Times are really tough, especially for those of us looking to purchase a home. Had we jumped on the loan bandwagon a few years ago, we probably would be homeowners right now! Granted, we’d probably be going into foreclosure, as well, but it’s a gamble some of us wish we took.

At any rate, the good news is that owning a home is still possible. Just follow these five simple steps and you are well on your way to happy househunting.

1. Make sure that your bills are current as creditors don’t like past due accounts.

2. Get a hold of your credit report and watch it like a hawk. Errors are highly possible and they may be hurting you without your knowledge. If there are disputes, put it in writing. Send a letter right away explaining why it is wrong and request that it be removed IMMEDIATELY!

3. When purchasing a home, put down as much money as you can! Hey, I know it’s hard but it is worth it. Save, save, save until you’ve got something to throw down because a. banks will be more willing to loan money to you and b. it will cut costs on monthly mortgage payments.

4. Finding the right bank is like shopping for shoes or Seven jeans. Shop around until you find the perfect fit. Banks have different lending standards and you, the consumers, may find better rates if you compare/contrast.

5. Maxing out your credit is a no-no. Don’t get me wrong, we all know that credit cards make it oh, so easy to do. And if this happens, ask for an increase in spending credit BUT stop spending!

Popularity: 4% [?]

It happens from time to time that even banks do not have enough money. A lender may make a loan request that one single bank cannot handle, either because it does not have the funds or because to make such a loan would put the bank outside its legal lending limits. The solution for this bank is the participation agreement, also called a loan participation agreement. A participation agreement allows a bank to enlist the wealth of other banks to handle this one loan. Typically, a single bank, called the lead bank, will originate the loan and then seek other banks to share in the risk and the revenues. The lead bank sells participation shares to the participating banks. The lead bank also services the loan and deals directly with the borrower, thereby retaining control of the relationship.

The act of selling shares can be seen as a securities issue-and banks can run afoul of securities laws-unless the participation agreement contains certain language about the exposure to risk and loss.

Participation agreements are mainly two-tracked. On the first track, all banks share equally in the profits and the risk in what is called a pari passu arrangement. On the second track, the lead bank is senior to the other subordinate banks; the lead bank is paid first. This second track can be subdivided further in to Last In, First Out and First In, First Out arrangements.

Banks are motivated to use participation agreements for several reasons. From the lead bank’s perspective, they are useful because they generate income for the lead bank; they spread the risk among other institutions; they allow the lead bank to manage the client relationship; and they offer the lead bank the opportunity to originate a loan that it might otherwise have been able to handle. From the perspective of the participating banks, these agreements share the wealth and allow such banks to generate income in slow markets and to diversify their investment portfolios.

Where banks run into trouble, apart from the securities question, is in glossing over scenarios that are possible, even likely to happen-that is, default by the borrower, profit sharing among the lenders, and the duties of the lead bank. Participating banks may not like the terms of the lead bank’s participation agreement-such as loan fees paid by the borrower to the lead bank will not be shared with participating banks, that the lead bank owes no fiduciary duty to the participating banks-but they will certainly appreciate seeing and knowing such terms up front and in clear language, rather than finding out later, only after such problems have surfaced. Banks are well advised to make the terms of the agreement very clear and to address all of these points.

Popularity: 5% [?]