Handling Your Finances by Budgeting

Budgeting is in itself a broad concept that may differ for everyone, but it involves basic steps such as listing the things you need, ranking them according to priority and allotting the necessary amount of money to those things. Single citizens usually have less complicated budget allocations for their needs and wants as opposed to families. For instance, an unmarried person may divide his or her budget among food expenses, house bills, shopping expenses, savings and recreational activities. Families on the other hand may include in their budget, among house bills, the education of their children, car expenses, insurance and many more.

It can also be applied to the bigger scope, in society. Nations also make use of budgeting in different departments or committees. For instance, the nation’s wealth may be divided among facets like its education, military defense, public infrastructure, maintenance and many more. Indeed budgeting is imperative in handling money.

Budgeting is a crucial aspect in handling your finances. This is one way to avoid financial struggles like heavy debts which is common among credit card holders. It involves making debt lists, prioritizing which debts to pay first and then cutting down on expenses. The process of budgeting may differ for each one as each one has set different priorities for their expenses. But, the key idea-especially when it comes to cutting down on debts-is to spend only for the necessities (at least even only temporarily).

However, self-assistance aside, there are also various programs that offer to help to cut down on debt if budgeting really won’t do it anymore. Some of these processes involve debt consolidation programs, debt management programs and debt settlement programs.

Debt consolidation, as its name suggests, is about combining multiple bills into one so that it can be paid at a lower interest rate altogether. Typical aspects of consolidation programs involve low monthly payments, reduced interest rate or late fees, and negotiations for personal loans. Debt settlement is also similar yet it focuses more on helping the debtor pay off the debt rather than helping him or her consolidate it. It also involves Debt management on the other hand is more of helping the debtor regulate his or her payments. It does not necessarily aim to reduce the debts, but rather a more smooth flow of payments.

Pennsylvania is one of the states that offer such programs to customers. Pennsylvania debt consolidation involves the basics of lowering monthly interest rates and payments and merging multiple bills into one. A typical consolidation program would have an analyst assess the financial situation of the applicant and it helps them prepare their budget. At the same time, the analyst takes into account the monthly income of the debtor to figure out how much he or she can pay in a month. Based on that, the analyst will then negotiate necessary agreements with creditors to help the debtor pay off his credits. Negotiation may be as broad as to include lowering interest rates and penalty charges to settling accounts in collection.

Commercial Mortgage – Borrowers Frustrated As Lenders Halt Walgreens Financing

Walgreens recently announced that they will be gradually slowing organic growth of new stores from a planned 5% down to 2.5%-3% starting next year through 2011. But Walgreens is a big chain, and even considering the slowdown there should be 30 to 50 new Walgreens outlets popping up on street corners around the country every quarter for several years to come.

The Walgreens model calls for most new stores to be built by developers, owned by investors and merely leased to Walgreens. But with the credit crunch still squeezing borrowers, the question becomes where will the capital to build all those stores come from?

Lately, plenty of Walgreens loans were originating from a fairly obscure lending platform known as “credit tenant lease” or CTL financing. CTL loans are underwritten in a very different manner as-compared to traditional commercial real estate mortgage loans. In CTL finance the properties lease, not the physical real estate itself, is considered the primary collateral backing the loan. Each deal is underwritten based on the structure of the lease and the financial strength of the tenant who signs it, rather than the underlying value of the building and the credit of the borrower.

To fund CTL loans commercial mortgage banking firms would issue private placement mortgage bonds and sell them to fixed income investors. The bond buyers providing the liquidity for CTL financing were often pension funds, endowments, trusts and insurance companies, all with insatiable appetites for dependable, secure income.

Despite the economic recession Walgreens has maintained its very healthy credit rating (A1/A+) and the chain tends to sign iron clad leases renewable every 25 years. These factors made Walgreens bonds among the most desirable securities in the private placement debt market. With Walgreens opening several hundred stores a quarter there was never a shortage of Walgreens paper to be had. Investors bought up all that was offered to them as fast as mortgage bankers could issue it.

Unfortunately, the incredible success of Walgreens CTL financing has now led to a near universal shut-down of the program. Without warning bond buyers have stopped purchasing Walgreens paper. Recent portfolio reviews by the investment policy committee’s and portfolio managers uncovered the fact that many portfolios were highly over-weighted in the sought-after paper. Many Walgreens bond buyers are highly regulated and must, by law and by policy, maintain strict standards of diversification. In simple terms, they own too much Walgreens debt and can’t take on any more without running afoul of their stated investment policies.

Beginning two months ago one CTL mortgage banker after another stopped taking mortgage applications for retail buildings that housed Walgreens pharmacies. As-of right now it is exceedingly rare to find a lender still willing to originate a Walgreens CTL deal; they know there will be no funding forthcoming.

The loss of CTL funding for developers holding Walgreens leases and commercial real estate investors with pending purchase contracts comes at a particularly inconvenient time; the whole banking system is still dealing with a severe credit squeeze.

If the credit environment were functioning correctly, the loss of one form of funding would be compensated for through an increase in other types, or the development of a temporary replacement funding vehicle. The collapse of the public commercial mortgage backed securities (CMBS) market coupled with the refusal of banks to lend, means that the loss of CTL capital flow can not be easily replaced.

Many real estate buyers and commercial developers chose Walgreens stores because they thought that the good name and excellent credit of their tenant would make it easy to secure mortgage and construction loans. They looked forward to a smooth closing and then to cashing the very dependable Walgreens rent check month after month. Now even top rated Walgreens finds itself caught up in the credit crisis, not because they are hard to finance but because they are easy to finance.

CTL financing is long-term, high leverage lending. Rates are fixed for the life of the loan and terms are co-terminus with the lease. For Walgreens loans that meant store owners could borrow nearly 100% of a property’s value and lock in 25 year loans at today’s historic low interest levels. Without CTL loans available, there is virtually no long-term fixed rate, high LTV mortgages for Walgreens buildings. There aren’t many banks still actively lending against real estate in the retail sector and none at high LTVs. Those that are loaning money typically offer fixed terms of 3, 5, 7, or less frequently, 10 years. Short term loans will initially have a lower interest rate but will force borrowers to seek a refinance just a few years into the future when rates are almost sure to be much higher than they are today.

Some CTL lenders are anticipating that their Walgreens financing programs will be on ice for 6 to 9 months. Other, more optimistic bankers are telling clients that Walgreens CTL loans will be back online in only 3 months. In any-case developers and real estate investors with pending deals are frustrated with the lack of dependable funding.

The bond buyers who funded the last few years of Walgreens growth won’t be back until their portfolios grow significantly or a large number of their current Walgreens debt is retired. Neither of those things is likely to happen quickly. Mortgage banking firms are desperately attempting to recruit new investors who have room for Walgreens paper in their funds.

Walgreens lending, it seems, is a victim of its own success. A hundred Walgreens a month were opening in population centers nationwide. An innovative lending platform called CTL made it possible. Now CTL lenders have had their fill of the A+/A1 rated Walgreens bond, and must take time to digest what they have already consumed.