Why Do Banks Pay Unpaid Property Taxes on Mortgaged Homes?

January 21st, 2012 by Bank Loan | No Comments | Filed in Loans

Why Do Banks Pay Unpaid Property Taxes on Mortgaged Homes?

If you invest in tax sale properties at the government held tax deed or tax lien auction, you’ll find that almost all the properties have one thing in common: none of them have a mortgage. The banks pay unpaid property taxes on homes that are mortgaged almost every time. Why is this?

The answer is simple: when the government forecloses on a property for unpaid property taxes, all liens and mortgages are wiped out. The buyer of the tax lien or tax deed, when they become the owner of the property, will have a free and clear title to the property. So if banks DON’T pay unpaid property taxes, then they will lose their ability to foreclose on the property and recoup their investment.

Also, frequently banks bundle property taxes into the monthly mortgage payment for homeowners. That way, as long as the mortgage is getting paid, the taxes are also getting paid, and if an owner gets behind on their mortgage, the mortgage company is still keeping the property current on its taxes and safe from government foreclosure.

What this means for investors is that it’s a much better investment to buy tax sale properties than properties that are in the process of bank foreclosure.

Since most tax sale properties are free and clear when you buy them, you remove the headache of settling with the mortgage company and other lien holders… not to mention you don’t have to pay the mortgage while figuring all those details out!

Unfortunately, savvy investors have already figured this out, and large companies have grown up around this industry. If you try to buy properties at auction, you’ll be bidding against companies that invest in tax sale properties full-time.

They employ teams of researchers that figure out which properties are the best investments, and they’ll outbid you on these properties every time.

The best thing to do is to forget the tax sale all together, and let the big companies do your dirty work for you! After the tax sale has been completed, there is usually a year where the buyer can come to the tax office and “redeem” the property– pay the taxes off, and get their property back. During that time, you can see which properties have been bought by the big companies and narrow your focus to those particular properties, and then go to work on buying them directly from the owner.

Delve into the world of “deed grabbing” as this method of tax property investing is known, and learn to easily profit with little to no competition.

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Attorney General Coakley Sues Banks Over Foreclosures: McGeough Lamacchia Realty Issues Response

January 12th, 2012 by Bank Loan | No Comments | Filed in Bank

Waltham, MA (PRWEB) December 03, 2011

McGeough Lamacchia Realty, the #1 Listing Agency in Massachusetts, issued the following statement in response to the lawsuit brought against five major banks by Massachusetts Attorney General Martha Coakley for alleged illegal foreclosures and loan servicing practices:

Weve been saying this for years. Loan modifications have been the biggest creator of false hope by banks and the government since this foreclosure crisis began, says John McGeough co-broker/owner of McGeough Lamacchia Realty.

Coakley announced Thursday she is suing five national banks, Bank of America, Wells Fargo, JP Morgan Chase, Citi, and Ally Financial (formerly GMAC), as well as Mortgage Electronic Registration System, Inc. (MERS) and its parent, MERSCORP Inc., in connection with their roles in allegedly pursuing illegal foreclosures on properties in Massachusetts as well as deceptive loan servicing including loan modifications. (Commonwealth of Massachusetts v. Bank of America N.A., 11-4363, Suffolk County Superior Court, Boston).

“The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis,” Coakley said in a statement Thursday.

Among other claims, Coakley alleges each of the Bank Defendants deceived Massachusetts borrowers about loan modification requirements resulting in increased and unnecessary defaults.

For instance, the lawsuit alleges the Bank Defendants deceived Massachusetts borrowers by informing them they must be over 60 days delinquent to get a loan modification, when the truth is that delinquency is not always required. In fact, if default is imminent, borrowers are supposed to be considered. Borrowers who otherwise may qualify for a loan modification were being improperly denied or dissuaded from applying.(1)

I applaud the Massachusetts Attorney General for including these loan modification practices in their suit. We have seen hundreds of homeowners over the last three years stop paying their mortgage because they were told they had to be late in order to be considered for a loan modification. Then after waiting months, the loan modification was denied. By this time, they are at least six months behind with no possibility of catching up, says Anthony Lamacchia, co-broker/owner of McGeough Lamacchia Realty.

Trial modifications were found to be deceptive as well. Prior to June 2010, Bank of America converted only approximately 30% of trial modifications to permanent modifications. Wells Fargo reported a similar conversion rate for the time period, while Citi and Chase hovered at approximately 40%.Borrowers were strung along in trial modifications for nine months or longer, subjecting them to plummeting credit scores and mounting delinquency amounts.(1)

The Bank Defendants’ modification efforts have been so poor that, for the first quarter of 2011, the United States Treasury Department withheld payment of the HAMP (Home Affordable Modification Program) Servicer Incentives to Bank of America, Chase, and Wells Fargo, noting they were in “need of substantial improvement.” (1)

They have also been accused of writing loans and modifications they knew their clients could not afford and foreclosing on properties where they were not the mortgage creditor.(1)

We have been saying all along that distressed homeowners want the truth more than anything. If they do not qualify for a long term loan modification they deserve to know and to know quickly so they have enough time to explore other foreclosure alternatives such as short sales which provide a graceful exit from a home if they are underwater and can no longer afford their home, stated Lamacchia.

For more information about the lawsuit, visit the New England Short Sale Blog

1.Commonwealth of Massachusetts v. Bank of America N.A., 11-4363, Suffolk County Superior Court (Boston).

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Letting the Banks Compete to Refinance Your Home Mortgage

December 31st, 2011 by Bank Loan | No Comments | Filed in Loans

Letting the Banks Compete to Refinance Your Home Mortgage

Home Mortgage rates have been falling fast and finally hit record lows. Unfortunately, many homeowners might not be able to take advantage of these rates. Falling home equity and credit scores might prevent them to refinance. Furthermore, stricter lending requirements do not help the situation. Nevertheless, considerably high refinance mortgage applications show that people find ways to qualify for the best rates. It might be high time to check if you would qualify and save with home loan refinancing.

It is wise to start refinance mortgage search with finding out how much is your home worth in the current market. Fallen house prices have left many with negative equity. Consequently, cash in refinance mortgages have become new trend. Homeowners might need to put their savings in the refinance mortgage deal so that they lower their monthly mortgage outgoings.

This will allow them to save in time and build back their savings. Is your home valuation high enough to refinance or are you prepared to put down cash to reach necessary down payment level?

If so, take out your mortgage papers and find out your existing mortgage rate. If your mortgage is at least one year old, current home loan rates might be low enough for you to benefit from home loan refinancing. Depending on how long you intend to stay in your home, the savings could be enough to pay back refinance closing costs shortly. Converting adjustable rate mortgage to fixed rate when the rates are this low might offer extra motivation.

Another factor that will affect your mortgage refinance rate is your credit score. If it has been on the up since you got your mortgage, you might be eligible for even better rates now.

Otherwise, you might still have time to improve your credit score a little bit more. However, if you are serious about refinancing, you would better start putting all your documents in order. Rates might begin climbing again while you are trying to improve your credit score to qualify for better rates.

Consider getting a free Mortgage Refinance Quote to see, if you would be able to reduce your monthly mortgage payments. You never know when the rates are going to be this low again. Some may be running a risk of waiting for even lower rates that might never come, too. Weigh your options carefully and take a realistic mortgage refinance decision. Use online resources to get quotes, rates and find calculators. Nowadays, it is much easier and faster to find out where you stand with home loan refinancing.

Free Mortgage Rates, Quotes, Articles and News at Refinance Mortgage. Mortgage Quotes in a minute Refinance Quote.

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Customer Satisfaction with Banks and Credit Unions Increases in 2011: Prime Performance 2011 Bank and Credit Union Satisfaction Survey

December 29th, 2011 by Bank Loan | No Comments | Filed in Bank

Denver, CO (PRWEB) December 07, 2011

Customers claim they are more satisfied with banks and credit unions and less likely to switch banks than in 2010 according to the 2011 Bank and Credit Union Satisfaction Survey released today by Prime Performance, which advises banks and credit unions on improving the client experience.

Based on a recent interaction with a representative, credit union customers rate their overall satisfaction a net score of 89 percent. The comparable score for small banks (banks with less than 300 branches) is 88 percent and for large banks (300 to 4,000 branches) it is 80 percent. The industry average is 82 percent. Falling below that were: Bank of America, 73; Wells Fargo, 75 percent; and Chase, 79 percent.

A net satisfaction score is the percent of satisfied customers minus the percent of dissatisfied ones. A score of 100 percent is perfect.

The industry average net satisfaction score increased 5 percent over 2010. Chase and large banks increased faster than the industry rate, at 12 and 6 percent, respectively. Increasing slower than the industry rate were Bank of America at 3 percent, and credit unions, small banks and Wells Fargo, all at 2 percent.

While satisfaction is on the rise, the survey also showed that some banks, particularly the mega-banks, have not completely won back the loyalty of their customers. Many consumers at big banks believe their bankers may put institutional interests ahead of customers, have concerns about fees and are not ready to refer friends and family to do business with them.

These findings and others come from the Prime Performance 2011 Bank and Credit Union Satisfaction Survey. This survey was conducted in August and September 2011 with more than 8,000 customers who had recently been assisted by a representative at a credit union, small bank, large bank or one of the three mega-banks Bank of America, Chase and Wells Fargo.

Contrary to most press reports, banks have made significant progress in creating a more satisfying experience, mainly with younger customers. Small banks have pulled even with credit unions among Gen Y and Gen X customers, while credit unions have increased satisfaction among older members. Large banks and Chase had the greatest increases in satisfaction but still have work to do to win back their customers trust. Customers told us they experience more problems or had more complaints with the big banks and are not sure the banks are acting in their customers best interest particularly when it comes to fees, said Jim S Miller, president of Prime Performance.

While customer satisfaction is improving, banks and credit unions are slipping in some key behaviors that make customers feel better about their banking experience. Using the customers name dropped by 5% and thanking the customer fell by 3% from 2010. Representatives at Wells Fargo are most likely to use their customers name and least likely at Chase. Customers are most likely to receive a thanks at Wells Fargo and least likely at Bank of America. While known for their personalized, friendly service, credit unions and small banks are not better than the industry average at thanking and using their customers name.

While credit unions and community banks enjoy high satisfaction and customer loyalty, their larger competitors are closing the gap, especially with younger customers. If small banks and credit unions dont live up to customer expectations and provide a more personalized service they run the risk of losing their service advantage, Miller said.

Other interesting survey findings included:


????Chase had the greatest increase in satisfaction overall and among Gen Y and Boomers and Pre-Boomers. Chase also showed the greatest improvement in likely to recommend and likely to switch. In spite of the improvement, Chase remains below the industry average in these categories.
????Customers believe credit unions have the most competitive fees and Bank of America the least competitive.
????Credit union and small bank customers are least likely to experience problems or complaints while the most occur at Bank of America.
????Customers at small banks and credit unions are more apt to believe employees enjoy their jobs than customers at big banks and mega-banks.
????Bank of America customers are the youngest, with an average age of 41.2 years (excluding minors). Small banks serve the oldest customer base, with an average age of 47.1 years.

About Prime Performance

Headquartered in Denver, Prime Performance works with financial institutions to increase profits by developing and implementing a superior client experience. By capturing the voice of the customer and using that feedback to energize behavior change, Prime Performance helps banks and credit unions create a shared vision of consistent service excellence throughout the organization. After conducting over 5 million consumer interviews, Prime Performance finds that banks and credit unions that focus on improving the customer experience gather more deposits, increase customer loyalty and improve the likelihood of cross-sell & referrals.

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TorFX Comments on OFT Foreign Exchange Super Complaint Against Banks

December 29th, 2011 by Bank Loan | No Comments | Filed in Forex

(PRWEB UK) 21 September 2011

Currency broker TorFX reacts to news that the OFT is investigating whether consumers are receiving a poor deal on foreign currency from the major banks.

Watchdog Consumer Focus has made a “super complaint” to the Office of Fair Trading claiming that consumers are paying too much for foreign currency.

TorFX Managing Director Jon Beddell commented. “The banks provide a number of key services to consumers but foreign exchange is an area in which they are often not very competitive. Many customers find the charges confusing, with 0% commission deals often covering the fact that the exchange rate itself is several percent lower than the underlying market rate. The growth of independent foreign currency brokers is symptomatic of the consumers need for more choice in this sector. These companies are growing strongly because they provide a good service and significant savings. Its not only travel money that is affected by uncompetitive rates, its also individuals and companies making international currency transfers. These transfers account for a far larger portion of the FX market than retail travel money. Many consumers dont realise that there is a cheap and simple alternative to the banks when it comes to converting one currency into another and sending a payment abroad. Independent currency dealers like TorFX can offer competitive and transparent exchange rates that are closer to the underlying wholesale rates that large financial institutions like TorFX have access to. TorFX will also send your funds abroad without charging any fee. The exchange rate savings can be huge on larger currency transfers. For example, a typical TorFX customer transferring money for an overseas property purchase can expect to save as much as 3%. On a ?200,000 transfer thats a saving of ?6,000. Another popular service offered by TorFX is the regular overseas payments scheme. Clients with a fixed monthly currency requirement are able to set up a standing order /direct debit to cover mortgage costs, living expenses or any other monthly bills, and will benefit from better exchange rates and no transfer fees. Banks usually charge ?25 per transfer. Based on a monthly transfer of ?1,000 the savings amount to approximately ?700 each year. The message to consumers is to shop around and compare rates. There is far more choice now than ten years ago and you may be surprised at the potential savings.”

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US Banks – A Full 68% Of Negative Comments Online About The US Financial Sector Are Attributed To Just Two Banks, Citibank And Bank Of America What Was Going Wrong?

November 26th, 2011 by Bank Loan | No Comments | Filed in Bank

Columbus, OH (PRWEB) August 21, 2011

DigitalMR analysed thousands of customer comments about high street banks for the month of June 2011. Over half of these customer views are negative, compared with 45% being about positive customer experiences.

The four most mentioned banking brands, with the highest number of consumer comments were: CitiBank (32%), Bank of America (23.50%) followed by American Express and Wells Fargo (both 17%).

There was, however, a large difference between the positive and negative mentions that these banks generated. American Express (30%) and Bank of America (23%) attracted the largest proportion of positive posts but Bank of America also attracted the second highest number of negative comments (24%). By comparison the bank that had the highest proportion of negative posts was Citibank (44%).

Taking the difference in positive and negative posts into consideration the clear winner for June was American Express with a Net Sentiment Score (NSS) of 58% followed by Capital One with 19%. The high NSS score for American Express shows an overall high satisfaction level for users of this service.

The two banks with the lowest net-sentiment score were CitiBank (unsurprising, perhaps, given its proportion the total negative posts) with a NSS of -52% and US Bank which achieved a score of -59%. CitiBanks higher rating is attributed to the fact that although they were the subject of the highest amount of negative comments they also were the subject of 17% of all positive comments about financial service providers. Much of the negative commentary was related to the June revelation that hackers had accessed 200,000 Citibank account holders details.

The banks with the highest and lowest rated NSS scores remain unchanged from April, the date of our last syndicated report, when American Express led the group, and US Bank brought up the rear.

The US Banking Sector should take note that of the ten banks we analysed conversations about, seven have either a neutral or negative NSS. This means that overall the majority of people were using social media far more to criticise than compliment their banking service.

DigitalMRs report (powered by SocialNuggets) analyses thousands of customer comments posted via a range of relevant finance related websites and open access social media platforms. It measures not only the number of comments posted by consumers on the internet, but also sentiment whether these posts are positive or negative.

Results are based on comments posted by consumers on the major US banks: CitiBank, Bank of America, Wells Fargo, US Bank, American Express, HSBC, Capital One, Barclays, JP Morgan Chase Manhattan and US Bancorp.

Ryan Rutan, President of DigitalMR USA commented: the findings indicate that American consumers who utilize social media platforms are voicing frustrations about their banking experience at a higher rate than positive experiences, but that certain brands are achieving a net positive sentiment”. This tells us that although the balance of comments are on the negative side, it is not strictly an outlet for dissatisfaction. This is easily seen in the divergence of the findings related to CitiBank and American Express.

While conversations about CitiBank accounted for nearly a third of all mentions of companies in the sector (suggesting a wide exposure), they were negative 76% of the time. By contrast American Express should be pleased to see while they accounted for a lower total volume of posts, that 79% of comments about their bank were positive. Amex has, for the second time this year, the highest net sentiment score of all banks we monitored.

1) Net Sentiment Score (NSS)

Most of the banks we measured, achieve a negative Net Sentiment Score (NSS) for June. NSS provides an overall percentage score of net positive posts. A positive score means a bank attracts more positive than negative posts, while a negative score suggests a higher proportion of negative posts.

The average NSS taken across all banks measured is -10%, which shows that US consumers continue to see social media as a space to share experiences of frustration and unhappiness with the service they had experienced. This is a lower NSS however than the results from our December 2010 analysis which showed in the four months from July October the cumulative NSS for US banks was -28%.

Net Sentiment Score ranking

1st American Express (Amex):???????? 58%

2nd Capital One:????????????????????????????????19%

3rd US Bancorp:???????????????????????????????? 7%

4th JP Morgan Chase Manhattan:????????0%

5th Wells Fargo:???????????????????????????????? -2%

6th Barclays:????????????????????????????????????????-11%

7th Bank of America:???????????????????????? -12%

8th HSBC:???????????????????????????????????????? -34%

9th Citibank:???????????????????????????????????????? -15%

10th US Bank:???????????????????????????????????? -51%

2) Features and Services

DigitalMR measured thousands of customer posts across June regarding the services and features that banks offer. Services attracting a much higher proportion of positive mentions to negative ones were: Credit Card Incentives (18% positive vs 1% negative).

The service attracting a higher proportion of negative comments was Credit Cards with (26% positive vs 19% negative) This was followed by conversations about mortgages which displayed a negative sentiment being 17% of all negative conversations regarding a particular service.

3) Click here to view customer comments in their own words

4) How can Banks use social media to their advantage?

Banks can use analysis of data from websites and other social media in the following ways:

????Engage in a one-to-one dialogue with their customers and respond to negative comments.
????Invite some of the customers to join online forums and chat groups to further express their views
????Positive sentiment can be leveraged in advertising
????Operations can learn about and fix specific branch performance issues
????Financial products can be adjusted, and new ones can be designed to meet customer needs

About the syndicated banking report

The monthly banking report monitors thousands of customers online conversations through comments posted on open-access social media platforms such as Twitter and Facebook, forums, blogs, microblogs and commercial websites, for US banking services.

The report is available on annual subscription with updates provided on a quarterly, monthly or weekly basis. Results will be updated to the press on a monthly basis.

Contact

For regular reports and more information:

Ryan A. Rutan

rrutan(at)digital-mr(dot)com

tel: +1 (614) 638-0216

http://www.digital-mr.com

About DigitalMR

DigitalMR is a specialist agency which provides a holistic approach to web based market research. It specialises in utilising social media research, especially web-listening, and sophisticated technology platforms to enhance its business consulting approach.

DigitalMRs solutions also include community panels, access panels, web usability and a distinct focus on qualitative research online. The agency has pioneered new methods in online focus groups alongside tools such as video diaries, bulletin boards and online ethnography.

The agency operates in affiliation with international market research company MASMI. DigitalMR is headed by founder and MD, Michalis Michael and has European headquarters in London, UK, and Nicosia, Cyprus, and Columbus, Ohio, in the US.

About SocialNuggets

SocialNuggets technology delivers real-time market intelligence for fast moving industries by

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Getting Commercial Loans from Banks

November 22nd, 2011 by Bank Loan | No Comments | Filed in Loans

Getting Commercial Loans from Banks

Commercial loans are attained by business owners to support a brand new business or grow a current business. However commercial loans can even be applied for other business associated reasons including obtaining properties for investment in order to use up along with your business, the acquisition of new equipment, working capital, inventory purchases, and a lot of other grounds. Usually banks provide commercial loans to business owners based on their credit rating as well as the status of their business. Commercial lending is actually a business segment in which pays an important function in the income and profits of most finance institutions, hence they usually have quite a few skilled commercial lenders that could aid a business with its financing wants.

Banks are delivering commercial lending to new and proven business people.

People borrowing money will need to make a decision on the type and term of their commercial loan. They also need to choose just how much they prefer to borrow and how much they are prepared to pay for that money. Borrowing cash at the right rate is essential in sustaining the health of a business, simply because over-borrowing / over-leveraging, and borrowing money at to high an interest rate, can put a business at risk. According to the sort of commercial loan, terms will fluctuate largely. Ordinarily commercial loans have a minimum term of one-year and also a maximum term of 5 years. But you will discover shorter and longer-term choices offered as well. Amortizations for term debt change significantly from as short as one year to so long as 30 years, depending on the type of loan and collateral.

Lending companies and banking institutions supply various kinds of loans which will go well with the certain wants of diverse types of companies. You will discover also unique approaches to apply for commercial loans. When you are planning to apply for a commercial loan, it’s crucial to understand concerning the choices readily available from distinctive commercial lenders such as distinctive interest rates becoming offered by many lenders. It really is also important that you simply select those that offer probably the most flexible terms. You’ll be able to basically collect information about different commercial loan alternatives as well as obtain aid acquiring those loans accomplished by way of commercial loan consultants / brokers, since they’ve the best resources and expertise to guide business people to the correct commercial loan resolution.

Despite the fact that the process is in no way a fairly easy one, sometimes obtaining a commercial loan is vital to maintaining the well being of a business or helping it expand. You can find plenty of solutions out there for business people to make the most of to help them develop into or remain effective. Obtaining Commercial Loans from Banks

Commercial loans are obtained by business people to aid a new business or expand an existing business. Although commercial loans can even be utilized for other business linked purposes including acquiring properties for investment in order to occupy together with your business, the acquisition of new equipment, working capital, inventory purchases, and lots of other purposes. Commonly banks offer you commercial loans to business people according to their credit history as well as the status of their business. Commercial lending is a business segment which pays a urgent part in the income and profits of most financial institutions, so they generally have lots of knowledgeable commercial lenders which can support a business with its financing requires.

Banks are offering commercial lending to new and established business owners. People borrowing money need to choose on the type and term of their commercial loan. They also have to make a decision how much they desire to borrow and how much they’re prepared to pay for that money. Borrowing income at the right rate is essential in sustaining the health of a business, due to the fact over-borrowing / over-leveraging, and borrowing money at to high a rate, can put a business in danger. According to the kind of commercial loan, terms will deviate broadly. Normally commercial loans have a minimum term of one-year plus a maximum term of five years. However there are shorter and longer-term alternatives obtainable as well. Amortizations for term debt differ greatly from as short as one year to as long as 30 years, depending on the sort of loan and collateral.

Lending companies and banking institutions present numerous types of loans that can match the certain requirements of distinct kinds of organizations. There are actually also distinctive methods to apply for commercial loans. If you are planning to apply for a commercial loan, it really is essential to understand concerning the solutions obtainable from distinct commercial lenders such as different interest rates becoming supplied by several lenders. It can be also essential that you simply choose those that offer by far the most flexible terms. You are able to basically collect data concerning various commercial loan solutions as well as find aid getting those loans performed by means of commercial loan consultants / brokers, since they have the right resources and expertise to guide entrepreneurs to the best commercial loan solution.

While the method is never a straightforward one, in many cases obtaining a commercial loan is essential to maintaining the well being of a business or helping it increase. There are actually lots of solutions out there for business people to reap the benefits of to assist them grow to be or stay prosperous.
 

To know more information about Commercial Lenders and Commercial Loan visit http://www.commerciallendingx.com/

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Social Responsibility in Banking: How Local Banks Help Communities and Customers Recover from a Disaster

November 8th, 2011 by Bank Loan | No Comments | Filed in Bank

Social Responsibility in Banking: How Local Banks Help Communities and Customers Recover from a Disaster

Article by Bret Pippen

Social responsibility is more than a program. In banking, it’s the approach to service that can help you and your community when you need it most — in the aftermath of a disaster. Whether dealing with tornadoes in the southeast or hurricanes on the coast, your local bank can help you get back on your feet as soon as possible.

As your neighbor, a local bank understands the financial needs of families and businesses affected by a disaster. The bank’s associates are dealing with the same challenges as you. And their support comes in many forms, such as offering financial assistance, establishing relief efforts and providing useful online resources.

Offering Financial Assistance Programs

When you’re trying to put your life back together after a disaster, you don’t want to worry about your finances. With a greater emphasis being placed on social responsibility in banking, you’ll often find dedicated programs to assist you with payment solutions during times of crisis. For example:

• Personal Loan and Credit Card Assistance. If you’re having trouble making loan or credit card payments because of a disaster, talk to your bank – the sooner the better. Banks that “walks-the-walk” in terms of social responsibility often have established programs, special phone hotlines and dedicated teams standing by to assist. Some banks may let you defer loan payments, withdraw Certificates of Deposit (CDs) without a penalty or provide other special offers.

And your bank can work with you directly so you don’t have to use a third-party counseling service. It’s often better when you work together to find a solution that best fits the situation.

• Mortgage and Foreclosure Help. The last thing you want to worry about following a disaster is losing your home. Check with your bank first for help. They can steer you away from scams and help you avoid foreclosure.

By working directly with your bank, you may be able to establish a new repayment plan and get back on track quickly. Don’t want to wait to get help! Whether you’re experiencing a temporary or long-term hardship, learn about the options available — including repayment plans, special forbearances, loan modifications, loan reinstatements, short sales, deeds-in-lieu, as well as customized options. Your local bank can review your circumstances and recommend the best approach.

Remember – it’s important to take action following a disaster, especially if you believe there is a chance that you’ll fall behind in your payments. When you and your bank can work together to keep you in your home, help you avoid negative credit reporting and protect your financial future, everyone benefits.

• Business Financial Assistance. As part of its commitment to the entire community, banks look at ways to help business owners in times of crisis, another example of how social responsibility in banking influences how financial institutions prepare for disaster response. Obviously, disaster can impact your business, as well as your home and family. The first step is talking with your banker immediately following a disaster.

Just as with personal loan assistance, look for special hotlines from your bank, as well as other online references to assist you during a crisis. They may also offer special assistance programs, like deferrals or discounts on new business loans. And, they can direct you to various resources – including the Small Business Administration (SBA) and Federal Emergency Management Agency (FEMA) for disaster loan programs – for additional help.

Establishing Relief Efforts

In addition to providing financial assistance to customers in the wake of a disaster, banks are often hubs of assistance, volunteer efforts and more following a disaster, another way that financial institutions personify a commitment to social responsibility in banking:

• Charitable Contributions. During times of natural disaster, many banks step up to the plate with generous donations. For example, banks may donate directly to organizations such as the Red Cross or other agencies that support areas hit hard by natural disasters.

• Donation Collection Programs. Because bank branches are widespread, banks are often used as collection points for various charitable donations. In addition, because of the convenience, banks in many cases accept donations of from the public to disaster relief funds.

• Volunteer Programs. Many local banks offer programs to encourage their employees to volunteer, such as providing a day-off with pay for employees to donate their time to charitable causes. In the case of disasters, because many of those employees live and work in the same affected communities, those employee volunteer hours are used in disaster recovery.

Providing a Resource Center

Social responsibility in banking can mean a lot of things, but helping you prepare for disaster is definitely part of it. Check to see if your bank has an online resource center to help you plan. Many banks provide a wealth of tools and useful, detailed information on what you can do. Look for this type of information on your bank’s web site:

• Checklists. Guidelines, forms and checklists on how to get help following a disaster. These lists identify what you’ll need to have on hand when you call your bank for assistance. Also look for tips on disaster preparedness for tornadoes, hurricanes, floods, thunderstorms, droughts, fires and other natural disasters.

• Links and Phone Numbers. During and after a disaster, the last thing you want to do is search for information to get help. Your bank may have this information on their website. Check now. If they don’t, make a list of contacts you’ll likely need and keep it with you. This might include contact numbers for your banker, the SBA, the Red Cross, and others.Banks want to build strong relationship with their communities, because the success of a bank is tied to vitality of the community, and that’s why social responsibility in banking is so important. It helps ensure that the community remains strong, even when the worst comes to pass.

It’s a commitment that makes a big difference in how you and your neighbors overcome hardships, and it’s good to note that, in times of crisis, help is there.

Bret Pippen is the head of advertising and customer communications for Regions Bank, one of the nation’s largest full-service providers of consumer and commercial banking products and services. Learn more about social responsibility in banking by visiting our website.










supervisory functions that the Shari’ah Boards of Islamic banks

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Services Offered by Community Development Banks (Cdbs)

November 3rd, 2011 by Bank Loan | No Comments | Filed in Bank

Services Offered by Community Development Banks (Cdbs)

Community development banks (CDBs) operate mainly in Third World countries in the field of microfinance. And also in providing financial services (such as loans, asset management and insurance), they are characterized by very low unit amounts.

The first of this type of institutions, Grameen Bank was founded in 1976 by Muhammad Yunus in Bangladesh. The experience of banks for the poor has recently been imported, with the necessary adjustments, even in developed countries to try to rescue the so-called new poor. Who may be in serious difficulty of paying bills or simply to meet unexpected costs.

In some cases, the activities of development banks is augmented by the participation of neighborhood associations such as sports groups and Catholic associations.

In the United States, those wishing to establish a new community development bank should seek a state or national bank charter. And the Office of the Comptroller of the Currency, regulates the activities of all chartered community banks, in the same way as any national bank.

As such, the chartered CDBs are permitted to lend, invest, and render services mainly to LMI persons or communities in which it is chartered to carry out business. ShoreBank is one of the most prominent in this field in the US, with branches in Cleveland, Chicago’s South, West sides and Detroit.

To achieve their objectives, these types of banks operating in developing countries use the following principles:

   – bank officials move from village to village taking their bank services to prospective clients.
   – most of the paperwork is abolished as a means of accomodating the illiterate, and the loans are granted on trust with no bank guarantee.

   – to further reduce costs and safer refund through mutual solidarity, the credits are often awarded to small groups of applicants who are morally committed to help each other in case of difficulty.
   – in the bank officials’ tour through the villages they meet the customers, collecting repayments and collects any savings, even if they are of modest value.

   – loans, small or large, must be returned since they are not handouts, but a loan given by a bank to a customer;
   – restitution is in installments, often weekly, so that any problems are immediately identified by the contractor and give way for the bank to intervene in time (e.g, through granting of extensions).

These simple mechanisms have, over the years, yielded surprising results, by improving the living conditions of beneficiaries (for instance, by setting up a craft making project or improving one already operational through the purchase of new equipment). The rate of return of lending is, on average, 99% and with the profits, the bank pays the salaries of employees and widens further round of loans.

Now widespread in many developing countries, some of these banks have joined in creating the International Microfinance Network: members of this organization are over twenty NGOs, commercial banks and supporting institutions that offer technical advice.

 

Written by George Chapungu

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Supervisory Functions That The Shari?ah Boards of Islamic Banks

November 1st, 2011 by Bank Loan | No Comments | Filed in Bank

Supervisory Functions That The Shari?ah Boards of Islamic Banks

 SUPERVISORY FUNCTIONS THAT THE SHARI’AH BOARDS OF ISLAMIC BANKS THE SUPERVISION OF ISLAMIC BANKS

INTERNAL CONTROLS FOR SHARI’AH COMPLIANCE

The experience of Islamic banking in various countries has shown that Shari’ah Boards/Advisors of Islamic Financial Institutions (IFIs) should have a proactive role in supervision of Islamic banks’ transactions for the purpose of Shari’ah compliance. Islamic banks are generally using modes involving fixed rates of return.  Non fulfilment of any of the Shari’ah essentials of such modes may render the transactions un-Islamic. The passive role for approving the products or their procedures and leaving their applications totally on the banks opens door to interest in the garb of asset-based transactions like Murabaha, Tawarruq, Hire-purchase, etc. Therefore, experts deem it necessary Shari’ah Boards should thoroughly inspect at least once a year the activities of Islamic banks to ascertain their Shari’ah compliance.
Similarly, a large part of Islamic banks assets comprises investments in equities/capital markets. Shari’ah Boards must ensure compliance of criteria for Islamic banks investments in shares, equities, Sukuk and other avenues of business. This aspect of Shari’ah controls would include prohibition of investment in companies with unacceptable business lines which produce prohibited products and provide prohibited services like:
  Alcoholic beverages and tobacco products
  Grocery stores dealing in Haram goods
  Restaurants, casinos and hotels with bars for prohibited activities
  Amusement and recreational services
  Financial institutions which deal with interest 
  Companies of which:
  Interest income ratio is more than (5)%
  Debt ratio (leverage) is less than (10 – 33)%
  Total illiquid assets less than 10 % of its total assets
If investment is made in equities of such companies, Haram or interest related income will have to be given in charity and the Shari’ah Boards must ensure its credit to charity Accounts.

SHARI’AH CONTROLS IN RESPECT OF VARIOUS MODES

In order to ensure Shari’ah compliance, Shari’ah Boards should specify detailed controls for modes which respective banks are using particularly in respect of  commonly used modes like Murabaha and Ijarah which are susceptible to be used as back-door to interest. Murabaha in various goods may involve different aspects that may need close monitoring.  For example, Murabaha in perishable goods, shares of Joint Stock Companies, particularly when the transactions involve dual side agency agreements, Tawarruq and other by – products of major Islamic modes. We give internal control in respect of some modes as hereunder:-

MURABAHA

1 Shari’ah Board should ensure that accounting in Murabaha is made similar to that of a trade transaction instead of financial transaction. In this respect, AAOIFI’s Accounting Standard on Murabaha may be consulted. Some banks record only the disbursement of the total amount including mark-up. This is against the substance of Shari’ah compliant Murabaha.
2 To ensure that banks are not involved in Rollover of Murabaha transactions, strict internal controls be applied.  Price of the goods cannot be changed if the customer does not pay on time. Accordingly, there is no opportunity for a rollover of Murabaha transactions. Nevertheless, it should also be kept in mind that a Master Murabaha facility entails multiple Murabaha transactions, and in case it is necessary to extend credit, a new Murabaha should be initiated against new goods with a complete process of purchase offer and acceptance. Against this, some banks resort to arrangement in which they disburse the amount payable by their client against a new Murabaha, credit the amount to the client’s account; and then debit his account against the old Murabaha. This is merely a book entry.  In some cases, banks might not be making even the book entry and there might be simple rollover of the previous Murabaha including the previous receivable plus mark-up for the new term.  Shari’ah Board will have to restrict the bank from such operations. Return on such Roll-overs must go to charity fund.
3 The client who is being paid the amount for purchase of the commodity on behalf of the bank may not purchase the commodity for a long time and use it for any other asset that might not be permissible e.g. for purchase of interest-based securities or shares of interest based companies.  Therefore,  there must be effective controls that client purchases the commodity within a given minimum time and gives declaration to the bank followed by acceptance by the bank and sale to the clients.  For effective control, Shari’ah Board may also advise the bank to make payment directly to the supplier.
1 For genuine Murabaha, it is necessary that legal title of ownership is transferred to the bank before it sells the commodity to the client on Murabaha basis. But banks, in order to avoid payment of transfer charges, purchase the goods in the name of the client; thus the banks do not become owner of the goods in any way.  Shari’ah Board must ensure that not only title of goods is in the name of the bank at the time of its sale to client, but also that bank retains all risk and rewards related to ownerships till the goods are sold to the client.
2 Shari’ah Board must ensure that all documentation requirements particularly in case the client is also agent of the bank are being fulfilled properly. The Board should not allow any change in the Master Agreement without its prior approval.
3 Mark-up should be charged from the time bank sells the commodity on credit to the client.  Shari’ah Board must ensure that it is not charged from the date of disbursement to the supplier or to the client (as agent).  Any part of the mark-up should not be referable to the intervening period i.e. between disbursement and declaration/acceptance by the bank.  Islamic banks should calculate their Murabaha profit from the date they sell the commodity to the client.
4 Bai al Inah/Buy-back arrangement is not allowed in Shari’ah. The Shari’ah Board should put in place effective controls that banks do not resort to buyback technique in case of Murabaha transactions.
Banks, upon financing, normally take Demand Promissory Notes (DP Note) from the client. As Islamic banks financing is based on the underlying trading/leasing contracts, they should get DP Notes only after executing the Murabaha sale and creation of liability e.g. after the sale of goods.  Shari’ah Boards should ensure that banks do not take DP Note at the time of disbursement to the client/agent.  If such Note is necessary at the time of disbursement for the sake of Security, it can be of the principal amount only i.e. excluding the mark-up or profit margin.
Some Shari’ah Boards have also allowed in Murabaha structure the use of Tawarruq  i.e. the client selling the goods purchased from bank on Murabaha to get cash for any other business activity.  In this case, Shari’ah Board must ensure that the process of genuine Murabaha is completed fulfilling the Shari’ah essentials and that the cash realised by the client is used for any Halal business/purpose.

IJARAH

The other major mode Islamic banking are using is ijarah alongwith its variants. Following may be some of its controls:
1 The Shari’ah Board should ensure that ownership title of the leased asset is transferred to the bank i.e. Lessor. In case it involves import, banks should import in its name directly or through agent/client.  It has been observed that to avoid some taxes/charges the assets are imported in the name of client/lessee. It is not permissible and the minimum that should be ensured is that a Counter Deed should be signed between the Bank (Lessor) and the Client (Lessee) for transfer of ownership to the Lessor.
2 Ijarah and Bai are entirely different types of transactions in terms of their implications for the parties involved.  Therefore, the two transactions should not be mixed in such a way that their respective Shari’ah essentials are not fulfilled. Transfer of ownership to lessee should not be an integral condition of the Lease Agreement. It could be a unilateral promise, not binding on the other party.
3 Shari’ah Board should ensure that expenses relating to purchase and ownership of the asset are borne by the bank.  As such, expenses that are necessary to maintain the overall corpus of the asset are lessor’s responsibility.
1 As per AAOIFI’s accounting standard for Ijarah, accounting for Ijarah based financing should be similar to that of the operating lease and not that of finance lease.
2 It should be ensured that if rentals are received in advance, the same should not be treated as a liability.  This is because no rentals will be due before the asset is handed over to the client capable of being used by him.
Similarly, for all other modes which an Islamic bank is using, Shari’ah Board should identify the Shari’ah controls which must be ensured so as to maintain sanctity of Islamic business products. For example, in
Diminishing Musharakah different documents relating to creation of partnership, leasing and sale of units to the other party must be independently enforceable.  All expenses relating to ownership must be borne by the parties in the proportion of their ownership. The rate of Musharakah payments should be net of such expenses and not directly linked to any benchmark like LIBOR. If the jointly purchased asset is not capable of being leased (like an unused plot of land), no rental should be charged because it is only a commercial asset and can give profit only upon its sale. Commercial asset or its units can be revalued only keeping in view its actual value/per units value. If it is pre-stipulated that units would be revalued by ( X )% per month/annum, without regard to actual value, the transaction would become usurious.
In case of Musharakah agreements, expected profit rates are projected in the agreements. Shari’ah Boards will have to ensure that payments to banks under projected rates have been subjected to final adjustment procedure as approved by it and the bank’s management treatment of loss, if any, is also very important and it must be ensured that loss is borne by the partners exactly in proportion of their share in the joint investment. It should also be ensured that Islamic banks investments in shares of joint stock companies is subject to the screening criteria approved by the Shari’ah Board and in case of any non-compliance, the dividend income or the capital gain from non-Shari’ah compliant investments must go to the Charity Fund.
Shari’ah Board must also ensure that Islamic bank’s placements with other institution are only on any of the Shari’ah-compliant basis and any income from non-Shari’ah compliant placements must go to charity.  It also should be ensured that the bank fulfils necessary disclosure requirements and profits are distributed among shareholders and various categories of depositors according to already disclosed criteria/ratios/weightages. 

SHARI’AH SUPERVISION OF ISLAMIC INVESTMENT FUNDS

Islamic Unit Trusts and Islamic Mutual Funds represent one of the most important avenues for investment available for Muslim investors, including Islamic financial institutions and high net worth individuals.
With standards of service, accountability and transparency risking to keep pace with the market, and with sophistication and expectations rising among Muslim investors Shari’ah Boards need to be more vigilant and proactive in supervising Shari’ahcompliance audits.
Customer Advocacy
The Shari’ah Board supervision as customer advocacy requires the board taking all aspects to ensure that Islamic investments funds represent halal investments for Muslims. Thus, the services of the Shari’ah Board members in their role of supervisors , are director to the investors who should be assured that investors’ funds are being put to use in way that accord with the Shari’ah principles. .
Portfolio Purification: Fiscal and Moral
Shari’ah-compliant investments may often yield a small percentage of income from some form of interest-bearing instruments or from prohibited business activities. All such income is considered impure. The responsibility of Shari’ah Board members is to ensure that the income is calculated by the fund, and that a corresponding percentage is deducted from the earnings, passed on to investors as dividends.  The decision must be given to charity (not to be confused with Zakat). It is therefore essential that the participation of Shari’ah scholars in an Islamic fund’s strategy of proactive engagement with companies. 
Portfolio Diversification
With the aim of mitigating risk through portfolio diversification, an Islamic fund may  require to turn to markets other than the stock markets, or to target other asset classes. Or a fund may want to do something different as part of a defensive strategy in a bearish market as a way to manage short-term liquidity. Whatever the case, fund managers will need the assistance and advice of an effective Shari’ah Boards to manage the portfolio within the Shari’ah precepts.
Portfolio Selection: Screening Stocks
One of the most important functions of the Shari’ah Board is the scrutiny of equities of companies with Shari’ah established criteria. While Islamic funds are now subscribing to Islamic indexes, if the Islamic Index does not have a full independent Shari’ah Board, then it will require the supervision of a Shari’ah Board to oversee its choice of investments that accord with the guidelines for prudent Islamic investing. Shari’ah scholars should work on these issues even after a fund has subscribed to an Islamic Index. It is also important for Shari’ah scholars to keep abreast of developments taking place in each of the investment sectors and work closely with management on policies and guidelines on the company’s ethics which cannot be easily quantified.
Portfolio Monitoring
Beyond selecting stocks it is also important for the Shari’ah Board to monitor stocks. In an every changing business environment, vigilance is required to ensure that all of the fund’s holdings remain within the parameters of the prescribed Shari’ah screening filters. In the case of the Shari’ah Board of an Islamic Index, the Shari’ah supervisor will need to verify the removal of any non-compliant security/asset from the fund investment portfolio.
Monitoring Management
The Shari’ah supervisory function includes vigilance in relation to the management of Islamic investment funds. An important issue is the Cash-to-asset ratio.  Fund managers may retain an amount in cash, if for example, they are bearish about the market, or if possible they are unable to find a an attractive or suitable asset or stock to purchase for the purpose of investment. The concern is that the idle cash amount may be used to temporarily invest in interest bearing money market instruments. Shari’ah supervision must also monitor the purchase of stocks and equities on margin that is payment of part of the purchase price (or without paying the full purchase price). Such purchases are not permitted by the Shari’ah.
Monitoring Fees
The Shari’ah Board must ensure that the investors are made fully aware of the fund’s fees and how these are structured. Here again, the Shari’ah Board funds itself in the role of consumer advocate. It is important as aside from annual fees and different sorts of loads applied, funds will generally also  charge fees for a number of other services that may be associated with the fund manager’s responsibilities. Load in finance terms is the sales fee the manager will require to pay in order to acquire an asset. This fee varies according to the type of asset and the way it is sold. Many investment funds impose a sales charge. As a result of the load, only a portion of the investor’s funds go into the investment itself. 
Monitoring Fund Documentation
The Shari’ah Board should also pay a part in assisting management in the preparation of filing reports to regulatory bodies, subscription agreements, prospectuses and the like. This is because in preparation of such documentation there will need to be references to the Shari’ah and its interpretation.
Reports
Shari’ah Boards must prepare reports on the status of the fund it supervises. The purpose of these reports is to promote transparency and full disclosure.
Charity Fund
Income derived from interest-bearing securities and non-Shari’ah-compliant securities that may be allowed to be held in an investment portfolio, must be set aside in a charity fund.  The charity fund must also be overseen by the Shari’ah Board. Generally, it has been left to Islamic banks themselves as to whom and how they disburse such funds. However, if regulators in respective countries do not advise any procedure/avenues for disbursement of Charity funds, Shari’ah Boards must ensure that these are used for uplift of the poor or for social welfare projects in the respective economics/societies and are not used for any other purpose not  conforming to the Shari’ah tenets.
Zakat
The matter of zakat is complicated by way of factors that lie outside the control of Islamic funds (and for that matter, Islamic banks and other financial institutions as well). While, zakat is a matter for the investors themselves, the fund manager may request the Shari’ah Board to prepare guidelines for calculation of zakat on profits earned through investments in funds. These guidelines should be published and circulated to investors

SHARI’AH COMPLIANCE AND REGULATORY ISSUES

In most jurisdictions, Islamic banking is to a large extent been governed by the regulatory framework which has been designed for conventional banks. An important element in developing a regulatory framework for Islamic banking involves bridging the twin requirements of Shari’ah compliance and international standards. However, Islamic banking is outside the considerations that inform international standards. 
This raises questions about the relevance of Basel II on Islamic banking, in view of the unique peculiarities of Islamic financial contracts and instruments. 
An important feature of Basle II is the capital allocation for operational risk, which includes legal risk. Legal risk relates to potential loss arising from an unexpected application of law or regulation or because a governing contract cannot be enforced. The implication of the inclusion of legal risk in Basel II is that every bank must now ensure that the systems and controls for the management of operational risk should adequately cover its legal risk. The nature of legal risks involved in financial institutions’ business varies as determined by the particular circumstance of each institution. The Shari‘ah being the foundation of an Islamic financial institution, it delineates its model or business practice and underlines the nature of its legal risk exposure. Recent English court decisions underline the need for financial institutions to identify and mitigate legal risks involved in Islamic financing. While the fact that Islamic banking is based on religious principles is not a supervisory matter of concern to regulators in Europe and the United States, it is capable of threatening the consumer protection objective of banking regulation. It is therefore imperative to assess the established system of Shari’ah compliance against the requirements of Basel II as it relates to managing legal risk.
 

Written by Zia Ahmed
Investment Banker, Islamic Banker

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