JP Morgan Chase to lay off 5000 employees in US

June 1st, 2015

JPMorgan Chase & Co., the biggest U.S. bank by assets, will cut thousands of jobs over the next year as it seeks to contain expenses and sells businesses, said a person with knowledge of the plans.

 

The lender has been consolidating back-office support, cutting mortgage workers as home-loan volumes decline and reducing the ranks of tellers as more customers use automated channels, said the person, who asked not to be identified discussing personnel matters. The New York-based bank may cut more than 5,000 workers by next year, the Wall Street Journal reported Thursday, citing people familiar with the matter.

 

JPMorgan, which had 241,145 employees as of March 31, said in February it would pare $4.8 billion of expenses from its consumer- and investment-banking divisions. Banks have made cost cuts a priority as revenue stagnates in a prolonged era of low interest rates that has suppressed interest income.

 

JPMorgan eliminated about 6,000 jobs in the 12 months ended March 31, according to an April filing. The number of total employees may hold steady over the next year if business conditions allow hiring in areas including wealth management, the person said.


 

This is How You Leave a Legacy By: Jim Rohn

June 1st, 2015

Jim Rohn, the philosopher who has left an indelible legacy of time-proven principles and wisdom, shares his secret for making an impact. "You know me, I am a philosopher. I love principles. Yes, actions are great and I talk about them regularly, but the important stuff is what lies underneath—the principles," Rohn says.

 

Here are the principles he says we must commit to in order to leave the legacy we desire:

1.               Life is best lived in service to others. This doesn’t mean that we do not strive for the best for ourselves. It does mean that in all things we serve other people, including our family, co-workers and friends.

 

2. Consider others’ interests as important as your own. Much of the world suffers simply because people consider only their own interests. People are looking out for number one, but the way to leave a legacy is to also look out for others.

 

3. Love your neighbor even if you don’t like him. It is interesting that Jesus told us to love others. But he never tells us to like them. Liking people has to do with emotions. Loving people has to do with actions. And what you will find is that when you love them and do good by them, you will more often than not begin to like them.

 

4. Maintain integrity at all costs. There are very few things you take to the grave with you. The number one thing is your reputation and good name. When people remember you, you want them to think, “She was the most honest person I knew. What integrity.” There are always going to be temptations to cut corners and break your integrity. Do not do it. Do what is right all of the time, no matter what the cost.

 

5. You must risk in order to gain. In just about every area of life you must risk in order to gain the reward. In love, you must risk rejection in order to ask that person out for the first time. In investing you must place your capital at risk in the market in order to receive the prize of a growing bank account. When we risk, we gain. And when we gain, we have more to leave for others.

 

6. You reap what you sow In fact, you always reap more than you sow—you plant a seed and reap a bushel. What you give you get. What you put into the ground then grows out of the ground. If you give love you will receive love. If you give time, you will gain time. It is one of the truest laws of the universe. Decide what you want out of life and then begin to sow it.

 

7. Hard work is never a waste. No one will say, “It is too bad he was such a good, hard worker.” But if you aren’t they will surely say, “It’s too bad he was so lazy—he could have been so much more!” Hard work will leave a grand legacy. Give it your all on your trip around the earth. You will do a lot of good and leave a terrific legacy.

 

8. Don’t give up when you fail. Imagine what legacies would have never existed if someone had given up. How many thriving businesses would have been shut down if they quit at their first failure? Everyone fails. It is a fact of life. But those who succeed are those who do not give up when they fail. They keep going and build a successful life—and a legacy.

 

9. Don’t ever stop in your pursuit of a legacy. Many people have accomplished tremendous things later on in life. There is never a time to stop in your pursuit of a legacy. Sometimes older people will say, “I am 65. I’ll never change.” That won’t build a great life! No, there is always time to do more and achieve more, to help more and serve more, to teach more and to learn more. Keep going and growing that legacy!

 

 

These are core principles to live by if you want to become the kind of person who leaves a lasting legacy.

Commercial Lending Glossary

June 1st, 2015

Acre: Unit of land measure equal to 43,560 square feet.

Amortization (To Amortize): The act of paying off a debt through scheduled periodic payments. Example: A 20 year amortization means that the payments are evenly distributed monthly over the course of 20 years, so that the final payment on the last month of the 20th year will have paid the entire principal balance of the loan.

Appraisal: A document prepared by a professional, licensed appraiser that determines the monetary value of commercial real estate. Most commercial appraisals have three approaches to determining the value of a property. These three approaches are: income approach, cost approach and fair market value. An appraisal of the subject property is needed on all commercial real estate loans with Mission Oaks National Bank.

Assumability: A loan that is capable of being transferred to a new borrower with no change in rate or terms of the loan. It also allows a borrower to sell a property and avoid paying a prepayment penalty because the loan is being transferred and not paid off.

ADR (Average Daily Rate): A unit of statistics used to determine a hotel or motel's pricing scale. The statistic is determined by dividing the room revenue by the total number of rooms sold.

Balloon Loan: A loan with a term shorter than its amortization therefore requiring a final loan payment significantly larger than the payments preceding.

Basis Point (BP): A basis point is 1/100th of 1%. Example: 25 basis points is equal to 0.25%.

Bridge Loan: Short term financing designed to be paid off after a designated period of time. A common form of bridge loans is construction loans.

CAM (Common Area Maintenance): Common Area Maintenance describes the act of maintaining areas which are used by one or more of the tenants in a building or their customers. Common areas can be as simple as a picnic table in the quad of an office complex to the entire interior corridor of a shopping mall and the parking lot. Many times these expenses are passed on to the tenants as part of their base rent or as a direct expense of a tenant in a triple net lease (NNN).

Cap Rate: Capitalization Rate: a capitalization rate is used to measure how quickly an investment will pay for itself based on the income that it produces. The Cap Rate is calculated by dividing the Net Operating Income (NOI) by the purchase price of the property. If the purchase price of the property is $1,000,000 and the most recent annual NOI for that property is $120,000 then (120,000/1,000,000 = 0.12 or 12%) the property has a Cap Rate of 12%. The property could pay for itself in 8.33 years (100/12 = 8.33).

Cash Flow: Cash flow is a measure of financial strength for a company. Cash flow is equal to cash receipts minus cash payments over a certain period of time. In order to determine the cash flow of a business based on tax returns, non-cash expenses such as depreciation and amortization are added to the net income. Cash flow is used by lenders to determine the amount of cash available to service the debt of a loan. Cash flow is used to derive the DCR (Debt Coverage Ratio) of a business.

Closing Costs: Any fees or costs that are incorporated into the transfer of real property applied at the closing of a loan (not including the cost of the actual property).

Construction Loans: A loan where the funds are used for ground-up construction, renovation or expansion of a building on real property. Generally construction loans are short term loans designed to be taken out by permanent financing. The Construction Loan Program with Mission Oaks National Bank includes the construction loan and permanent financing in a single closing.

Contingency: Any condition of a contract that must be satisfied before the contract can be consummated.

Cost Approach to Value: The cost approach in determining the value of a property is simply determining how much it would cost to construct the permanent improvements at the subject property plus the cost of the unimproved land.

Credit Tenant: Credit tenants are tenants that are usually publicly traded or large private entities with a strong S&P rating.

DCR (DSCR), Debt Coverage Ratio (Debt Service Coverage Ratio): DCR is a calculation that banks use to determine the capability of a income producing property or business to pay its debt obligations. DCR is calculated by dividing the Net Operating Income (NOI) by the annual debt payments. Example: NOI = $120,000. Annual debt payments= $100,000. $120,000/$100,000 = 1.20. This means that the property or business would have a DCR of 1.20x or 120% of the annual principal and interest cost of their debt. A DCR below 1 would mean that the property or business is not producing enough income to meet its debt obligations or proposed debt obligations.

Discount Rate: The Federal Reserve Board defines the discount rate as "...the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility..."

Default: When a borrower does not meet his/her obligation to pay their debt as prescribed in the loan documents, their loan is in default. When a loan is in default, if not made current, the property secured by the mortgage is in danger of being foreclosed upon.

Depreciation: Depreciation is an accounting method that provides a way for businesses to expense assets over time, rather than only at the time that they purchased it. Depreciation is a non-cash expense, letting businesses report lower earnings, but higher Net Operating Income and Cash Flow.

DTI (Debt to Income Ratio): The debt to income ratio is used to determine the percentage of gross monthly income going to pay debts. The calculation used to determine DTI is monthly debt payments divided by gross monthly income. For example: If someone makes $10,000 per month and their debt payments (including mortgages, credit cards, car payments, etc.) total $3,000 per month, then they have a debt to income ratio of 30% (3,000/10,000 =0.30 or 30%). That is to say that 30% of their gross personal income goes to pay debt. Although DTI does play a role in qualifying a commercial loan, DCR plays a much more important role in commercial lending than does DTI.

Environmental Report: Many banks and lenders require a subject property to be proven environmentally clean prior to committing to fund a loan with the subject property as collateral. This report discusses the actual or potential environmental hazards related to the property.

Equity: The monetary value of a property beyond the amount leveraged.

Escrow: Escrow is a third party that will hold funds in trust until all contingencies are fulfilled and then will distribute the funds according to the instructions of the parties involved.

Fair Market Value: The US Supreme Court defines Fair Market Value as "...the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts."

Federal Funds Rate (Fed Funds Rate): The Fed Funds rate is the rate at which banks lend to each other for overnight money. It is the interest rate on which the Prime Rate Index is based. The nominal Federal Funds Rate is controlled by the Board of Governors of the Federal Reserve.

FF&E (Furniture, Fixtures and Equipment): FF&E or Furniture, Fixtures and Equipment is a term used to describe the non-permanent assets that are necessary to perform the business being operated on the property. For example: FF&E for a restaurant would include stoves, ovens, tables, booths, chairs, light fixtures, etc. Sometimes the FF&E of a property can be financed, especially when using SBA financing.

Foreclosure: Foreclosure is the legal process of seizing the collateral that secured a loan that has been defaulted.

Fully Amortizing Loan: A loan that has an amortization schedule the same length as its term. It is a loan that has no balloon payment.

Hectare: A unit of land measure equal to 2.47 acres or 107,639 square feet.

Hospitality Property: A property designed for the specific purpose of providing guests with overnight accommodations. Hospitality properties include: hotel properties, motel properties, and bed and breakfast properties.

Income Approach to Value: Also known as the "Income Capitalization Approach," is a method appraisers use to determine the value of commercial real estate based on income derived from the property. The value is determined using capitalization rates of the net operating income.

Index: An economic indicator in the form of an interest rate on which other interest rates are based. Examples: The Wall Street Journal Prime Rate, The Federal Home Loan Bank (FHLB) of Seattle indices, Treasury SWAP indices.

Interest Rate: The percentage of a sum of money that is charged by a lender to a borrower for the use of said sum.

Interest Only: A loan where the borrowers pay interest on the principal balance and no amount of the payment goes towards reducing the principal balance.

Lease: A contract renting land and/or buildings to another. A lease identifies the amount of rent to be paid, the responsibilities of both the property owner (lessor) and lessee (tenant), and sets a start and expiration date.

Limited Service (Hotel): A hotel that offers only lodging services and does not offer special services such as a full scale restaurant or a spa. Many limited services hotels offer a free continental breakfast to guests and some have a pool and small gym.

LTV (Loan to Value Ratio): LTV is a ratio expressed as a percentage and is the calculation of debt over equity. It is used to express the amount of debt owed on real property as a percentage of its total appraised value. For example, if someone wishes to purchase a property for $1,000,000 and they have $250,000 cash to put down on the property, they would need a loan of $750,000 to complete the purchase. The loan ($750,000) to value ($1,000,000) ratio is 75% (750,000/1,000,000 = 0.75).

Lock-Out Period: The period following the closing of a loan in which the loan may not be prepaid.

Mixed Use Property: A mixed use property is a property that has both residential and commercial uses. A typical example of this would be a building with one or more office or retail units on the first floor and one or more apartments above.

Multifamily Property: Multi-family property is a property that can house more than one family; an apartment building.

Multi-Use Property: A multi-use property is a property that can easily be converted for multiple purposes. Examples of multi-use property are: office, retail, warehouse, light industrial, and general use commercial.

NOI (Net Operating Income): The gross annual income of a property minus its operating expenses. Mission Oaks National Bank uses the NOI of a property to determine the debt serviceability of said property. The NOI of a property is used to determine the DSCR of a property.

Origination (fee): Origination is the process of pre-screening, Prequalification, due diligence, underwriting and funding/recording. An Origination fee is the fee for this service.

Permanent Financing: As opposed to a bridge loan or construction financing, permanent financing is the long term financing of commercial real estate. Permanent financing usually has a term longer than 10 years and has an amortization schedule of at least 15 years. With MONB you will typically find loans with terms and amortization schedules of 20 or 25 years.

Pre-Leased: Pre-leased it a term used when a landlord leases property to tenants before the construction of the property is completed. Sometimes borrowers need to pre-lease a portion of their property in order to qualify for a commercial construction loan.

Prepayment Penalty: A prepayment penalty is a fee charged to a borrower if he/she pays off their loan prior to the end of the prepayment penalty term. Sometimes these penalties are based on a percentage of the amount prepaid, and sometimes they are based on the amount that the borrower would have paid in interest payments had the note not been prepaid. A prepayment penalty is not a lock-out.

Prime Rate - The Prime Rate is defined as the interest rate charged by banks to their most creditworthy borrowers. The Prime Rate varies little throughout the country. The most commonly accepted publisher of the Prime Rate is the Wall Street Journal. That is why the index is often referred to as the Wall Street Journal Prime Rate (WSJ Prime Rate). Although the Board of Governors of the Federal Reserve does not directly control the Prime rate, the open market generally calculates the Prime Rate to be the Fed Funds Rate + 3.00%.

Principal: Principal refers to the outstanding debt of an entity without including interest costs.

Profit and Loss Statement: A statement that details the income and expense for a business or commercial real estate for a given period.

Pro Forma: Pro forma, when translated from Latin, literally means “matter of form.” In commercial real estate financing it simply means projected or expected and usually refers to income, expense, or cash flow.

Recourse: Recourse refers to a lender's ability to hold a personal guarantor personally liable for a loan. There are some commercial loan programs available that do not require a personal guarantor and thus are "non-recourse."

Refinance: To replace securitized debt with new debt, secured by the same collateral.

Rent Roll: A list of tenants in a commercial or multi-family property that includes some detail of the lease agreement between tenant and landlord (i.e. tenant name, base rent, length of contract, area or unit description).

SBA (U.S. Small Business Administration): The SBA website states: The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation. We recognize that small business is critical to our economic recovery and strength, to building America's future, and to helping the United States compete in today's global marketplace. Although SBA has grown and evolved in the years since it was established in 1953, the bottom line mission remains the same. The SBA helps Americans start, build and grow businesses. Through an extensive network of field offices and partnerships with public and private organizations, SBA delivers its services to people throughout the United States, Puerto Rico, the U. S. Virgin Islands and Guam.

Second Trust Deed (Second Mortgage): A second trust deed (also written 2nd TD) or a second mortgage (also referred to simply as "a second") is a loan in a subordinate position to a first trust deed loan secured by the same collateral.

Special Use Property: A commercial property type that cannot be easily converted into many different uses. Examples of Special Use Property are: gas stations, most restaurants, automotive service facilities, assisted living facilities, marinas, carwashes and hospitality properties (motels/hotels).

Square Foot: A unit of measure usually used to describe the size of a building or lot of land smaller than one acre. A square foot is the area of a square with sides equal to one foot in length. Also equal to 144 square inches.

Tenant: A tenant occupies and uses a property according to terms outlined in a lease or rental agreement signed by both tenant and landlord.

Term: The term of a loan identifies how many years until full repayment is required.

Title: The legal document that provides evidence of ownership of a piece of real estate.

Triple Net Lease (NNN Lease): (Also referred to as Net-Net-Net). A triple net lease is a lease agreement where the tenant pays all real estate taxes, property insurance, common operating expenses (utilities) and Common Area Maintenance (CAM) in addition to the base rent.

Unanchored: Unanchored usually refers to small retail centers with no major credit tenant in the center. Major credit tenants are usually very large regional, national or international companies.

Underwriting: The process of due diligence performed by a lender in preparation of final approval to fund a loan.

Vacancy: A vacancy is an unoccupied unit in a commercial or multi-family building.

Vacancy Percentage: The percentage of available rentable space that is not occupied by a tenant.

Yield Maintenance: A type of prepayment penalty designed to allow investors to attain a similar yield as if the borrower made all scheduled mortgage payments until maturity.


 

Ex-Im Bank's Relationship With Private Lender

June 1st, 2015

In the current Congressional debate over whether the Export-Import Bank (Ex-Im Bank) should be reauthorized, one aspect of its activities has received little, if any attention.

 

Since 1970, the Ex-Im Bank has maintained a cozy relationship with the Private Export Funding Corporation (PEFCO). The “PEFCO is a private sector, tax-paying entity.” It “was established in 1970 with the assistance of the Export-Import Bank of the United States (Ex-Im Bank) to supplement the export financing then available through Ex-Im Bank and from commercial banks and other lending institutions.”

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Instead of PEFCO performing its own risk analysis, Ex-Im Bank does that and makes U.S. taxpayers serve as the backstop for guaranteeing loans: “Since all loans made by PEFCO are guaranteed or insured as to the due and punctual payment of principal and interest by Ex-Im Bank or other U.S. government institutions, such as the Overseas Private Investment Corporation (“OPIC“), whose obligations are backed by the full faith and credit of the United States, PEFCO relies upon this U.S. government support and does not make evaluations of credit risks, appraisals of economic conditions in foreign countries, or reviews of other factors affecting collectability of its loans.”

 

This has been the case since 1971, as PEFCO mentions in its 2014 annual report: “Under the terms of a Guarantee Agreement, DATED DECEMBER 15, 1971, AS AMENDED, BETWEEN PEFCO AND EX-IM BANK, DUE AND PUNCTUAL PAYMENT OF THE PRINCIPAL OF AND INTEREST ON ALL FOREIGN IMPORTER NOTES (“GUARANTEED IMPORTER NOTES“) EVIDENCING LOANS MADE BY PEFCO WITH THE APPROVAL OF EX-IM BANK WILL BE FULLY AND UNCONDITIONALLY GUARANTEED BY EX-IM BANK.”

 

Under this agreement, the Ex-Im Bank exercises a level of supervision over the activities of PEFCO, including the right to have a representative present at PEFCO board meetings, access to financial information, approval of loans, etc. PEFCO also pays “a semi-annual guarantee fee on the total interest accrued by PEFCO during the preceding semi-annual period on securities on which interest payments have been guaranteed by Ex-Im Bank.”

 

When you look at who owns PEFCO, things get interesting. “PEFCO’s stock is owned by 26 commercial banks, six industrial companies and one financial services companies (sic).” The largest “shareowner” as they call shareholders is JPMorgan Chase & Co. which owns 2,937 shares or 16.51 percent. Of particular note, the fifth-largest shareholder, and the largest owner among the industrial companies is The Boeing Company, which owns 1,425 shares or 8.01 percent. Boeing, as has been noted many times, is a major beneficiary of the Ex-Im Bank’s activities, something that has earned the Bank the moniker, “Bank of Boeing.”

On page four of its annual report, PEFCO states that it made 118 loan commitments totaling $1,562,000,000 in 2014. Of this amount, 84 percent, or $1,316,000,000, was for aircraft. Page six of the report states that $6,166,000,000 of their $7,342,000,000 in outstanding loans, or 84 percent, is for aircraft.

 

Boeing, as it just so happens, has been a beneficiary of PEFCO loans to its customers in the past for aircraft such as its 777-300ER, which “the national flag carrier of Angola, TAAG Angola Airlines (Linhas Aereas de Angola), is purchasing.”

 

So it works like this: companies like Boeing through their involvement in PEFCO get risk-free, government-guaranteed investments, and those investments then go to purchase their own products. The company gets profits from their PEFCO ownership and sales because PEFCO finances purchases of their own products.

 

Like 10,000 other things that most people have never heard about, does this sound like something in which the government should be involved? It is fine if a group of companies wish to band together to form a corporation to finance the sales of their own products. Just do it without having the federal government so woven into the fabric of the corporation that the line between public and private disappears.


 

Foreclosure Filings Rose 3 Percent Nationally From March to April

June 1st, 2015

Top Ten States

Utah: 1 in every 901 housing units received a foreclosure filing.

Change in filings from March: Up 45.9 percent

Nationally: 1 in every 1,049

 

Ohio: 1 in every 847 housing units received a foreclosure filing.

Change in filings from March: Up 12.7 percent

Nationally: 1 in every 1,049


Oklahoma: 1 in every 800 housing units received a foreclosure filing.

Change in filings from March: Up 102.4 percent

Nationally: 1 in every 1,049


Delaware: 1 in every 786 housing units received a foreclosure filing.

Change in filings from March: Up 5.9 percent

Nationally: 1 in every 1,049


Illinois: 1 in every 696 housing units received a foreclosure filing.

Change in filings from March: Down 34.8 percent

Nationally: 1 in every 1,049


Tennessee: 1 in every 647 housing units received a foreclosure filing.

Change in filings from March: Up 103.8 percent

Nationally: 1 in every 1,049


New Jersey: 1 in every 594 housing units received a foreclosure filing.

Change in filings from March: Down 14.5 percent

Nationally: 1 in every 1,049


Maryland: 1 in every 594 housing units received a foreclosure filing.

Change in filings from March: Down 10 percent

Nationally: 1 in every 1,049


Nevada: 1 in every 555 housing units received a foreclosure filing.

Change in filings from March: Up 5.5 percent

Nationally: 1 in every 1,049


Florida: 1 in every 425 housing units received a foreclosure filing.

Change in filings from March: Up 4.9 percent

Nationally: 1 in every 1,049


 

JP Morgan Chase to lay off 5000 employees in US

 

JPMorgan Chase & Co., the biggest U.S. bank by assets, will cut thousands of jobs over the next year as it seeks to contain expenses and sells businesses, said a person with knowledge of the plans.

 

The lender has been consolidating back-office support, cutting mortgage workers as home-loan volumes decline and reducing the ranks of tellers as more customers use automated channels, said the person, who asked not to be identified discussing personnel matters. The New York-based bank may cut more than 5,000 workers by next year, the Wall Street Journal reported Thursday, citing people familiar with the matter.

 

JPMorgan, which had 241,145 employees as of March 31, said in February it would pare $4.8 billion of expenses from its consumer- and investment-banking divisions. Banks have made cost cuts a priority as revenue stagnates in a prolonged era of low interest rates that has suppressed interest income.

 

JPMorgan eliminated about 6,000 jobs in the 12 months ended March 31, according to an April filing. The number of total employees may hold steady over the next year if business conditions allow hiring in areas including wealth management, the person said.