. For example:
I thought at the beginning it would be such an awesome story, a comeback story and show so much success to be able to pay everything back, but at the same time I think I had a bit of a wishful thinking going on, because I didn’t realize when I first started what kind of a hole I was in. The hole’s so big that at this point, I’m really out of options.
Yeah, but here’s what’s going to happen. I pay a credit card — even fifty bucks — that doesn’t do anything to the collection process. Here’s what happens: it’s going to go and get discharged, and then they’re going to try to sue me and try to get that money. So that fifty bucks could have been used better in something where I can actually make money, perhaps doing another deal —
And:
GDS: What’s your FICO now?
CS: I actually don’t know because I haven’t logged into Washington Mutual in a while and I probably should have done that before this call, but last time I checked it was in the high 400’s, 490 I believe or something along those lines. It might be lower now because I’m going to have two official foreclosures showing up on my record any time.
GDS: Well, it doesn’t go below 450, so it doesn’t get much —
CS: It might be interesting to see if I might be a person that actually gets a 450 FICO score. I might be one of the few amongst some of my friends. I’m hoping other people don’t do the same thing I did.
The end of the conference call is the best part. A caller named Nacho tries to push Serin to think about his situation, about the things he’s done.
CS: Not everyone’s going to be successful and self-employed. But don’t you know self-employed doctors or lawyers or successful realtors or anybody who doesn’t have a W-2 but still makes money? It’s not like W-2’s the only…
NACHO: But you haven’t been successful! So isn’t it time to try something else? Supplement your side jobs with a real job.
CS: Well, you know, I never said I’m not going to get one. I’m definitely considering that, and since I do still have money coming in through some of those other sources, it allows me to stay flexible so I can still kind of be in real estate a little bit, and other opportunities.
NACHO: Do you understand that the real estate market is tanking? Do you have a grasp of that?
CS: Oh, yeah. That’s why I’m looking at other investing opportunities, not just real estate.
NACHO: And do you understand that you bought in at the worst possible time? You do understand that, right?
CS: It’s not like you can’t make money in a down market. My local Rich Dad, he made his fortune in the last downturn in California. But of course he had a lot more experience.
NACHO: Did he have decent credit? Was he able to secure loans?
CS: Well, he could secure loans. He had money partners. He had mentors. See, I kind of started off without any mentors guiding me, and that’s kind of one of my problems. And I didn’t have any construction experience.
NACHO: You know what, Casey? I don’t think mentors is your problem. I think you’ve got enough with these guru mentors. I think that that’s the last thing you need. What you need is a swift kick in the ass, from somebody who’s going to tell you the truth. Seriously. Someone who’s going to tell you the truth.
CS: I appreciate you being upfront and giving me a little dose of reality, as you said.
NACHO: Well, that’s how I roll. I’m always trying to keep it real. I’m just trying to let you know, man, that you need to start looking at things differently. You’ve been going a certain way and it’s not working out for you, and you really need to change the way you’re viewing life.
CS: Well, I appreciate it.
NACHO: Because everybody that you owe money to is going to get shafted, and then, in turn, taxpayers are going to have to pay — you know, foot the bill.
NACHO: Are you worried about going to jail?
CS: I’ve already kind of addressed it, but the thing is, if I live my life in fear, what good is that going to do?
NACHO: And you don’t think that you deserve to go? You don’t think that what you did was basic thievery?
CS: Well, the thing is I wasn’t out to rob banks, I was out to make a business, and I screwed up.
NACHO: But Casey, you got everything fraudulently. Come on, you knew in your heart that that was the wrong thing to do.
CS: Part of me was thinking that maybe I shouldn’t be doing stated income loans, because even though everyone seems to be OKAY with it, I had a little bit of a gut instinct. I should have listened to it; you’re right.
NACHO: And you understand that when you do things wrong like that, sometimes you have to pay the piper?
CS: Oh, yeah. And do you think I’m paying the piper?
NACHO: No, not yet. Not by any means, no.
CS: You don’t think that all the financial stress and the issues I’m going through is not enough?
NACHO: Absolutely not, Casey. I think you should be out there working your ass off — two jobs if necessary — paying five bucks a month on every single bill if that’s what it takes to pay this stuff down. I think you should be calling your creditors and making some sort of payment arrangement for you to —
CS: You know what? Check this out; put yourself in my shoes. Even if I get three or five or ten jobs right now I’m not going to be able to catch all my loans up, so they’re going to go to collections, and they’re going to start suing me. So if the only good thing I can really do right now is bankruptcy protection or refinance all those loans.
NACHO: If you pay five dollars a month on any bill, they can’t send it to collection, Casey, do you understand that?
CS: Sure, they can.
NACHO: No, they can’t.
CS: If I don’t pay the full monthly payment — I can’t just keep letting them go… That means I can just pay a dollar on all my loans and they’ll just keeping indefinitely. They’re not going to do that.
NACHO: I’m not talking about the foreclosure loans, I’m talking about the credit card bills.
CS: Even the credit cards.
NACHO: Casey, you have to do something to try and right this wrong. Who’s the guy who has the blog – I am [$334,442 in unsecured debt. I am 23. Will I make it ?] dollars, whatever the hell it is, in debt.
CS: Yeah, the guy eating Ramen and stuff. Yeah, he’s eating Top Ramen; he’s doing all this other stuff.
NACHO: He’s doing the right things. If you would do those things, people would be behind you. People would be giving you suggestions and telling you what to do. Do you understand that?
CS: Well, you might have a good point there. But I wonder if that guy’s really for real, though. Do you think a person can survive on Top Ramen for six months?
NACHO: Oh, yeah. Sure.
CS: Do you think he can eat that crap and still be healthy and still be safe?
NACHO: Yeah, throw some vegetables in there. Casey, the last thing you need to worry about right now, seriously, is eating your vegan — your mildly vegan — seriously, you throw some vegetables and a little bit of whatever, some chicken in the Top Ramen, and it’s fine. Have some beans and rice; that’s fine. Buy a big-ass bag of beans and a big-ass bag of rice and cook it up. Have oatmeal for breakfast —
Casey Serin may or may not be a good guy. I can’t tell. He seems likeable enough. But he has succumbed to the idea that the best way to make money is through tricks and games. I’m not saying that you have to be a wage slave all your life in order to get money to save for retirement. But there are clear, safe paths to wealth and happiness. They take time. They take effort. My goal is explore these paths with you. It’s too bad Casey’s not along for the journey.
Source: getrichslowly.org
Initial public offerings (IPO) are a common tool for companies to raise capital, and the funds raised in an IPO are known as IPO proceeds.
When investors purchase IPO stocks, the company gets to keep the proceeds, after paying underwriters, the exchange, and others that helped with the IPO process.
By opening up to public investment, a previously private company can bring in significant funds that can be used for various activities, rather than turning to debt as a means of expansion.
Companies can use the capital brought in through an IPO in a variety of ways, but they must disclose their plans to investors.
When a company holds an initial public offering (IPO) they must publish their plans for how they will use the proceeds. This helps investors understand how the company will use their money, and decide whether they agree with the company’s plans before they invest.
This is important because even though the IPO process is highly regulated, it’s also highly risky. Some companies that issue their stock for the first time can see the stock price soar; others can see it plunge. It’s also possible for the IPO to have an IPO pop, or price spike, before dropping. This kind of volatility is common to IPOs, which is why investors must proceed with caution.
Companies preparing for an IPO file an S-1, a several-hundred-page document, with the Securities and Exchange Commission (SEC) which includes a disclosure about the planned use of IPO proceeds.
They must also show investors a business plan. Potential investors can evaluate the business plan and see if they think they will receive a satisfactory return on their investment if they buy stock in that IPO.
While companies get to keep most of their IPO proceeds, a portion also goes to all investment banks, accountants, lawyers, and others who helped them with the IPO process, including valuing the company and setting an IPO cutoff price. According to PWC, underwriting fees alone eat up 3.5% to 7% of IPO proceeds.
💡 Quick Tip: Keen to invest in an initial public offering, or IPO? Be sure to check with your brokerage about what’s required. Typically IPO stock is available only to eligible investors.
There are a few areas where companies tend to spend IPO proceeds. Generally companies mention multiple uses in their S-1 filings, and it may also be something that they discuss with investors during their IPO roadshow. These might include:
General corporate purposes is a very common area companies talk about in their use of proceeds statements. It is a broad category that covers a lot of uses such as capital expenditures, operating expenses, and working capital, and getting more money for this is a major reason that many companies go public. Companies can use this term to describe broad activities without going into detail about their plans.
This allows them to keep their plans private and also lets them keep their options open and decide exactly how to spend money at a later date. Some companies do go into greater detail about the meaning of their general corporate purposes statement.
Companies might also use proceeds from an IPO to fund research and development. They spend funds developing new products and services, which can take years and significant amounts of money. Since R&D is so expensive, it is a major reason companies choose to hold IPOs.
Without R&D, some companies might struggle to keep up with competition and stay relevant in their industry. Some companies go into detail about the types of R&D projects they plan to work on using IPO proceeds, while others keep their plans vague.
Companies often choose to hold an IPO to raise funds for company growth. Company growth plans often appear in their business plan, and can include capital expenditures, working capital, sales and marketing plans to help a company grow its reach and revenue.
Companies want to create long-term, sustainable growth so that a company can stay in business for a long time. Like other uses of IPO proceeds, companies may go into detail about their plans for company growth expenditures or they may keep their plans vague.
💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.
Companies can use IPO proceeds to merge with or acquire other businesses, something that can be very expensive. Without holding an IPO a company might not have the funds required to complete an acquisition. Acquisitions and mergers can help a company grow their customer base, eliminate competition, and expand their product and service offerings.
When a company includes an acquisition in its S-1 filing, they must state which company they intend to acquire. If they don’t yet have a company in mind to acquire, they can just list acquisitions as one possible use of IPO proceeds. A company does not have to state the exact company they are interested in acquiring if it will harm the potential of the acquisition plan.
Some companies take a unique path to acquisitions using IPO proceeds, known as a “blank check” IPO or special purpose acquisition company (SPAC). Companies create a shell company that they take public with an IPO and then use the IPO proceeds to complete an acquisition.
Another common use of IPO proceeds is to pay off debt. By paying off any existing debts, companies no longer have interest payments, so they reduce their operating costs, and they can also gain access to more funds from loans. Although it can be beneficial to a company to pay off their debts, this use of IPO proceeds is not popular with investors.
In addition to the uses described above, there are many other ways companies can use IPO proceeds, including paying taxes and charitable actions.
The SEC requires companies file a “use of proceeds” section in their S-1 IPO submission. The S-1 explains to investors the goals of the IPO and what the company plans to do following the IPO, including how they will use proceeds. Requirements for what must be included in the S-1 are fairly broad, so companies can choose how much to share with potential investors, and they have a lot of choice about how they can use IPO proceeds.
There are several specific requirements for what must be included in the S-1, a document scrutinized by investors as part of their IPO due diligence. The “use of proceeds” section must include a brief outline of how proceeds from an IPO will be used. The requirements for what the brief outline includes are broad, giving companies a lot of freedom in what they want to disclose. Companies are allowed to use broad statements about planned use of funds, such as listing the categories described above.
Later sections in the S-1 submission require companies to go into greater detail about spending plans if they plan to use funds for certain activities. Just because a company states they plan to use funds in a certain way doesn’t legally bind them to actually use the funds in that way. However, companies need to inform investors that plans may change later if that is the case.
With many companies going public per year, knowing how a company is going to use its IPO proceeds — the funds earned from the public offering itself — is important if you’re thinking about investing in that company’s IPO. You can find that and other useful information about a planned IPO in a company’s S-1.
Common uses for IPO proceeds include paying off debt; funding additional research and development; general corporate purposes, and more.
Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it’s wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.
Invest with as little as $5 with a SoFi Active Investing account.
When a company holds an IPO, they receive money from banks and institutional investors who have agreed to invest prior to the start of the IPO. The company receives proceeds from the initial sale of stock. Any money exchanged after the IPO from the sale of stock doesn’t go directly to the company.
Primary proceeds are those made from the initial sale of stock in an IPO. Secondary IPO proceeds are those made in the stock market following the IPO.
An IPO raises money by offering shares of stock in a company to institutional and retail investors. When investors purchase those stocks, the company gets to keep the proceeds, after paying underwriters, the exchange, and others that helped with the IPO process.
Photo credit: iStock/Charday Penn
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.
New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com
Anxiety can be considered a disability. If you have severe anxiety symptoms that prevent you from working and you meet certain criteria, it’s possible to qualify for Social Security Disability Insurance (SSDI) benefits.
Applying for disability benefits takes time, though, and most claims are denied. To increase your chances of getting approved, you’ll need to show robust medical documentation. Consider getting an experienced disability lawyer to help you put together a strong case.
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Find and hire fiduciaries, financial advisors, and financial planners that will work with you to achieve your wealth goals.
The Americans with Disabilities Act (ADA) requires that reasonable accommodations be made in the workplace (assuming the employer is able to do so) for employees with disabilities, including mental health conditions and anxieties
. Common accommodations for workers with anxiety might include:
Quieter workplace environments.
The ability to work from home.
Flexible scheduling to allow for medical appointments.
If your employer refuses to provide reasonable accommodations for anxiety, this could be considered discrimination. If you believe you’re being discriminated against on the basis of disability, you can file a complaint with the U.S. Equal Employment Opportunity Commission within 180 days of when the discrimination occurred. You might be entitled to a remedy such as a reassignment, promotion or back pay.
Your anxiety needs to be found to be a medically determinable impairment of your daily life in order to qualify as a disability for SSDI, says Amanda J. Bonnesen, an attorney with Berger and Green Attorneys at Law, an injury and disability law firm based in Pittsburgh.
The Social Security Administration (SSA) will first consider whether your supporting medical documentation aligns with the adult medical listing for anxiety in the SSA Blue Book
, the guide that lists medical specifications to qualify for disability.
For anxiety disorders: Patients must display several overlapping symptoms, starting with three or more of the following:
Irritability.
Difficulty concentrating.
Restlessness.
Easily fatigued.
Muscle tension.
Sleep disturbance.
For anxiety that’s medically diagnosed as agoraphobia or a panic disorder: The condition must cause a person to have a disproportionate fear or anxiety about two separate situations (like interacting with other people and using public transportation) and/or cause persistent panic attacks.
Along with those indicators, you’ll also have to show either
:
Certain functional limitations.
Or a history of having a serious or persistent anxiety disorder for at least two years and receiving treatment for it.
If your medical records don’t exactly match the criteria in the Blue Book, the SSA will move on to analyze your work history. That usually includes consulting with vocational experts, physicians and/or therapists to formulate what they see to be a person’s functional limitations, and whether or not the condition is impacting the ability of a person to do their job.
A disability attorney will typically try to get a claim approved “by showing that even though a client is in treatment, the best functionality this person is going to have still prevents this person from attending work regularly,” Bonnesen says. “Or, if they do attend, they’re not able to stay on task, maybe requiring moments to leave work to gather themselves, or to leave altogether because of their symptoms.”
The likelihood of your SSDI application being approved depends greatly on the details of your specific case.
For claims filed from 2010 through 2019, 31% of disabled-worker applications were granted benefits
. As of December 2021, about 4% of SSDI recipients received benefits due to “other mental disorders,” a category that includes anxiety.
“The problem is, at every stage of the game there’s a human being on the other end making that decision,” Bonnesen says. “So unfortunately, as much as they try to make it objective with rulings, laws and federal codes, there’s still a human being interpreting it. There’s no way to take the subjectivity completely out of it.”
Julie Burkett, an attorney who serves on the board of directors for the National Organization of Social Security Claimants’ Representatives (NOSSCR), says she recently had two decisions handed down regarding anxiety disorders in the same week, one that was approved and one that was denied.
The likelihood of getting a claim for anxiety approved? “It’s possible, but not a given,” she says.
How much income a person can bring in through SSDI is dependent on several factors.
“What Social Security will do is analyze your earnings history pooled through the IRS,” Bonnesen says. Social Security then uses its own formula to calculate a monthly benefit.
Of those awarded benefits, payments typically amount to more than part-time wages but not as high as a full-time salary, Bonnesen says. In June 2023, Social Security paid approximately $1,483 per month to disabled workers
. This, it’s worth noting, is barely above the federal poverty level.
Applying for SSDI can be a challenging task. There are a few things you can do to help improve your chances of qualifying.
The SSA is looking for medical conditions where the person is doing everything medically recommended to get better and the treatments are just not helping them stabilize, says Bonnesen. Someone who drops out of treatment or only sees a primary care physician — as opposed to therapists and specialists — won’t be considered, she notes.
Be sure to communicate all of your symptoms with your doctors and therapists.
“Don’t assume or take for granted that the first time you tell them something, that will carry through,” Bonnesen says. “Be vocal the whole time, or your records won’t reflect what you’re suffering with.”
If your doctor recommends a course of action or treatment for your condition, you’ll want it documented that you’re doing what they recommended, says Burkett.
If you drink or use recreational drugs and have anxiety, the SSA will need to determine whether you’d still suffer from anxiety without the interference of those substances. This makes the process more difficult.
Anyone looking to apply for SSDI should understand the rules regarding working and receiving benefits.
“A person cannot be working full time. That’s the whole standard,” Bonnesen says. “Social Security compensates individuals who are unable to work full time, on a consistent and ongoing basis, due to a condition lasting or expected to last 12 months or longer.”
Since the application process can take a while, people can work part time, within certain limits, while waiting on their decision. That’s typically under 40 hours a week, with gross monthly earnings that are less than a certain amount. For 2023, someone earning over $1,470 per month (or $2,460 if they’re blind) won’t be considered for SSDI
.
Once your application has been accepted, there is a trial period of nine months allowed for someone to receive full benefits and test their ability to work, regardless of how much they make.
If it seems like qualifying for SSDI requires jumping through a lot of hoops, that’s because it does.
“Representation can help so much, because it allows an individual to focus on what they need to do with their health team, rather than worrying about paperwork with the administration or deadlines or gathering records,” Bonnesen says.
Look for a disability lawyer with experience working on claims like yours, with a high rate of successful outcomes. Disability lawyers work on contingency, meaning they won’t be paid unless your claim is approved. The SSA also sharply limits how much disability lawyers can charge in fees.
If I’m denied SSDI once, can I reapply?
There are four ways to appeal an SSDI denial:
A reconsideration of your original claim by a person who was not involved with the original claim.
A hearing by an administrative law judge.
A review by the appeals council.
A federal court review, which can only take place if you disagree with the appeals council or your request was denied by them.
If you do plan to appeal a denial, you have 60 days from when you receive notification of your denial to do so.
What records do I need to share with the SSA to qualify for SSDI?
The more information you can gather to file your SSDI request, the better your chances are of succeeding.
The SSA recommends getting together a “substantial” history of treatment from your physician and qualified mental health professionals. That includes therapy notes, hospitalization records, psychological tests, reports from your doctors and, if relevant, work history reports.
What if my anxiety keeps me from being able to handle everything I need to do to apply?
Look for an experienced disability lawyer who has worked on anxiety claims in the past. They can help with meeting deadlines and completing the application process.
Source: nerdwallet.com
There’s nothing I like more than writing my annual checks for all my insurance protection…cough.
Not including my long-term disability policy, my $2.5 million 30 year term policy, standard homeowner’s and auto policies, and personal umbrella policy; I pay roughly $5,124 per year for my total business insurance coverage.
But we all know that insurance is a necessary evil.
When you damage someone else’s property or cause injury to someone else, you are usually held personally liable for the costs.
This means that you have to pay restitution.
In some cases, these costs can exceed your ability to pay. That is not a good situation!
With the help of personal liability insurance, though, it is usually possible to meet these types of obligations.
Personal liability insurance is a completely different ballgame from life insurance.
Chances are that you already have some liability coverage. Most homeowners policies and auto policies include a certain amount of personal liability coverage.
If someone is injured at your home, or if you ruin someone’s property with your car, the insurance company pays the claims, up to the amount that you are covered for.
Personal liability coverage helps you protect your assets since the insurance company pays out the claim, and you don’t have to dip into your savings, or into your other assets.
However, the personal liability coverage that comes with your more common insurance coverage isn’t always enough.
One way to augment your personal liability coverage is to purchase an umbrella policy.
Umbrella insurance protects you in larger amounts than what is usually offered with your other policies, but the premium increase isn’t as bad.
You can usually buy a popular umbrella coverage amount for about $150 a year, and an increase of $50 for each additional $1 million. Many consumers find that boosting the deductible on auto or home insurance can offset the cost of umbrella insurance.
If you have factors that increase your chances of damaging property or injuring others, it can be worth it to get umbrella insurance — especially if you have a high net worth.
Someone who knows you have more assets might be more willing to sue you for $2 million after a slip and fall at your home. Umbrella coverage kicks in after your regular insurance is tapped out.
So, if your homeowner’s policy has $750,000 in liability coverage, and you have $3 million in umbrella insurance if you are sued for $2 million, your homeowner’s policy will be tapped first.
Once the $750,000 has been paid out, the remaining $1.25 million will be paid from your umbrella policy.
We initially started with a $1m umbrella policy but recently increased that to $2m of total coverage. I also have an umbrella policy for my business, too.
When you are self-employed, you have to be aware of some of the liability issues that can come with your job.
If a client holds you responsible for a service you provided, or if the promised results were not realized, or if you are considered liable for a service you didn’t provide, this can become an issue.
Financial planners, lawyers, cosmetologists, and others who are in positions to provide advice and some services to clients can benefit from this type of liability insurance.
This is my whopper of a premium, but with my profession; it’s a necessity. My total premium is $3,654 per year for E&O coverage…gulp.
Some additional benefits that my E&O coverage policy covers on top of the $1m of coverage are:
Make sure you consider your situation and your position. If it appears that you could be sued for what you have done, it’s important to make sure that you have the proper liability insurance.
That way, you will protect your assets, and avoid financial ruin if you are held liable for someone else’s injury, loss, or property damage.
Source: goodfinancialcents.com
On Thursday, attorneys for the former employees, Sprout’s affiliated company Recovco Mortgage Management and Michael Strauss, an industry veteran who founded the lender, requested that the court to continue its review of the settlement.
“The bankruptcy proceeding was commenced only against Sprout, so consistent with the approach adopted by some cases under similar circumstances as those presented here, the parties request that the automatic stay only applies to the action against Sprout, not Recovco or Strauss,” an attorney for the former employees wrote in court filings.
In addition, the parties requested that the judge allow the distribution of funds currently escrowed under the settlement reached before the involuntary bankruptcy petition. They claim that the escrowed funds are not the property of Sprout’s estate for bankruptcy.
According to the document, Sprout has “nearly fully complied with the terms of the class settlement agreement, but for the last $300,000 payment.”
The document states that Recovco and Strauss are not admitting any liability but believe that under the circumstances present, it is in the interest of all parties for the settlement process to continue.
Scott Simpson, one of the attorneys for the former employees at Menken Simpson & Rozger LLP, said he had no comment.
“Our clients still have no comment,” Marc Wenger, an attorney for the defendants Sprout, Recovco and Strauss at Jackson Lewis P.C., said.
Also due to the involuntary bankruptcy petition, Sprout’s attorneys moved to adjourn “without date” a pending motion and a hearing scheduled for August 3 on a lawsuit filed by Merchants Bank of Indiana.
Sprout’s lawyers mentioned in court filings Section 362 of the Bankruptcy Code, which gives debtor protection from creditors, among other things, from “the commencement or continuation of any judicial, administrative, or other action or proceeding” that was or could have been commenced before the bankruptcy court case.
Merchants Bank of Indiana claims in its lawsuit that it purchased a mortgage loan from Sprout, and the underlying borrowers subsequently tendered a full payoff of the mortgage loan to Sprout. Still, the company failed to remit it to Merchants as the parties’ written agreement required. The total value was $1.2 million.
A representative for Merchants said the company had no comment.
Long Island-based Sprout informed hundreds of workers and business partners it was closing its doors on July 6, 2022, when a sharp rise in rates saddled the company with loans it could not sell to investors in the secondary market at par.
Ex-employees alleged the company did not pay their last paychecks and severance package. The company also canceled health insurance coverage retroactively to May 1, resulting in several lawsuits against the lender. The lender is also the target of lawsuits from former business partners.
Strauss is reportedly trying to sell a property at 610 Park Avenue in New York for $19.9 million and has started a new mortgage company. But Strauss and his new company, Smart Rate Mortgage, appealed in April a decision from an Illinois regulator to suspend their licenses to operate in the state. Meanwhile, the licenses remain active.
Source: housingwire.com
In the era of online banking and mobile financial technology apps that all but replace traditional bank accounts, the idea of a human banker feels downright quaint.
Yet human bankers still play an important role in the banking ecosystem. They’re especially important for affluent people with extensive assets and complex financial needs. Many of these folks use human-led private banking services that come with bespoke wealth management, tax planning, trust and estate planning, lending, and access to financial products and investment opportunities unavailable to the rest of us.
Private banking isn’t for everyone. But you don’t have to be a multimillionaire to take advantage of it, either.
Private banks provide customized financial products and services for wealthy people. Private banking encompasses multiple aspects of clients’ financial lives, including traditional bank accounts, investment accounts, insurance, tax management, and estate planning.
Some banks’ wealth management divisions provide the same scope of services as others’ private banking divisions. However, wealth management more often refers to a narrower set of services focused on managing clients’ investments. That said, financial institutions sometimes use the terms “private banking” and “wealth management” interchangeably.
Private bankers work individually or in teams, usually within much larger financial institutions that also operate retail banks and investment management firms. Private banking teams can include lending specialists, investment managers, alternative investment specialists, and bankers who specialize in managing complex financial situations.
Many private banking teams or the wealth management teams housed within them operate as fiduciaries. That means they’re legally obligated to act in their clients’ best interests, which extends to recommending investments they believe are the best fit for their clients (rather than the most profitable for the institution). Before signing with a private bank, ask if its team acts in a fiduciary capacity, and reconsider if the answer is no.
Even if the client has access to multiple financial professionals on a private banking team, one banker typically serves as the main point of contact for all financial matters covered by the private banking agreement. This person is often referred to as the client’s relationship manager.
For help with more specialized client needs, such as tax and estate planning, the relationship manager or others on the team may coordinate with outside lawyers or accountants.
Private banking clients may get discounted pricing on loans and lines of credit, bank accounts, safe deposit boxes, investment products, and possibly other financial products and services. They may also get higher interest rates on interest-bearing checking accounts, savings accounts, and CDs.
To cover ongoing services like investment and cash account management, private banking clients typically pay a percentage of the assets the bank is managing, aka assets under management. If the bank charges it in place of all other fees, it’s known as a wrap fee.
Private banks’ asset management fees typically range from 0.5% to 1.5% of assets under management and often decline as total investable assets increase. Wrap fees may be a bit higher because they encompass the institution’s entire range of services.
Private banks cater to high-net-worth people. Some also cater to a broader group of clients known as “emerging affluents,” who are typically younger, high-income people poised to build significant wealth.
Depending on the institution and the mix of clients they serve, private banking teams provide some or all of these services:
Each financial institution has its own unique approach to private banking and may offer different mixes of services. And some peripheral services, like tax and estate planning, may involve out-of-pocket fees. Before opening accounts with a private banking team and moving your life savings, ask exactly what it can do for you and how much it costs.
Every financial institution sets a minimum asset threshold it requires to qualify for its private banking services. Some institutions make exceptions to their asset requirements on a case-by-case basis, but the easiest way to qualify for private banking is to exceed the threshold.
Private banking asset thresholds can range from as little as $50,000 or $100,000 to more than $2 million. Many private banks set the threshold at $1 million in investable assets, including cash held in deposit accounts and cash or securities held in investment accounts. Funds held in tax-advantaged retirement accounts typically count toward the asset threshold but less liquid assets like real estate don’t.
Some private banks have multiple service tiers that also depend on investable assets. For example, clients with less than $1 million in investable assets might qualify for a relatively basic set of private banking services without a dedicated relationship manager. Clients with between $1 million and $5 million might get a higher level of service and personalization along with a dedicated relationship manager. And clients with more than $5 million might qualify for the bank’s highest level of service and personalization.
Private banking has some clear upsides it’s difficult to argue with. But it has some hidden downsides as well and definitely isn’t right for everyone who qualifies.
Private banking offers a level of personalization and access that retail banks and DIY brokerages can’t match. It’s an excellent fit for affluent (or downright wealthy) individuals and families who don’t have the time or interest to directly manage every aspect of their complex financial lives.
Private banking clients are captive to a single financial institution, reducing their ability to shop around for better deals and potentially increasing their all-in costs. And though private banks hold team members to basic professional standards, they’re not always world-class.
You don’t need a private bank just because you have $1 million or more in liquid assets. If you’re a seasoned DIY investor and have the time to manage your money on your own, you might not need help from any financial professionals at all.
On the other hand, if you’re not a confident investor or financial manager and don’t have the time or interest to learn, private banking could make sense for you. Specifically, it could be a good fit if:
The idea of private banking is simple enough, but novices can get bogged down in the details. These are answers to some of the most frequently asked questions about it.
It depends on your definition of “rich,” but the short answer is no. Some private banks accept clients with as little as $50,000 in liquid assets. Chase Private Client, which offers a full range of financial services, requires $150,000 in liquid assets.
That said, many private banks set the asset floor at $1 million, which meets any reasonable definition of “rich.” And some banks have multiple relationship tiers that reserve the highest levels of service and choicest financial benefits for clients with more than $5 million or even $10 million.
The easiest way to qualify is to meet the bank’s asset minimum. An entry-level private banking relationship could be yours for as little as $50,000 to $100,000, though many banks require much more.
Some private banks make exceptions to their asset thresholds for young, high-income “emerging affluents” expected to amass considerable wealth in the near future.
Private banking and wealth management are often used interchangeably and can mean different things to different people.
Some define private banking narrowly, as only core deposit and lending services, but the more common definition is broader and encompasses investment management, financial planning, tax and estate planning, and risk management.
Wealth management is narrower but still quite broad, encompassing wealth management and long-range planning. The difference is that wealth management excludes the deposit and lending services at the heart of private banking.
If you think you’re ready for a private banking relationship, you should shop around. As you would if you were in the market for a new independent financial advisor, investigate several private banks that operate in your area. For each, consider:
It’s especially important to understand how much you can expect to pay your private bank and whether the team members have a fiduciary duty to you. Be very cautious about working with non-fiduciaries or with private banks that are significantly more expensive than the competition, even if they claim to offer more or better service.
Most Americans don’t have $1 million sitting in the bank waiting for white-glove management. Most don’t have $150,000, for that matter. And not everyone who does is a good fit for private banking, anyway. Some are perfectly capable of managing complex financial situations on their own — they might even prefer to.
But while private banking isn’t exactly mainstream — which would defeat the purpose — it’s an important component of the broader financial system.
For better or worse, a disproportionate amount of American wealth is controlled by individuals and families who easily qualify for private banking relationships, and many of those folks take full advantage. It’s helpful to understand how they stand to benefit and the tradeoffs they accept in return.
Source: moneycrashers.com