Tag Archives: borrowers

Arizona Economic Forecast 2011

Arizona Bankers Association rejects bankruptcy court theory

On February 7, The Arizona Bankers Association joined 10 other western state bankers associations along with the American Bankers Association on a brief (the associations’ brief) to the Ninth U.S. Circuit Court of Appeals urging the reversal of a Ninth Circuit Bankruptcy Appellate Panel (the BAP) decision with far reaching and negative implications for real estate lenders in the western United States.

The lower court decision essentially would allow small creditors in chapter 11 bankruptcies to make the decision on whether to accept the reorganization plan, disregarding the needs of the holder of the largest claim.  It does this by segregating claims with potential and speculative third party sources of payment from the rest of the unsecured class of claimants.

“Allowing a third party guarantee to actually diminish a real estate lender’s rights in bankruptcy makes responsible underwriting that much more difficult,” said Paul Hickman with the Arizona Bankers Association.  Having a third party source of repayment adds flexibility to underwriting and ultimately allows real estate lenders to qualify more borrowers.  “Now we potentially have case law in this district that not only makes that inconsequential, but could make the deal less attractive to a lender,” said Hickman.

The lower court’s decision allows the debtor to gerrymander the creditor classes to permit a small class of unsecured claimants with a relatively small aggregate claim to accept the reorganization plan over the objection of the single asset real estate lender with a much larger claim.  The associations’ brief asserts that the lower court’s “theory . . . contradicts historical bankruptcy policy, drowns plan classification in an interpretive swamp with no logical bottom, and undermines policies on good lending practice.”

The case is In re Loop 76, LLC, Case No. 12-60021, which appeals a BAP decision, In re Loop, LLC, 465 B.R. 525 (9th Cir. BAP 2012).  The BAP decision affirmed four orders of the Arizona bankruptcy court, In re Loop 76, LLC, 442 B.R. 713 (Bankr. D. Ariz. 2010).

The 109-year-old Arizona Bankers Association represents commercial and community banks operating in the State of Arizona, irrespective of asset size or deposit base.

Download the AMICUS CURIAE BRIEF here.

Ted and Cindy Ferkenhoff

Boefly, A New Online Marketplace, Matches Borrowers With Lenders

One couple searched unsuccessfully for six months to secure a loan. Then, 14 days after using a new online marketplace, Ted and Cindy Ferkenhoff had an offer.

The Ferkenhoffs, who needed a loan to open an AlphaGraphics franchise in Flagstaff, weren’t expecting such a quick response.

“With the lending market being pretty shaken up … it was a little surprising that they contacted us and did so, so quickly,” Ted Ferkenhoff said.

It was Mark Danford, executive vice president of the loan-consulting firm FranFund, who introduced the Ferkenhoffs’ loan request to BoeFly, the online marketplace. Danford, who has used BoeFly since its inception on March 17, 2010, decided that BoeFly was the most efficient way to connect the Ferkenhoffs to an appropriate lender.

BoeFly, which is headquartered in New York City, works much like an online dating service, but instead it matches lenders with borrowers.

“We see websites and technology efficiently matching up a whole world of people,” said Michael Rozman, executive vice president of BoeFly. “Matching up boys and girls looking for dates, down to travel and consumer mortgages. It became apparent to us that small business lending would greatly benefit from a service like ours.”

In an online marketplace setting, borrowers can submit their financing request and have almost 500 lenders see it immediately, Rozman said.

The speed at which lenders and borrowers can see results is what inspired the name BoeFly.

BOE stands for business opportunity exchange, Rozman said.

“It’s an exchange that allows businesses to connect more efficiently, and the idea of adding on the fly is a mix of how quickly transactions can fly through the system with a little bit of whimsy behind it,” he added.

It also helps professionals like Danford by saving them time. BoeFly allows him to connect “almost instantaneously” with lenders.

“It’s a night and day difference,” Rozman said.

Transactions with BoeFly are quick, but the main goal is to also make sure the appropriate lenders see the loan requests. Lenders range from small to large institutions all over the country, with six small community banks in Arizona using BoeFly. On average, a submitted loan request will see six to 12 loan offers through BoeFly, Rozman said.

Not only is BoeFly more efficient than the one-by-one approach of lending, but it can also help franchisees and small businesses owners who aren’t familiar with the lending process.

Rozman said he wants to see the word spread about BoeFly, so more small businesses can “leverage BoeFly to end up with business loans.”

The Ferkenhoffs are doing their part to inform others about their success with BoeFly.

“We have passed that around and, of course, given the feedback to AlphaGraphics,” Ferkenhoff said. “Obviously they’re looking for the best method to get new franchising funded.”

With $1.2 billion in transactions since its start, Rozman said he sees BoeFly continuing to grow as people recognize the ease of the online process.

“More and more banks realize that their clients are turning to the Web to be able to more efficiently connect with lenders,” Rozman said. “Banks historically aren’t the earliest adopters of technology, but they do when their clients lead them in that direction.”

The Ferkenhoffs are set to open their AlphaGraphics this month.

Arizona’s Credit Unions Are Helping - AZ Business Magazune Sept/Oct 2010

Arizona’s Credit Unions Are Helping Those Who Depended On Payday Loans

With Arizona’s payday loan industry now history, the state’s credit unions are jumping into the resulting void to both help consumers and gain new members.

Called REAL Solutions, the Arizona Credit Union League & Affiliates’ new program offers an option for consumers who depended on the short-term loans made by the payday loan industry. But in proverbial teach-to-fish fashion, REAL Solutions also aims to help those consumers build long-term financial security.

One service provided by REAL Solutions is a small dollar emergency loan, which allows credit union members to get short-term loans at lower interest-rates than normal payday lenders would offer.

The average payday loan was typically for 14 to 30 days, and the fees varied between $15 and $20 per $100 borrowed. Under this model, a 14-day loan could carry an APR of 520 percent. With REAL Solutions, interest rates vary by credit union, with rates starting as low as 12 percent.

While these loans are an option for consumers, they are not the solution to borrowers who relied heavily on payday loans. However, credit union loans can benefit the borrower in ways that payday loans cannot. If repaid on schedule, the short-term loans can build the borrower’s credit score, because payments to credit unions are reported to credit bureaus, while most payday loans are not. Credit building allows borrowers to obtain better interest rates and terms on their next loan products.

Some credit unions also will put a portion of the loan repayment in a savings account if paid on time. The amount is small, but normally will cover the fee involved in setting up the loan.

Because borrowers can easily fall into a debt trap with payday loans, credit unions only provide members with the opportunity to have one of these short-term loans at a time. This keeps the borrower from getting into a never-ending cycle of taking out a loan to pay off another loan.

Two additional components of the REAL Solutions program are low-interest credit cards and member-rewards programs.

Low-interest credit cards help members gain financial stability. These credit cards are designed to be less of a financial burden on the cardholder by keeping interest rates lower than normal cards.

Credit union members also can enroll in a member-rewards point program, which is similar to a credit card rewards program. The member receives a point for every dollar paid in interest, as well as incentive-based points for continued membership, referring new members or utilizing member-friendly services such as online bill pay. The members can use the points they accumulate for items such as discounted loan rates or even to waive fees they have incurred.

The Arizona Credit Union League realizes that education is the key to financial stability and freedom. Proper financial education on budgeting, debt management, identity theft prevention, building credit, home buying, retirement savings and buying a car are key to being financially empowered.

REAL Solutions includes such benefits as:

  • Second chance checking
  • Member rewards
  • Credit building loan programs
  • Free financial education (for all stages of life)
  • Short-term, small-dollar emergency loans
  • Credit building credit card programs
  • Reloadable prepaid debit cards
  • Low-cost personal loans
  • Overdraft protection
  • IDAs (Individual Development Accounts)
  • ID theft/fraud services
  • Holiday loan skip pay

Each REAL Solutions Credit Union provides independent programs and services. Names of services and programs may vary depending on the credit union.

Arizona credit unions participating in REAL Solutions:

  • Alhambra CU
  • Altier CU
  • American Southwest CU
  • Arizona Central CU
  • Arizona Federal CU
  • Bashas’ Associates FCU
  • Canyon State CU
  • Credit Union West
  • Desert Medical FCU
  • Desert Schools FCU
  • First Credit Union
  • Hughes FCU
  • MariSol FCU
  • Mohave Community FCU
  • Pima FCU
  • Pyramid CU
  • Southwest Health Care CU
  • Tempe Schools CU
  • TruWest CU
  • Tucson Federal CU
  • Tucson Telco FCU
  • Vantage West CU

Austin De Bey also contributed to this article.  He is vice president of governmental affairs for the Arizona Credit Union League & Affiliates. For more information about the REAL Solutions program and the credit unions that offer it, visit the Arizona Credit Union League website at www.azcreditunions.coop.

Arizona Business Magazine Sept/Oct 2010