Best of Investing
Insider Look: Big Increase In Insurance Claims
Episode Aired: May 30th, 2020
Show Speakers: Michael Snearly, Edward Brown, Mark Hanf, and Nam Phan
COVID-19 has driven a big increase in the number of cyber, worker’s compensation, and business interruption insurance claims. We wanted an insider look into the reasons, how we can avoid being a victim of cyber crime, and other tips you can use to navigate this new space we are all in.
Please click play, and read along with the audio.
Edward Brown: [00:00:00] Welcome. You’re listening to the Best of Investing. I’m your host, Edward Brown, along with my cohost Mark Hanf, and Nam Phan of Pacific Private Money, California’s fastest growing private lender. Our phone number is (888) 912-1190. Use that number to answer the trivia questions for a five pack tanning certificate given away during this show that certificate’s not sponsored by the radio station, but by Tan Bella tanning salon with two locations in San Francisco and one in Marin. I’m sure there’s still shelter in place, but once they come out, it’ll be great to use those certificates, which are worth over a hundred dollars. Today’s trivia theme is general trivia. Now we do have a special guest. We are welcoming back Michael Snearly to discuss a few things. One- how the Coronavirus has led to an increase in cyber claims, workers’ compensation and business interruption insurance. Michael, welcome to the Best of Investing.
Michael Snearly: [00:00:51] Thank you, Edward. Thanks for having me back.
Edward Brown: [00:00:53] You’re very welcome. So let’s start off with the Coronavirus with, of course it’s been on everybody’s lips for a few couple of months now. And you’re saying that there has been an increase in the cyber claims. Why don’t you go ahead to explain that to us.
Michael Snearly: [00:01:10] Yeah, well, clearly a lot more people are working through the cloud and on their computers, as opposed to being onsite and maybe collaborating together in a conference room or, you know, discussing things across cubicles, everything is having to be done online and through the cloud.
And consequently, it just provides a lot more opportunity for the various people to insert themselves into the equation. Actually, the main kind of cyber claim that has been on the uptick since the Coronavirus started is what’s called social engineering, where somebody is embedded in the network. They’re not making themselves known. They’re noticing how people correspond with one another. And at some point at an opportune time, they will send new bank information. They will make a request for money, that seems very reasonable. And the reason those claims are on the uptick is maybe three months ago or four months ago, I could have stuck my head out of my office and asked my CFO like, “Hey, did you just request, you know, $500 in gift cards?”
Edward Brown: [00:02:11] Yeah.
Michael Snearly: [00:02:11] And they would have been like, “No, I didn’t send that.” Whereas now it’s like, it seems urgent. Maybe I respond. Maybe I sent an email, but don’t get a response, but they keep saying it’s urgent, it’s urgent. So, that’s the main one. And so, you know, I personally have seen more than a normal share of those kinds of claims. And of course the industry is reporting that as well.
Edward Brown: [00:02:30] Yeah. And I know that, from the, wiring instructions. We went to a few seminars way before the Coronavirus, and they were talking about a huge uptick in wire fraud. The obvious thing is, when, you know, you get a request that’s changing the instructions. You know, rarely does a title company change the wire instructions.
Michael Snearly: [00:02:47] Absolutely. And in fact, just last week, one of my clients, they received an invoice from one of their vendors, and immediately after the invoice came, another email came saying, and Hey, by the way, we forgot to tell you, but we changed our wiring instructions.
We changed our banking information. So when you pay this invoice, make sure you pay it to the right bank. So they paid the mone, and a couple of weeks later, the vendor reaches out and says, Hey, you still owed the bill. And they said, well, we sent it to the bank that you had indicated because it came from either the exact same email address or a very similar email address.
So close you wouldn’t notice.
Edward Brown: [00:03:23] Yeah.
Michael Snearly: [00:03:24] And so, unfortunately that’s how it works.
Edward Brown: [00:03:27] Yeah. In fact, lately I’ve been getting, like invoices, on the heading, you know, needs your attention, that sort of thing, and it’s for the radio show that has no invoices. So I’m pretty sure it’s spam.
Michael Snearly: [00:03:43] Yeah.
Nam Phan: [00:03:45] How do they insert themselves?
Do they, essentially have access to your email inbox. Is that how they’re able to pick up on these communications?
Michael Snearly: [00:03:55] Yeah. So they’ll hack their way into your network, and so like back in the day when they would do it, it would be kind of like a smash and grab. They would hack their way in.
They’d announce themselves and say, send us money or, you know, or else. But now what they’re doing, they’ve found to be much more lucrative, is to just kind of lay low. So let me describe a scenario. This happened pre-Coronavirus, but it was for our firm, the most costly, claim in this space.
And, it’ll kind of show you how it worked. So somebody had hacked into a system of a small private business, but it was a very wealthy, private business. And so they’re in, and there were wealthy individuals in the private business. They were in there for actually six months, and they were just watching how people send emails.
They were watching how people corresponded. They were watching how emails went, and who they went to to get money. So what ended up happening is the owner, they knew from all the correspondence, was remodeling his house. He was going to Asia to buy art for his remodeled house, specifically for his kitchen.
And they knew he was leaving out of LAX at 10:00 AM. So
Edward Brown: [00:05:00] Wow
Michael Snearly: [00:05:01] At 10:05 AM, presumably he’s in the air. These hackers now seize the opportunity, send an email to the person who sends money, and they send it from as if it were the person, Hey, my flight’s delayed 20 minutes.
I’m online. I want to go ahead and get this piece. Cause I don’t know if it’ll be there when I land. So I want to go ahead and buy it. It’s $250,000 sent to this account, and you know it’s for the kitchen, it’s for that North wall in the kitchen and everything sounds exactly right. And then they knew exactly how he would sign his name.
If he would use only lowercase letters, maybe. Instead of David, he would put lower case D and everything looked the same. So they sent the money, and then he said, Hey, flight delayed another 10 minutes. I see this other piece, 125,000 . They had sent three wires, and the only reason it stopped was because they said, well, we can’t send any more. The account’s empty, and that’s the only reason it stopped. They would have kept sending money, and it ended up being, you know, north of $600,000. He’s on the plane. So they can’t call him, they can’t confirm, and they just kept sending money.
Cause it made perfect sense.
Edward Brown: [00:06:09] And that’s what the title company was saying too, is that they watch transactions, and they just lay low until they seize the opportunity. Hey, good, good stuff here. I mean, not good for the people losing the money, but it’s interesting stuff. Let’s cut to our first
Michael Snearly: [00:06:22] They got some money back.
I will say that. They got some money back.
Edward Brown: [00:06:25] Did they? Okay, good. You know what? That ought to be illegal. Okay. Here’s our first trivia question. What is the curved line between two points on a circle call, what do you call that? We’re talking a little geometry here. And that’s what one tree said to the other tree geometry.
First trivia question: What is the curve line between two points on a circle called? All right. Stay with us. You are listening to the Best of Investing. Don’t touch that dial, we are gonna to be right back.
Edward Brown: [00:00:00] Welcome back to the Best of Investing! Again, I’m Edward Brown, your host, along with Mark Hanf and Nam Phan, and our special guest Michael Snearly. First trivia question was, What is the curved line between two points on a circle called?
Mark Hanf: [00:00:15] Nam knows. Arc.
Edward Brown: [00:00:16] Arc. That is correct.
Nam Phan: [00:00:18] All right! Sweet. What’d I win?
The first one I’ve answered correctly, I think.
Edward Brown: [00:00:24] You’re one of the hosts, you’ll win nothing and you’ll like it.
Okay. I was going to say in the studio, but we’re doing shelter in place. So on our zoom call here, we have Michael Sterling who is quite the expert in cyber security and worker’s comp and all that kind of stuff. And Nam, you wanted to ask Michael a question about the cyber claims.
Nam Phan: [00:00:44] Yeah. So essentially they are getting better and better, really sophisticated. So what are some safeguards or best practices to avoid getting, you know, Getting hoodwinked
Michael Snearly: [00:01:00] Yeah. Great question. Of course. Good network hygiene is important, and of course, if resources and funds are available, actually getting audited, getting your network audited, and seeing where the vulnerabilities are.
And frankly, while they’re auditing, they’ll also say, Hey, by the way we noticed someone’s in here. So that network hygiene I think is important. And then with respect to these social engineering fraud claims, I think the best practice is multiple points of verification, especially at certain limit levels. You know, say over $25,000.
It has to be, you know, you have to get sign off from two people to send that wire or, you know, maybe over 50,000, something like that and multiple points of verification. Then of course, if it’s coming from someone internally, a request. That would be the second point of verification, just confirming.
Cause you know, the big one right now is, is the gift cards, and the reason that is, is such a big fraud is because it’s low enough that it’s not going to be prosecuted criminally. It’s not high enough to reach a threshold, yet it’s still actual you know.
Edward Brown: [00:02:01] So, so Michael, when these bad guys go ahead and get you to wire money to some account, I’m going to guess that as soon as it gets wired in, it gets wired right back out. And there’s no trail because otherwise, you know, couldn’t you follow the trail and get the money back.
Michael Snearly: [00:02:17] Yeah. I haven’t known anybody that’s actually gotten the money back from the bad guys. So yeah, I think so, it probably gets wired right into the account, and probably converted immediately to Bitcoin, or some other non traceable or, you know, kind of currency like that.
So, the only people who have gotten money back from these kinds of claims are from their insurance carrier.
Edward Brown: [00:02:37] Well, how much does something like that cost to get that kind of insurance?
Michael Snearly: [00:02:41] Well, you can add it as sort of a, subliminal audit on your cyber policy. So, I mean, I sold a cyber policy yesterday for $1,800 a year, and it had social engineering fraud on there for $250,000 sub limits.
So, you know, it’s pretty cheap. You can also get it on the crime. You can get a little bit more coverage on your crime policy, but again, you’re looking at maybe two to $3,000 a year for most, you know, average sized businesses, I would say.
Mark Hanf: [00:03:09] We have that coverage at Pacific Private Money, and you made an interesting point about these emails that come in, you know, the way they tend to give themselves away is a misspelling or something obvious.
So, you know, we had one come in where, in fact, Edward sent an email to someone who had just recently been hired in one of our accounting departments, asking that person to change Edward’s wiring information, and the email was signed Ed. Yeah. So that’s the only way we knew. They weren’t watching too closely obviously.
Michael Snearly: [00:03:44] Exactly. So when they’re impatient, they’ll make those mistakes, but when they can just be patient and hunker down, and that’s why, you know, the big scores for them are usually when they’ve been able to observe for months. Because yeah, like they’ll know exactly that Edward may not even put Ed or Edward, he might just put lower e or he might put nothing. You might just send emails without any sort of name.
Edward Brown: [00:04:06] You know, it’s funny. Cause I look at this, and these guys are, are pretty sharp. You know, they’re opportunistic, but they’re cunning and sharp and you wonder why don’t they just use it for good and do good honest work. I mean, it’s almost harder to be a bad guy. If you have to watch the transaction for six months before making any money.
Nam Phan: [00:04:26] Edward, you’re living in the fairy land.
Edward Brown: [00:04:34] Bad guys will always just be bad guys, right?
Nam Phan: [00:04:36] Yeah.
Do they infiltrate like a network just primarily by email? Like I send an email with a link that you click on and download some malware, or is it like, are there websites that are, that people are going to, that’s our fake websites with, do you know, how do they get into the network?
Michael Snearly: [00:04:55] Yeah, probably my guess again.
So that would be more a question for someone who handles these claims on a daily basis. I don’t know how they necessarily get in for the most part. My assumption yes. Would be email or websites, something like that. But you know, what else they do is, they will create an email account that looks almost the exact same as say your CEO.
So, if I were the CEO of a company, it would be M I C H a E lowercase I dot Snearly at my tagline. So the only difference is that L. Would be a lowercase, I, which looks a lot like an L unless you’re looking really close.
Or they, you know, they would add an extra a, or maybe leave out the a it’s super close.
So unless you’re looking closely at it, you would miss it. So they just literally will create that and then can send it. So that’s also another way, that they, they make those requests.
Edward Brown: [00:05:49] Well, I’ll tell you what. What’s that?
Mark Hanf: [00:05:54] Always be on the lookout.
Edward Brown: [00:05:56] Yeah.
Michael Snearly: [00:05:57] Trust, but verify, trust, but verify
Edward Brown: [00:05:59] That’s it.
Mark Hanf: [00:06:00] With online banking, it’s become so much easier to transfer funds or wire funds or ACH. And as a result of all of this, now , the verification that’s required, authentication two factor. It actually has taken a little bit of the efficiency out of it, but it’s certainly well worth it for safety purposes to have a continuing confirmation on where you’re sending your money to.
Michael Snearly: [00:06:25] Absolutely.
Edward Brown: [00:06:26] Yup. I like that. Let’s see, when we come back from the break, I do want to get into worker’s compensation. Cause that’s kind of a hot topic as well as a business interruption insurance, which during this Coronavirus, force majeure is a famous phrase.
Michael Snearly: [00:06:46] We’ve all learned what that means.
Edward Brown: [00:06:48] Right?
That’s right. I didn’t take French, but, I think that’s, isn’t that it or is it in Latin?
Nam Phan: [00:06:55] French
Edward Brown: [00:06:57] Sounds French. Okay. Here’s our second trivia question. Alright, Nam
Michael Snearly: [00:07:01] That wasn’t the trivia question?
Edward Brown: [00:07:02] What’s that?
Michael Snearly: [00:07:03] That wasn’t the trivia question
Edward Brown: [00:07:04] That wasn’t the trivia question, here it comes. What US city is home to the gateway arch?
And it’s not McConnell’s all right. Call (888) 912-1190. The first caller with the correct answer is going to win that tanning certificate. What US city is home to the Gateway Arch? So after we come back from break, we answer the trivia question. We’ll ask Michael about worker’s compensation and business interruption insurance, and then both Nam and I have a deal of the week that is really interesting. This one is a little different. Each story is always a little bit different, you know, as to why someone comes to Pacific Private Money for a loan. This is a new phrase that I had not heard before. So, we will, come back from our break answer trivia question, and then move on.
So stay with us. You are listening to the Best of Investing. Do not touch that dial!
Edward Brown: [00:00:00] Welcome back to the Best of Investing. One more time. I’m Edward Brown, your host, along with Mark Hanf and Nam Phan of Pacific Private Money, and Michael Snearly, our special guest. A second trivia question. What US city is home to the Gateway Arch?
Mark Hanf: [00:00:14] St. Louis
Edward Brown: [00:00:15] St. Louis. Very good
Nam Phan: [00:00:17] Gateway arch or gateway Arc?
Edward Brown: [00:00:20] Yeah arc was in the first one, and arch was in the second. You guys are so funny. Okay. Well, the next question’s a little bit harder. Those two were a little too softball type. Alright. So our special guest is Michael Snearly. We’ve already talked about, how the coronavirus has led to an increase in cyber claims. Let’s move on to workers’ compensation.
Mike: [00:00:43] Yeah, well, workers’ compensation, covers bodily injury to employees. It’s a first party coverage for an employer and historically, and typically illness and diseases are excluded. So like if you catch a cold and you’re a worker there, it’s not going to be picked up on workers’ compensation. Even if you could prove beyond a shadow of a doubt, your coworker gave it to you.
You know, it’s just really hard to figure out where you got sick. And then of course they don’t want to pay disability. You missed a week of work cause you had the flu.
Edward Brown: [00:01:10] It’s for accidents.
Michael Snearly: [00:01:11] It’s for accidents, but Coronavirus is different and it’s a fluid situation.
And so everything I tell you could be totally different once the show airs, you know, once the show is over. But basically right now, the way it works is Coronavirus will be covered by workers’ compensation per state law, per state statute for essential workers. So if an essential works at a grocery store, if an essential worker works at a hospital or something like that, and they contract Coronavirus, in the course of their work, then they are going to receive.
Edward Brown: [00:01:44] Okay. So I’ve got a couple of questions. One. How do you prove that they got it from work and then two, how does that affect the workers’ compensation claim or compensation insurance premiums?
Mike: [00:01:57] Well, to answer your first question, it’s very hard , and I actually read the, guidance from OSHA yesterday and they said, you just have to give a reasonable effort.
That’s literally what it says, a reasonable effort to do an investigation. And, but basically the, the burden of proof is going to be on the employer to prove that it didn’t happen at work. So if you are a grocery store and somebody gets coronavirus and works , as a checker or bagger, it’s going to be the burden of proof on you to prove they did not.
So it’s, I think basically it’s going to kind of work where,
Edward Brown: [00:02:28] Everthing is covered. Okay
Michael Snearly: [00:02:29] Yeah. And then second with premium, it’s going to count as a claim, you know. That’s like somebody, you know, might hit their hand with a hammer or something and they go to the doctor and they miss a couple of weeks of work because of it.
It’s, going to be counted as a claim, which would then affect the premium. So,
Edward Brown: [00:02:46] Oh, that, that’s a killer because there’s really not much you can do, except for tell your employees stay at home. Even if you’re an essential worker.
Michael Snearly: [00:02:54] You know, this is the reason I was actually reading the OSHA guidance yesterday is because people are going to start going back to offices.
And so, you know, the question there is like, Hey, we’re not essential workers, but we are around our coworkers. But if we get Coronavirus at work because we had a meeting in our conference room and the person who sat next to me got it, and now I have it. So again, very fluid.
It’s all sort of emerging right now, but as it stands, the guidance would seem to indicate that, employers will be on the hook.
Edward Brown: [00:03:23] That’s really kind of tough, specifically because you know, like you said, if you get a cold and you got it from your coworker, but that doesn’t matter. A regular cold doesn’t count.
Michael Snearly: [00:03:33] Yeah.
Edward Brown: [00:03:34] You know, or the regular flu doesn’t count.
Michael Snearly: [00:03:36] Right.
Edward Brown: [00:03:37] That’s a tough one. And then the last one here is business interruption insurance. Explain a little bit about that if you would.
Michael Snearly: [00:03:44] Yeah. So business interruption is a coverage on the property form of an insurance policy, and what it seeks to do is to cover the business income that would be lost because of a covered loss. So say a fire burns down a grocery store. Well clearly they can’t produce revenue. They can’t pay employees. They’re going to lose income and revenue because of that, the business interruption would respond. I don’t know of anybody who hasn’t experienced some interruption because of Coronavirus who hasn’t seen some dip in revenue because everybody and some significantly, right?
Like certain dining restaurants where they don’t have a taken out option. I mean, zero, arts, museums, theaters, places like that zero. I mean, even businesses that can still operate remotely through the cloud have seen a decrease. So of course the big question is my business has been interrupted.
Do I have coverage? And I have answered this question for almost literally every single one of my clients because everybody has asked. Unfortunately, the answer is no because, for the business interruption coverage to respond there has to be a covered loss, which is related to a property damage.
The carriers are coming down in the place, and just saying, a virus doesn’t produce property damage. Therefore, the coverage doesn’t respond. They’re also saying a virus is a state of exclusion in the policy, which, you know, for almost every single policy is true. Wow.
Nam Phan: [00:05:11] Wow.
Edward Brown: [00:05:13] Oh, you’re full of good news today. Aren’t you?
Michael Snearly: [00:05:16] That, yeah, this is why, you know, of course everybody in the insurance industry has such a great reputation , and everybody loves us so much. Yeah , it’s been a, it’s been a very hard conversation. Now, I must say that if someone wants to submit a claim for a Coronavirus interruption, we submit it.
We don’t ask questions. We don’t counsel against it. I’m just sharing with you where the carriers have stood. There’s already been multiple lawsuits. This will also get played out in court. And so it is also a fluid situation. So we’ll see where it ultimately lands. But as of right now, that is the carrier stance.
Mark Hanf: [00:05:50] The laws are such that, you know, the people that can pass laws are politicians. They’re going, especially here in California, they’re going to look for every deep pocket possible. And try to pass laws in favor of their constituents. There’s going to be actions to try to force insurance companies to cover virus related losses.
Just like there’s a legislation to make it illegal to evict, your non-paying tenant, and to be able to forgive, not only just defer for as long as a year, but even forgive rent payments. I mean, you know, where does it end? Who’s the one that ends up, you know, picking up the tab at the end of the day?
Is it the U S taxpayer in the form of, you know, increased national debt? I mean, it’s just
Edward Brown: [00:06:31] Listen, as soon as they allow that for the IRS, I’m on board! But forgiveness is like, yeah, don’t worry, you don’t have to pay your taxes this year.
Michael Snearly: [00:06:40] Exactly. I know! I love, I love how, you know, the governors and everybody are like, Hey, you don’t have to pay rent.
And it’s like, well, Do I still have to pay property taxes.? Like, you know what I mean? Like while, while we’re in this coversation
Edward Brown: [00:06:50] And do we have to still pay your salaries?
Mike: [00:06:52] here too, so that’s cool.
Edward Brown: [00:06:53] All right. Let’s cut to our last commercial break. And again, when we come back, we’re going to share some deals of the week, and get an update from Mark about Pacific Private Money, because I think there’s some very good stuff going on there.
All right. Here’s our third trivia question. Who did Eisenhower defeat twice in presidential elections during the 1950s. Mark you were born in 1950s. You should know this.
Mark Hanf: [00:07:21] Very, very late 1950, about five minutes left.
Edward Brown: [00:07:28] Alright, well, 888-912-1190. The first caller with the correct answer is going win that tanning certificate.
Who did Eisenhower defeat twice in presidential elections during the 1950s. All right. Stay with us. The Best of Investing will be right back.
Edward Brown: [00:00:00] Welcome back to the Best of Investing last time, actually not last time. Next time will be the last time. One more time. I’m Edward Brown, your host, along with Mark Hanf, Nam Phan, and our special guest, Michael Snearling. A third trivia question, who did Eisenhower defeat twice in the presidential elections during the 1950s?
Mark Hanf: [00:00:20] Dewey
Edward Brown: [00:00:20] No, close. Adlai Stevenson
Who apparently, a very brilliant man, but he was like one of those guys who’s a little too far ahead. So people could relate more to Eisenhower. Okay. let’s see. So I’m going to share first, my deal of the week, alright. Here we go. So, these borrowers have FICO scores in the 700s. The bank had already approved them, but then the underwriter backpedaled under what was a term that used to be used and it seems to be coming back called payment shock, which basically is that the new house payment was going to be much larger than the current one that they have. So that’s a big payment shock.
I mean, the borrowers know they have it, but the bank says, Whoa, wait a minute! You know , it’s going to double. Right? Yeah. So the bank said, Listen, as soon as you’ve gotten about 6 months worth of seasoning, then we can go ahead and refinance you out. But we’re not going to help you buy the house for now.
The company that they own grosses over a million dollars in business. It’s a 70% loan to value. They have 100s of 1000s of dollars in the bank, and they received, and there were multiple offers on this property. And it’s in a very good neighborhood. So, this is one of those deals where, we’re going to provide them an 11 month bridge loan, so that in six months, when the bank goes ahead and says, okay, now you’ve proven that you can make your mortgage payment.
We’ll go ahead and refinance you out. So it’s one of those kind of slam dunk, I want to say, somewhat of a slam dunk type of deal that is provided by Pacific Private Money. And Nam, I’m gonna let you get into a little bit more of what PPM does.
Nam Phan: [00:02:01] Yeah. Before I do though, so quick question, on the last one, payment shock. Who was shocked? Was it the bank?
Edward Brown: [00:02:07] The bank. Yeah, the borrowers already knew.
Nam Phan: [00:02:12] We doubt that you can make this payment basically because it’s doubled. So even though you’re approved and even though you’re okay with it, but we’re going to hang back until you’ve proven that you can.
Until you have enough reserves.
Edward Brown: [00:02:27] Not reserves, but until you can prove that you are making the payment for six months and then we won’t be shocked anymore.
Nam Phan: [00:02:36] Wow. That’s crazy. So , this deal of the week is, well, okay, so what does Pacific Private Money do? Pacific Private Money, we’re alternative lenders. We lend on residential real estate. We’re Plan B essentially when somebody can’t get bank financing, so can’t get Plan A financing. Which they should always approach a bank first because the rates are, you know, obviously, especially these days very, very low, but there’s a lot of reasons why people can’t get bank financing, especially right now. And Pacific Private Money is here to fill that gap with financing options. Oftentimes, they’re really short term. People come to us typically because they’re in, you know, some sort of transactional distress as we call it. Versus somebody who really isn’t a qualified borrower, delinquent, credit. And in your case, this, my deal of week is one where, again, very qualified borrower, high credit scores. This person had an employment gap. So they’re were in between jobs. And at this person’s level, he was, he was going to start a job as President of a small company. So it’s not like this person was, you know , a new employee who is trying to get alone.
This person had a track record, a 20-year track record of successful leadership running companies. But, you know, at that level, sometimes you don’t get a job the week after you leave your prior jobs. So this is a six month gap and the bank said, Well, you know what? You have this employment gap. We want to see employment seasoning.
Edward Brown: [00:04:15] Right?
Nam Phan: [00:04:15] Employee shocking. We can’t believe you’re going to get another job, even though you’ve been president for 20 years, somewhere else. So he came to us, and, so not only, you know, would we look at their employment history as sort of a metric for determining whether or not they can get another job, but this was also a short-term need. Where they’re using collateral that they own in other properties for the purchase of a property in Carmel. So we cross-collateralized other property, and again this person is very successful. So he owned other investment properties in this case. And we made a loan for 1.4 million. They got the pending offer on the table. We closed the loan a week after they started there. This person started his new job. So, we love stories like this, just because there’s so many people like Mark says in other shows, you know, the Bay area has a lot of transitory employees. Even at the C-level, at the Executive level, people jump. And we look at their track record and we know that, you know, oftentimes we feel comfortable that they’re going to land on their feet very quickly in a new position.
Mark Hanf: [00:05:26] Yeah, conventional financing today, you know, what they call conforming loans.
It’s really a narrow window, and it’s not built for people who move around. It’s really not built for a typical Bay area client. So you’re in Northern California, you’re at the hub of technology. People are moving around, you know, not withstanding what’s happening right now, where you’ve got a lot of people who are either furloughed or working from home. But you know, you have self-employed and you have transitory issues. And then you’ve got payments oftentimes that are deferred. Cause you’ve got stock options. So you’ve got other types of things going on. Bank financing is just not built to accommodate that. Now, at least not in a hurry. And so when you’re buying real estate and you need to close in 21 to 30 days because you have to be able to compete in, and provide a compelling offer to a seller of a home. Oftentimes, borrowers will take advantage of one of our Bridge Loan products. Yes, the interest rate’s higher, but you’re only paying interest, you’re not paying principal. So , you know, someone who borrows a million dollars from us, the payment’s actually roughly about the same. It’s a little bit higher than they’re going to pay the bank., but our payment it’s just interest only. So, when you talk about payment shock, it’s really, they’re not, first of all, they’re not going to keep the loan for a year, generally speaking. They’re not going to pay 10% for the money. The payment is based on an annualized rate of 10%, but again, you’re just paying interest on the money. And then when you sell your current home, you could pay us off. So it’s, it’s really a great tool. It gives people the time they need. It’s a tool to capture the property, gives them the time they need, then now to go and get a refinance loan. Which again, refinances right now in the COVID period take longer and a lot of banks are not even taking applications right now. But as in the ensuing months, when things get back to normal again, you know, banks will again be looking for, you know, a vibrant refinance market.
And, and again, we just, we just provide people the opportunity and the tools to help capture the real estate. Then they have all the time, they need it for the 90 to 120 days to get optimal bank financing, based on their abilities.
Edward Brown: [00:07:35] Okay. why don’t you give out your information? And then before we get to break, we want to give out Michael’s information also.
Mark Hanf: [00:07:40] Sure.
So, go to pacificprivatemoney.com. That’s the best way we’re always updating that website. We just added some new products to our investor page. Definitely worth checking out. pacificprivatemoney.com or if you’d like to pick up the phone and talk to people live we’re at, 415-883-2150.
Edward Brown: [00:08:02] And Michael, how do people get a hold of you if they have questions about insurance, worker’s comp, cyber claims, all that sort of thing.
Michael Snearly: [00:08:08] Yeah. No. The best way is via email. It’s my name. email@example.com , or via phone 415-223-5580. And that will connect you to my office.
Edward Brown: [00:08:22] Very good. All right, guys, we’re coming back with some closing comments. Don’t touch that dial.
Edward Brown: [00:00:00] Welcome back to the Best of Investing! Last time for today, I’m Edward Brown, your host, along with Mark Hanf and Nam Phan of Pacific Private Money, and Michael Snearly, our special guest. No trivia question, but Nam we have a fund event coming up soon.
Nam Phan: [00:00:14] Yeah, June is just around the corner. And so it’s time for our next, Fund Zoom meeting.
And, that will be Thursday, June 25th. It will be in the afternoon, probably five o’clock, maybe six o’clock, but , we’ll let people know on the next show and on our website too, under our events section. So last one we had was on April 16th, and it was really well attended. So many people wanted to know, Hey, what’s going on with lending, with, you know, COVID-19 happening.
I think this one will, it’ll be really interesting to see. You know, by the 25th it’ll will have been two months since the last event. And, you know, every week is like a lifetime right now of change. So in about a month time, it’ll be , you know, a lot will have changed
Edward Brown: [00:00:58] And things are actually going better for you because banks are pulling back.
So you’re getting more loan applications. Aren’t you?
Nam Phan: [00:01:04] Yeah. And you know what, I’ll tell you a quick story. We had an investor reach out who said, Hey, Nam, you know, I was just at bank. I have a CD that’s maturing next week. And the bank rep came up to me and said, Hey, because you are a premium client, I’ve got a great savings program for you where you can earn 0.004%.
He said wait, .04?
He’s like, no .004.
And he said the way he said it was so like optimistic and upbeat, but he said, no, I’m going to go invest it in Pacific Private Money. So we’ll see him next week.
Edward Brown: [00:01:45] We forgot to ask you the email question that came in. We have time for this one. Can you please explain how buyers are using your company to present quote, all cash offers.
Mark Hanf: [00:01:57] I’ll do that quickly. So, we don’t suggest that, a seller or a buyer rather, instruct their agent to make all cash offers if they intend to use a loan. However, in practice, what we find is that, you know your buyer’s agent, may very well, in an effort to, you know, get the contract. Competing with other offers they may decide, you know, they’ll, at the very least they’ll do a non- financing contingent offer.
They may still say there’s financing, but there’s no financing contingency, but if they really, really want to make it look strong, we’ve seen offers, purchase contracts come back to us from our borrower clients that say All Cash. And then , they basically alert the escrow officer that, Oh, by the way, we’re going to use a hard money loan to close. Oftentimes we’ll, you know, sometimes there’ll be a little bit of blow back from, the seller’s agent, the listing agent that is, but, again, it’s just, you know, in a marketplace where it’s tight inventory. I mean people do what they need to do to obtain.
And we don’t tell people to do it or not to do it. Other than the fact that using us for financing on the purchase side allows your agent to mimic an all cash offer in some form or fashion.
Edward Brown: [00:03:13] Gotcha. Yeah. Like sometimes the selling agent will call to make sure, Is this really like, are you guys really, really, really going to lend the money in 14 days or 10 days or whatever it is.
Give out your information one more time, if you would.
Mark Hanf: [00:03:25] Sure pacificprivatemoney.com (415) 883-2150.
Edward Brown: [00:03:33] Alright, Michael, give out your information one more time too.
Michael Snearly: [00:03:36] firstname.lastname@example.org, 415-223-5580.
Edward Brown: [00:03:41] All right, guys. Here’s our thoughts for the day. You are the only one who can limit your greatness, and the difference between interest and commitment.
When you’re interested in doing something, you do only what is convenient when you’re committed to something you accept no excuses, only results. And I got a, I got a quote here from Ronald Reagan says, “It’s true. Hard work never killed anybody, but I figured why take the chance?”
That came from el presidente.
Right? Well guys, another good show, Nam, one more time about registering for the upcoming webinar.
Nam Phan: [00:04:21] You can go to www.pacificprivatemoney.com and go to our events section and we’ll have the event up shortly. June 25th, it’ll be a, fund information session. And we’ll talk about all the different ways that you can invest, with Pacific Private Money because there are more ways today than there have ever been.
And it it’ll be at five o’clock. There you go.
We look forward to having everyone.
Edward Brown: [00:04:45] All right guys, tune in next week to the Best of Investing, we’re going to be giving away more free prizes for answering trivia questions. Thanks for listening on behalf of our team. I’m Edward Brown, wishing you the Best of Investing, so long.
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