Lto training course modified


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  • The Community Empower Lease-To-Own Program is a private home selling program designed to assist buyers and seller with residential home transactions. The program is proprietary and is owned by HYCA Development Services, LLC, a licensed real estate broker and program provider. © HYCA, LLC 2005-2010 Ver. 2, 05-2010 About Community Empower© HYCA’s unique Lease-to-Own home financing program is available nationally through many popular real estate brands. Since 2002, HYCA, LLC, the parent company of the Community Empower Network has made direct investments in financing structures for distressed residential real estate. HYCA is a Moodys-reviewed issuer of residential mortgage–backed securities. HYCA’s software companies serve the credit and mortgage markets. CE Analytics, Inc., is one of two commercial consumer credit scoring companies in the world. Its technology has received many recognitions including having been named worldwide data analytics software product of the year for its science in consumer credit and as a Top 17 most innovative new company worldwide. CE continues to innovate in data analytics for mortgage portfolio finance and in real estate financing structures having dispositioned over $2 billion in distressed loan portfolios and assisting 800,000 consumers in credit education cases annually. Score Manager©, CE©, CE Consumer Analytics©, CE Analytics©, CE Portfolio Analytics©, Home Buyer’s Club, and Community Empower© are copyrights of HYCA, LLC. 2002-2010. Community Empower Lease-To-Own Program TM is a trademark of HYCA, LLC. 2001-2010. All references to these aforementioned copyrights and trademarks in this document are reserved whether or not they are specifically marked. ISBN
  • About the Courseware This program is design for two purposes. First the course will help you understand the lease-to-own transaction, how it works and how to use it. Second, when you complete this course you will be able to identify and LTO opportunity and transact the business with your buyer, or seller. Upon successfully completing the quizzes and examinations you will earn the designation of “LTO Certified”. Good luck with your study and we hope this information will provide you a lifetime of profitable LTO transactions.
  • When to use the Program with Buyers When your buyers apply for the Program you want them to have the best possible chance to be successful . It isn’t difficult to understand whether a consumer will qualify, it takes a little common sense. There are, at least, three Buyer profiles you should watch for when considering an LTO solution for your buyer. Use LTO when Buyers have: Less than perfect credit (credit scores from 550) Good to Excellent credit (620+) with little to no down payment Good credit with clients (620+) who want to use their cash for something other than a down payment LTO is not for everyone. You can ask several simple questions which will help you understand whether the Program is a fit for you client: LTO is NOT a program for: Buyers with little to no income, or might be currently on unemployment Buyers who cannot afford a home Buyers with terrible credit (recent foreclosure, short sale, bankruptcy, auto repossession, unpaid judgments, tax liens) Buyers who are on welfare programs (e.g. Section 8) Buyers who cannot prove they have been renting and self-sufficient LTO will accept: Buyers who have Paid Collections on their credit report Buyers who have Unpaid Collections (may have to be repaid) Buyers who have Debt-to-income < 45% Buyers with little to no credit Multiple Buyers with income (spouses, friends, family, etc.)
  • When to use the Program with Sellers There are many Sellers who will directly benefit from using the Lease-To-Own Program. When you master LTO you will become a more creative agent who understands the power of gaining a return on a real estate asset and you will be a very different kind of agent. Generally speaking, the LTO program will bring your Seller more financial benefit than an ordinary sale. We’ll discuss this, at length, in the section LTO for the Seller . However, many Sellers will benefit. Which ones will benefit? Sellers with flexible terms. If you seller is flexible, LTO will be highly rewarding. Perhaps your Seller has already purchased another property, or has inherited a property from their family. These are excellent examples. Sellers with slow moving properties. Sometimes properties sit unsold for many weeks or months and threaten to place a financial burden, or a lifestyle hardship on the Seller – all the while their property value is sinking. Sellers who wants, or need income with a defined takeout. Move-on Sellers with less than 30% equity who can’t get new financing until they sell their home. This is a double benefit. The Seller can LTO their residence and move on to occupy a new residence under LTO themselves. Investor properties; those that need a managed process with an exit and those who seek higher returns with less ri sk are excellent LTO prospects. Non-delinquent short-sellers. We see a large number of short-sellers who may be able to correct the problem if caught early. If the default is small and can be solved with cash flow over time, Or no default is pending but the seller needs relief in fear of default, then LTO could be a viable selling strategy saving the Seller years of credit damage. LTO is NOT for Sellers who: Must have final sale immediately Most Bank-owned properties where final sale is only option
  • Lto training course modified

    1. 1. The Community Empower Lease-To-Own Certification Brought to you by Community Empower
    2. 2. About The Courseware <ul><li>This Program Will Help You Understand the Lease-To-Own (LTO) Transaction. It Will Teach You: </li></ul><ul><ul><li>How LTO Works </li></ul></ul><ul><ul><li>How to Use Lease-To-Own (LTO) </li></ul></ul><ul><ul><li>How to Identify an LTO Opportunity </li></ul></ul><ul><ul><li>How to Transact Business With Your Seller and or Buyer </li></ul></ul>
    3. 3. Who is Community Empower?
    4. 4. Community Empower LTO Preparing for Change <ul><li>RMBS Lease-To-Own Program </li></ul><ul><li>Only LTO Program Ever Reviewed by a Rating Agency (Moodys Rating Services 2007) </li></ul><ul><li>$1+ million invested in legal and statutory compliance over 6 years </li></ul><ul><li>Fully production tested </li></ul><ul><li>Fully Vetted </li></ul><ul><ul><li>Kutak Rock, LLC OmaOnlyha (tax and regulatory review) </li></ul></ul><ul><ul><li>Peck Schaeffer, LLC Cincinnati, Atlanta (bond counsel) </li></ul></ul><ul><ul><li>Lloyds of London, UK (insurer) </li></ul></ul><ul><ul><li>Moodys’ Rating Service (Rating Agency) </li></ul></ul><ul><ul><li>Coastal Securities, LLC Houston , TX (Structure firm) </li></ul></ul><ul><ul><li>Mitas, LLC (Servicer) </li></ul></ul><ul><ul><li>State Counsel (Attorneys at State Level) </li></ul></ul><ul><li>Agent model introduced in Summer 2010 </li></ul><ul><li>Currently debuting in 19 states servicing 3,000 zip codes </li></ul><ul><li>500 agent/broker panel with 250 Five Star Certified and growing </li></ul>
    5. 6. What is Community Empower LTO? <ul><li>A Private Transaction Between Buyer and Seller </li></ul><ul><li>A Purchase Agreement With a Temporary Lease (Up to 18 Months) </li></ul><ul><li>An Ordinary Transaction Just Like Any Other </li></ul><ul><ul><li>Title Works the Same </li></ul></ul><ul><ul><li>Lending Works the Same </li></ul></ul><ul><ul><li>Servicing Works the Same </li></ul></ul><ul><ul><li>Realtors Work the Same </li></ul></ul><ul><li>LTO Acts as a Program Guarantor to Protect both the Buyer and Seller in an Organized and Professional Structure </li></ul>
    6. 7. About Your Certification <ul><li>Your Certification Will Provide You With Many Benefits: </li></ul><ul><ul><li>Preferred Relationships With Lead Providers </li></ul></ul><ul><ul><li>State Regulatory Updates </li></ul></ul><ul><ul><li>Help Desk for Transaction Support </li></ul></ul><ul><ul><li>National Support for Program Materials, Inspection Appraisal </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>1-800-362-6101/480-226-9989 – Linda’s Cell </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul><ul><ul><li>[email_address] </li></ul></ul>
    7. 8. LTO - One of the Most Productive Ways to Buy or Sell a Home <ul><li>Buyer </li></ul><ul><li>Protection </li></ul><ul><li>Plan </li></ul><ul><li>________ </li></ul><ul><li>Locked in Purchase Price </li></ul><ul><li>Rent Credits </li></ul><ul><li>Appreciation </li></ul><ul><li>Financial Counseling </li></ul><ul><li>LT0 Program </li></ul><ul><li>____________________ </li></ul><ul><li>Buyers and Sellers Receive: </li></ul><ul><li>Transaction Flexibility </li></ul><ul><li>Freedom to Move </li></ul><ul><li>Financial Security Surrounding Their Transaction </li></ul><ul><li>No-Hassle Service from Qualified Realtor Professionals </li></ul><ul><li>Seller </li></ul><ul><li>Protection </li></ul><ul><li>Plan </li></ul><ul><li>______________ </li></ul><ul><li>Less Days On Market </li></ul><ul><li>Rent Guarantee </li></ul><ul><li>Property Mgmt </li></ul><ul><li>Qualified Tenant </li></ul><ul><li>Full Price Offer </li></ul><ul><li>Home Warranty </li></ul><ul><li>Benefits </li></ul><ul><li>___________ </li></ul><ul><li>Flexibility </li></ul><ul><li>Earn Ownership </li></ul><ul><li>Move-in Now </li></ul><ul><li>Build Wealth Through Home Ownership </li></ul><ul><li>Benefits </li></ul><ul><li>______________ </li></ul><ul><li>Flexibility </li></ul><ul><li>Financial Security </li></ul><ul><li>Asset Protection </li></ul><ul><li>Screened Tenant </li></ul><ul><li>Full Price Offer </li></ul><ul><li>Fully Managed Process </li></ul>
    8. 9. LTO Lifecycle Buyer Qualification Local Agent Finds Home Temporary Lease Agreement Purchase Agreement Credit Counseling Property Management Permanent Financing Signage Broker Support Property Qualification Full Doc Qualification Transaction Support 6 – 18 Months Lease Period <ul><li>Customer Applies for LTO Program </li></ul><ul><ul><li>Customer Evaluated Against Underwriting Standards </li></ul></ul><ul><ul><li>Customer Undergoes Comprehensive Credit Risk Evaluation </li></ul></ul><ul><ul><li>Customer Agrees to Participate in the Continuing Counseling Program </li></ul></ul><ul><li>Full Doc Underwriting </li></ul><ul><li>Customer Selects Property from Real Estate Agent </li></ul><ul><li>Lease Period Begins with Client Under Credit Management </li></ul><ul><li>Lessee Improves Score and Qualifies for Permanent Financing within 18 Months </li></ul>
    9. 10. Program Structure <ul><li>Structures the Transaction </li></ul><ul><li>Guarantees the Rental Income During the Lease Period </li></ul><ul><ul><ul><li>Rent </li></ul></ul></ul><ul><ul><ul><li>Taxes </li></ul></ul></ul><ul><ul><ul><li>Insurance </li></ul></ul></ul><ul><ul><ul><li>Property Management Fees </li></ul></ul></ul><ul><ul><li>Insures the Property from Peril </li></ul></ul><ul><ul><li>Insures the Property with a Home Warranty Covering Mechanicals and Other Typical Repair Scenarios </li></ul></ul><ul><ul><li>Provides Transaction Support and Program Providers </li></ul></ul>
    10. 11. Monthly Flow of Funds During Lease Period Lease Payments Lease Servicer Principal Interest Taxes Insurance Credit Counseling Property Oversight Servicing Fee $35/mo Purchase price x 30 year amortization at prevailing rate plus Actual Taxes, Insurance, $135 for Credit Counseling and Property Oversight Lease Payment Stripped & Distributed Collected Via ACH Reserve Pool Seller Carrier Program Administrator Due 1 st of Month Late After 5 th Late Fees go to the Servicer Funded by Buyer’s Program Fee 1 1/2 % of Purchase Price of Home Pays if Renter Defaults Re-Insurer Backs Reserve Pool
    11. 12. Transaction Administration <ul><li>Program Administrator Manages the Transaction </li></ul><ul><ul><ul><li>Manages the Flow of Funds </li></ul></ul></ul><ul><ul><ul><ul><li>Lease Servicer (3 rd Party) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Default Servicing (Collection & Eviction) </li></ul></ul></ul></ul><ul><ul><ul><li>Manages the Reserve and Escrows funds </li></ul></ul></ul><ul><ul><ul><li>Manages the Asset </li></ul></ul></ul><ul><ul><ul><li>Manages the Tenant </li></ul></ul></ul><ul><ul><ul><li>Manages Reporting </li></ul></ul></ul><ul><ul><ul><li>Manages the Insurance Policies </li></ul></ul></ul>
    12. 13. When to Use the Program With Buyers <ul><li>Use LTO When Buyers Have: </li></ul><ul><ul><li>Less than Perfect Credit </li></ul></ul><ul><ul><li>Good to Excellent Credit With Little to No Down Payment </li></ul></ul><ul><ul><li>Good Credit With Clients Who Want to Use Their Cash for Something Other Than a Down Payment </li></ul></ul><ul><li>LTO is NOT a Program for Risky Borrowers </li></ul>
    13. 14. Tenant Qualification <ul><li>Tenant Will be Fully Screened and Documented for Income, Credit and Debt </li></ul><ul><li>Seller Can be Comfortable because </li></ul><ul><ul><li>Rent will be Paid </li></ul></ul><ul><ul><li>Property will be Insured and Protected </li></ul></ul><ul><li>LTO Tenants Want to be Home Owners and Consider Themselves Buyers, Not Renters. </li></ul>
    14. 15. Tenants Earn Rent Credits <ul><li>Rent Credits = Rent Paid Minus Fair Market Rent </li></ul><ul><li>Fair Market Rent is Average Rental Rate in Area / HUD Estimated Rate Guidelines Established by Appraiser at Time of Purchase Contract </li></ul><ul><li>Rent Credits are Applied as Down Payment Credit, then to Closing Costs (As May be Allowable by FHA/Fannie/Freddie Underwriting Guidelines) </li></ul>
    15. 16. Rent Calculation <ul><li>The Rental Payment Consists of the following: </li></ul><ul><ul><li>Principal & Interest – is the Purchase Price Calculated at 6% Interest Amortized Over 30 years. </li></ul></ul><ul><ul><li>Taxes – Actual Taxes </li></ul></ul><ul><ul><li>HOA – Actual </li></ul></ul><ul><ul><li>Insurance – Calculated at $1.09 per thousand </li></ul></ul><ul><ul><li>Property Management and Credit Counseling - $135.00 per Month. </li></ul></ul><ul><ul><li>Example $100,000 Purchase Price </li></ul></ul><ul><ul><li>P & I = $599 per Month ($100,000 x 6% Interest, Amortized for 30 Years) </li></ul></ul><ul><ul><li>Taxes = $100 per Month ($1,200 per year) or Actual Property Tax </li></ul></ul><ul><ul><li>HOA = $50 per Month or Actual HOA fees, if Any </li></ul></ul><ul><ul><li>Insurance = $91.00 per Month / $1.09 x 1,000 = $1090/12 </li></ul></ul><ul><ul><li>CC & PM = $135.00 per Month – Actual Cost </li></ul></ul><ul><ul><li>Total Rent= $975.00 per Month </li></ul></ul>
    16. 17. How to Calculate Fair Market Rent <ul><li>Obtain Rental Comparables in Subject Subdivision </li></ul><ul><li>Evaluate the Average Rent Payment for That Specific Property Type with Similar Features </li></ul><ul><li>Once Rent Comps are Established You Will Calculate: </li></ul><ul><li>Rent – FMR = Above Fair Market Rent </li></ul><ul><li>Example: $975 Rent - $775 FMR = $200 AFMR </li></ul><ul><li>A Surplus of $200 per Month (per UW Guidelines) Can be Credited from the Seller Can be Applied Toward the Buyers Down Payment. </li></ul><ul><li>So - $200 per Month for 18 Months = $3,600 Credit. </li></ul><ul><li>FHA Requires 3.5% Down Payment. So on a $100,000 Purchase the DP is $3,500. The AFMR of $3,600 Completely Covers the Buyers Down Payment. </li></ul><ul><li>The Seller Can Still Pay up to 6% of Buyers Closing Costs and or Pre-Paids </li></ul>
    17. 18. Tenant Credit Counseling <ul><li>Every Buyer/Rent Must Participate in Monthly Credit Counseling Which May Include: </li></ul><ul><ul><li>Structured Bill Payment </li></ul></ul><ul><ul><li>Continual Credit Score Simulation Estimating Take-Out Date </li></ul></ul><ul><ul><li>ACH (Auto-Draft) from Buyer/Renter’s Bank Account </li></ul></ul><ul><li>Proprietary Credit Counseling Technology Monitors Buyer/Renter Monthly With Automated Oversight </li></ul>
    18. 19. Buyer Protection Plan <ul><li>Lock-in Purchase Price </li></ul><ul><ul><li>Based on Market Value and Established by Appraisal </li></ul></ul><ul><li>Rent Credits </li></ul><ul><li>Paid-in Principal Credits </li></ul><ul><li>Appreciation </li></ul><ul><li>Credit Counseling Assistance </li></ul><ul><li>Home Warranty </li></ul><ul><li>Buyer Support from Qualified Realtors </li></ul>
    19. 20. Property Appreciation / Devaluation <ul><li>If Price of Home Increases, Buyer Gets the Advantage of the Increase </li></ul><ul><ul><li>Purchase Agreement Established Price </li></ul></ul><ul><ul><li>Avoids Misunderstanding </li></ul></ul><ul><ul><li>Encourages Buyer </li></ul></ul><ul><li>If Price of Home Decreases, Buyer/Seller Can: </li></ul><ul><ul><li>Void Transaction </li></ul></ul><ul><ul><li>Mutually Re-Negotiate Price or Terms </li></ul></ul><ul><ul><li>Re-Establish Home at New Appraised Value </li></ul></ul>
    20. 21. Maintaining The Property <ul><ul><li>Driven by the Lease Agreement </li></ul></ul><ul><li>Generally, Tenant is Responsible for: </li></ul><ul><ul><li>Regular Maintenance of the Home </li></ul></ul><ul><ul><li>Maintaining the Home During the Lease Period </li></ul></ul><ul><ul><li>Notifying the Administrator With Serious Issues </li></ul></ul><ul><ul><li>Notifying the Home Warranty Company for Routine Issues </li></ul></ul><ul><li>This Includes Paying All Utilities, Telephone and Cable Charges, Mowing etc. </li></ul>
    21. 22. Program Fees for the Tenant <ul><li>The Tenant Program Fee is 1 ½% of the Purchase Price of the Property </li></ul><ul><ul><li>Due at Lease Signing With 1 st Month’s Rent </li></ul></ul><ul><ul><li>Can Come from Any Source </li></ul></ul><ul><li>Tenant Also Pays the Inspection Fee ($200) </li></ul><ul><li>No Deposit Required because Program Insures Loss-of-Rents and Damages </li></ul><ul><li>Seller Can Ask for Pet Deposit (Optional) </li></ul>
    22. 23. Reserve Pool <ul><li>One-Percent of the 1 ½% Tenant Program Fee is Applied to a Reserve Pool and is Held by the Lease Servicer (Mitas Specialty Servicing) on Behalf of the Program as a Condition of our Llyod’s of London Policy. </li></ul><ul><ul><li>It is Utilized to Protect the Seller’s Cash Flow from Default by the Tenant During the Lease Period. </li></ul></ul>
    23. 24. Buyer Support From Realtors <ul><li>Realtors Have a New Group of Transaction-Ready Buyers </li></ul><ul><li>Realtors Develop a Long-Term Relationship with the Buyers Encouraging </li></ul><ul><ul><li>Life Time Customers </li></ul></ul><ul><ul><li>Referrals </li></ul></ul><ul><li>Realtors Have New Ways to Assist the Home Buyer </li></ul>
    24. 25. When to Use the Program with Sellers <ul><li>Sellers with Flexible Terms </li></ul><ul><li>Sellers with Slow Moving Properties </li></ul><ul><li>Sellers Who Want or Need Income with a Defined Take-Out </li></ul><ul><li>Move-on Sellers with Less than 30% Equity Who Can’t Obtain New Financing Until They Sell Their Home </li></ul><ul><li>Investment Properties </li></ul><ul><ul><li>Investors Desiring a Managed Process with an Exit </li></ul></ul><ul><ul><li>Investors Who Want Guaranteed Higher Returns with Less Risk </li></ul></ul>
    25. 26. Loss of Rents <ul><li>If for Any Reason the Tenant Does Mot Make Their Monthly Rent Payment, or Otherwise Defaults, the Program Administrator Will Pay the Seller its Customary Rent Under the Lease </li></ul><ul><li>The Lease Servicer is Responsible to Collect from the Tenant </li></ul><ul><li>The Lease Servicer Earns Late Fees if the Tenant Defaults </li></ul><ul><li>The Lease Servicer is Responsible for Eviction at the Seller’s Expense </li></ul>
    26. 27. Property Peril Protection <ul><li>Peril Protection is Provided by Lloyds of London </li></ul><ul><li>It is Mandatory </li></ul><ul><li>If you Have an Existing Policy it is Not Necessary to Have Two Policies </li></ul><ul><li>The Peril Policy and Binders will be Provided to the Seller by Lloyds of London </li></ul><ul><li>The Annual Premium is Pre-Paid at the Beginning of the Lease Period by the LTO Program </li></ul>
    27. 28. Seller Protection Plan <ul><li>Tenant Qualification </li></ul><ul><li>Peril Protection </li></ul><ul><li>Reserve Pool </li></ul><ul><li>Loss of Rents </li></ul><ul><li>Home Warranty </li></ul><ul><li>No Property Management </li></ul>
    28. 29. Seller fees Q: Does the Seller Pay Any Program Fees to LTO? A: Yes. 2 ½% of the Listing Price is Due When the Tenant Becomes the Owner of the Property (At the end of the Lease). Traditional Real Estate Commissions/Fees Still Apply. Seller Also is Responsible for an Appraisal Fee and Title Search. Remember! Seller Receives a FULL PRICE OFFER Seller Receives Guaranteed Rent Cash flows are Insured Against Loss Seller Earns More Net Seller Proceeds Realtors Earn More Money
    29. 30. Commissions and Referral Fees <ul><li>Agents Earn Revenue in Three Ways: </li></ul><ul><li>Lease Commission </li></ul><ul><li>$500 - $900 </li></ul><ul><li>Property Oversight </li></ul><ul><li>$900 </li></ul><ul><li>Purchase Commission </li></ul>
    30. 31. Program Marketing Support <ul><li>Centralized Call Center Support </li></ul><ul><li>Lead Support </li></ul><ul><li>Collateral Materials </li></ul><ul><ul><li>Signage </li></ul></ul><ul><ul><li>Brochures (Seller & Buyer) </li></ul></ul><ul><ul><li>Newsletters </li></ul></ul><ul><li>Quarterly Legislative Updates </li></ul>
    31. 32. Sign Riders Newsletters Tenant and Seller Pamphlets Payment Calculator & Spreadsheet Models
    32. 33. Getting Started <ul><li>Complete LTO Certification </li></ul><ul><li>Sign the Broker Agreement </li></ul><ul><li>Order Marketing Materials </li></ul><ul><li>Establish Territory with Program Administer </li></ul><ul><li>Post Your Listings with Program Administrator </li></ul><ul><ul><li>Email or Fax PDF of Listing Information </li></ul></ul><ul><li>Commissions and Referral Fees </li></ul>
    33. 34. Broker Agreement <ul><li>Broker Agreement Establishes the Relationship Between the Broker and the Program </li></ul><ul><li>Specifies: </li></ul><ul><ul><li>Duties Performed by Parties </li></ul></ul><ul><ul><li>Confidentially </li></ul></ul><ul><ul><li>Price for Service </li></ul></ul><ul><ul><li>Commission Structure </li></ul></ul>Broker Agreement between Program and Broker
    34. 35. Checklist for Lease-to-Own (most states ) <ul><li>Buyer’s Temporary Residential Lease (AAR Lease Agreement) </li></ul><ul><li>Residential Purchase Contract (AAR Contract) </li></ul><ul><li>Addendum to Purchase Agreement </li></ul><ul><li>Addendum to the Lease </li></ul><ul><li>Exhibit “1” </li></ul><ul><li>Any Appropriate Disclosures for Each Property </li></ul><ul><li>Easy </li></ul><ul><li>No New Process to Learn </li></ul><ul><li>Customary Documents </li></ul><ul><li>Any Single-Family (1-4 Units) Property </li></ul><ul><li>We Fully Support You During the Entire Process </li></ul>
    35. 36. Lease-to-Own Documents Add Lease Addendum Add Purchase Addendum Exhibit 1 Exhibit 1 Ties Agreements Together Lease Purchase Contract