For Mortgage Brokers and Others Who Create Paper and Deal With It on the Secondary Market
If you deal in Mortgages, Trust Deeds, Leases, Contracts For Deed or really, Installment Contracts of any kind, you'll be literally "itching" to get this strategy in place because...you will easily create two new profit centers, you will quietly and safely protect more money faster—and you will stop state income taxes you are now paying. You create paper to facilitate transactions, exempli gratia:
First, you now understand the now famous Laughlin scenario called the Warbucks Nevada, Inc/Red, Inc. Strategy, where Warbucks Nevada, Inc. is your rich and clean corporation. Warbucks was born (incorporated) and lives (domiciled) in the great pro business state of Nevada. It never has, and never will leave home. Safe from all harm, Warbucks is "the lender corporation."
Then there's that poor debt ridden little corporation, Red, Inc.—Born in your home state or born in Nevada and qualified to do business in you home state, Red, Inc. takes all the risk and is hopelessly (translation: strategically) in debt to Warbucks....Got it? Here is the strategy:
Form two corporations.
The first, a "paper originator" corporation is formed and domiciled in your home state: It works hand-in-hand with a "lender" corporation. This "paper originator" corporation creates or "originates" paper transactions as a service for the "lender" corporation, id est, Red, Inc. as an independent contractor providing a [common] service called "origination" for Warbucks. (This happens all the time…in the real world…as you will soon see.)
The second, a "lender" corporation formed in Nevada. This corporation, domiciled in Nevada (hopefully at 2533 N. Carson Street), is in the business of buying paper on the secondary market, not unlike Fannie Mae (FNMA).
FYI: the acronym FNMA stands for Federal National Mortgage Corporation and they buy billions of dollars in residential real estate mortgages and trust deeds from every Fannie Mae approved institutional lender in America. The list of secondary mortgage buyers is a long one. Here are a few famous ones: Ginnie Mae—the Government National Mortgage Corporation; Freddie Mac—the Federal Home Loan Mortgage Corporation; and Sally Mae who buys student loans. There are huge numbers of institutions as well as private individuals who invest in paper on the secondary market and, THEY SHOULD ALL BE NEVADA CORPORATIONS DOMICILED IN NEVADA!
Here is what to do:
Step #1. Have the "paper originator" corporation (Red, Inc.) take applications from customers and clients who seek financing for a home, a lease, a service contract, even a company car you are selling.
Step #2. Create one new profit center—Have the "paper originator" corporation package or "underwrite" the loan and charge an origination fee of one to seven percent.
Step #3. Offer the completed deal and thus ownership of the paper to the Nevada Corporation. (CAUTION: Keep this whole thing at "arms length" id est "offering the completed deal" means create and maintain a paper trail with written contracts and correspondence by fax, by letter and by contemporaneous log from conception to completion.)
Step #4. Capitalize "the lender corporation" (Warbucks Nevada, Inc.) by personally contributing or lending money in the form of cash , property or services every time Warbucks needs money to fund a deal.
Step #5. Create a second new profit center—Red, Inc. sells the completed deal to Warbucks for a nominal [finders] fee.
Step #6. Create a third profit center—Red, Inc. retains a loan servicing contract. This means Red, Inc. will collect and disperse a check each month.. They handle all collection efforts and earn late fees. They earn a fee of 1/8% for each payment collected. This is exactly what mortgage bankers do. They make a profit by charging origination fees and/or points, usually 1-7% each, depending on what the market will bear. For the long term, they retain 1/8% of each payment for servicing the loan. But that’s not the best part.
Step 7, 8, 9, 10…. Create multiple new profit centers—Red, Inc., the "paper originator" corporation is now positioned to earn more profit from: mark ups and referral fees on repairs, remodeling, carpeting, windows, service and maintenance contracts, appraisals, pest inspections and home inspections, surveys and a plethora of other transaction costs and "back end" items.
There’s even more…state income taxes on interest income will drop to zero when Warbucks Nevada, Inc. earns all the interest from the mortgage, TD, lease or contract in Nevada because Nevada has no state corporate income tax. Besides…
© MMI By Ray Como. All Rights Reserved
Ray Como has created, produced, copyrighted and self-published 15 audio cassette programs and lots of other forms and tools for business, real estate, corporations, selling, marketing, finance, management and Entrepreneurship.
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