Finance Blog number 1

Democratic state legislators announced plans Thursday to implement a package of bills aimed at slowing the tide of foreclosures and cracking down on dishonest lending.

Democrats asked Gov. Arnold Schwarzenegger to approve a special legislative session so they can enact the bills as soon as mid-December if the session is called immediately, Assembly Speaker Fabian Nunez said.The bills would increase the number of counselors to help troubled borrowers and require lenders to send homeowners a list of their rights. The package would also limit the types of loans and mortgage fees.

Assemblyman George Plescia, R-San Diego, said he agreed with targeting unscrupulous lenders but warned against too much regulation.

“We need to make sure we don’t overreact with legislation that makes it not a competitive market and adds cost to people who are buying homes,” Plescia said.

He pointed out that although about 20 percent of subprime loans have defaulted, many consumers were able to purchase homes because of such loans.

RealtyTrac, an Irvine-based company that tracks foreclosures, announced Thursday that California has the second-worst foreclosure rate in the nation, behind Nevada. California has by far the highest total amount of foreclosures. RealtyTrac reported state foreclosures increased 213 percent during October from the previous year.

Nunez called the rate of foreclosures in California a greater threat than long-term water shortages or health care reform, the other topics the Legislature is supposed to be addressing in special sessions the governor called in September.

Lawmakers so far have failed to reach agreement on either of those topics.

“It’s a more immediate crisis,” Nunez said of foreclosures. “You better believe this is the biggest crisis we’re facing today.”

The bills proposed by the Democrats would also call for a ban on prepayment penalties that keep some homeowners from refinancing.

Officials said some lenders have already started contacting borrowers with interest rates set to escalate beyond affordability, something the Democrats hope to legislate.

“That’s one of the things the industry has already done without a government mandate,” said Dustin Hobbs, communications director for the California Mortgage Bankers Association pay day loan. “We definitely want to work with the Legislature and government to work through this crisis. It’s going to take support from both government and industry.”

There are an estimated 2.3 million borrowers with poor credit records whose home loans are projected to reset at higher rates through the end of next year. There are fears many of those loans risk default, worsening the nation’s soaring foreclosure rate.

As California’s Democrats seek action on the state enforcement, U.S. Treasury Secretary Henry Paulson and federal banking regulators are working out the details of a plan to extend lower, introductory interest rates on home loans before they reset at higher levels.

Paulson and the regulators met Thursday morning with loan servicing companies —- which collect and distribute loan payments —- and other industry executives. A formal agreement had not yet been announced as of Thursday but could be unveiled early next month.

“We’ve all agreed that there should be some sort of standardized approach to reaching more homeowners faster,” said Treasury Department spokeswoman Jennifer Zuccarelli, who declined to name those at the meeting.

Federal regulators have developed differing proposals for what to do about the problem. Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., has been urging mortgage servicing companies to agree to widespread, permanent conversions of adjustable-rate loans to fixed-rate loans for homeowners who are current on mortgage payments but unable to afford loans at higher rates.

However, Bair’s proposal met resistance from the industry. Critics say companies would face lawsuits if they permit modifications that are not in the best interest of investors.

Sourse

From recent surveys done by PricewaterhouseCoopers (PwC) and others, it is clear that Chief Executive Officers’ zeal for using outsourcing as a business management tool remains strong globally.

This is reflected by the media, which continually reports of customers entering the outsourcing marketplace and news items about existing contract renewals also abound. It is obvious from the overall picture that the CEOs’ keenness for outsourcing is driving (or being driven by) these critical industry trends:

* The number of service providers and service advisors is increasing rapidly.
* The number of countries hoping to attract outsourcing business is also rising.
* The complexity of outsourcing activity undertaken by organisations is increasing.

Taken together, these trends mean that outsourcing decision making is getting more difficult.

Outsourcing on the Rise

These trends get organisations thinking about the benefits outsourcing can deliver and how these benefits can be realised. While manufacturing, logistics and IT outsourcing contracts have been commonplace for years, the range of business functions being outsourced is increasing .

What may have been considered ‘core functions’ are all being outsourced today. Organisations are also likely to outsource several business functions concurrently. They may also enter multiple contracts with different service providers for one function (multi-sourcing).

Changing Mindsets

This paradigm shift is the result of decision makers becoming more aware that defining business functions as ‘core’ and ‘non-core’ is a subjective process that is difficult to carry out meaningfully. Senior managers are now making function-by-function outsourcing decisions based on careful analyses of the business benefits and risks likely to arise from outsourcing particular business functions in various scenarios.

This change in mindset is also being fuelled by the growing realisation among CXOs and managers that there are non-monetary paybacks:

* Improved timeliness (better time-to-market for new products, for instance).
* Reduced management workload (for example, removal of overlapping elements at the business unit level).
* Better governance (customer can use contractual mechanisms to enforce the use of business controls).
* Enhanced business knowledge (customer gains access to up-to-date expertise).

Making an Outsource Decision

One iterative approach could be:

* Identify potential outsource scenarios (the business function being investigated, service provider, infrastructure arrangements, expected tax regime, etc.).
* Evaluate the business benefits and risks associated with each scenario.
* Rank each scenario in terms of its evaluated business benefits and risks.
* Repeat the cycle, refining scenarios and analyses.

The ultimate iteration should yield two outputs:

* An outsource scenario that senior management has approved and intends to contract out.
* An ‘audit trail’ of the assumptions and critical decisions made by senior management during the selection process.

Conceptually, the relationship between the various scenarios investigated and their business benefits and risks can be visualised as a ‘window pane’ diagram (see Figure 1) online payday loan. Here, Outsource Scenario D is the ‘winner’, as it has ‘acceptable’ benefits and risks. The others are all ‘unacceptable.’ In practice, this representation is often misleading. The principal danger lies in attempts to quantify qualitative data, like non-monetary business benefits and some types of business risks (for example, security breaches). It is frequently observed that quantification can shroud common sense, i.e. numbers are sometimes accepted with blind faith by managers, simply because they are unaware of the assumptions behind the data.

A more realistic representation can be found in Figure 2. Here, the ‘clouds’ for each scenario highlight the inherent imprecision of the data being considered. Scenario D is still the preferred option, but Scenario A is a feasible alternative (business risks are greater than for Scenario D, but benefits may be greater in some circumstances).

Ranking Outsource Scenarios

It is obvious that the identification and quantification of business risk is central to ranking outsource scenarios. This being so, how should managers go about these tasks?

To understand the steps involved, it must be noted that every business risk has to be defined in terms of probability of occurrence and the impact when it occurs, and new risks arise with political, social and technological changes.

Risk Identification

In its Uncertainty and Risk Analysis Guide, PwC suggests risk identification workshops, in which brainstorming sessions are conducted. Considerable business risk literature is also available on the Internet. Other experience indicates that stakeholder analysis can highlight likely groups of risk (value net analysis has proved useful in this area). In its Enterprise-wide Strategic Risk Management Framework, PwC suggests that CXOs keep the following in mind for the complete lifecycle of any outsourcing contract:

* Political and country risk.
* Cultural risk.
* Operational risk, including information security risk, process controls risk and business continuity risk.
* Contractual and regulatory risk.
* Other hidden risks.

Setting up a Risk Register

Notwithstanding the sources of business risk or the methods by which they are identified, it is critical that the risks be assembled into a risk register. This should contain the following information:

* The generic risk category the risk falls into.
* A description of the specific risk.
* An assessment of the impact of the risk, using a uniform approach throughout the register (consistent with risk assessments used elsewhere in the enterprise).
* An assessment of the probability of the risk.
* A quantification of the risk (by probability and impact).

All of these require considerable effort. This may be a reason for getting help, especially during the initial stages of scenario ranking. Senior managers should carefully consider where ‘the need to know’ applies both internally and in the wider outsourcing marketplace.

Sourse

Most businesses need a little extra help at times. The important thing is to know whether additional finance is needed because the business is expanding and requires more resources, or because things are going badly and the operation is running out of money. There are various sources of finance, but where to go to depends on whether you have a tried and tested business or whether you are relatively new without much of a track record.

If you are setting up a business, finding backers can be a struggle.

Typically there are four common sources for money: Friends, Family, Founders (ie you and your fellow entrepreneurs) and Fools.

Fools is probably a harsh way of describing them but there are people out there willing to give you a chance – and because they are not really fools but people prepared to take a calculated risk, if you can attract such support it will be because you made a good case for your business.

But if your friends and family don’t have the necessary funds to spare, you can’t find any ‘fools’ and you yourself have committed everything you have but still need a little more, it may be time to resort to commercial lenders.

Call in at the bank

Raising the money yourself is a good way of keeping control of the business and ensuring that you are not in debt to anyone else. These days, however, trying to raise more than a few thousand pounds isn’t easy. That doesn’t mean the bank is the only place to go, even though about two-thirds of all businesses do go to their bank manager when they need money.

There are disadvantages to bank finance. Most banks will lend you money but only against some form of security, usually your house. If you are happy to see the bank taking your home if the business doesn’t work out, then go ahead. Of course, in practical terms you may find you don’t have much choice – banks are often the first and last port of call http://paydayloans-on.com. Typically banks will lend up to ?100,000 for a small business. For larger sums you need to call on the specialists – venturing arms at major High Street banks, specialist seed investors, business angels or even incubators (though there are few prepared to lend to untried internet ventures these days).

Start with a bank and see how much is available and how much it will cost.

Specialist backers

Then you can branch out to the specialists. Much depends on what kind of business you are running and who you are. If you are running a hi-tech venture, there are some investors that specialise in the sector. If specialist investors and banks aren’t to your taste, there are other sources of funding.

Grants can be obtained from Business Links and other local development agencies. Some can be provided by the Department of Trade and Industry and can amount to tens of thousands of pounds. The European Union also has various cash schemes in place for small businesses. Loans are also available from the Government-backed Small Business Service, which can lend as much as ?250,000, though the terms are stringent. The scheme is aimed at small companies which haven’t managed to get funding elsewhere, perhaps because they have few tangible assets against which they can borrow.

Schools for cash

Finally, universities and further education establishments, business schools and other academic institutions, have incubator schemes to help get new businesses off the ground.

Incubators came into their own in the dotcom boom and many attracted vast sums of money from venture capitalists. Some still have modest sums to lend and can provide funding or practical help with IT, accommodation, telecoms and even legal and accounting back-up.

by Thise is money http://www.thisismoney.co.uk