and Seller Carry Consultants
There are several items a note buyer should verify before purchasing a note. Both are related to the Payor. A note buyer needs to confirm the payor will continue to pay. We are buying a dependable cash flow. To that point, they are foundational. Details the impoortance of both.
Recently I attended the NoteWorthy Convention in Scottsdale. Kevin Shortle spoke of opportunities in
the note arena specifically loan modifications and non-GSE foreclosures and modifications. The following article was an op-ed in MSN Money and is so on target. With the changing economics on the horizon, the re-default rate will increase and may very endanger the US mortgage and housing markets.
Wall Street and the news media have paid considerable attention to U.S. home mortgage modifications, but not much notice has been given to the growing problem of re-defaults on these modifications. Re-defaults are a massive problem — and endanger the U.S. mortgage and housing markets. Many of these loans were guaranteed by the FHA
What is a mortgage modification? In the midst of the housing collapse more than a decade ago, mortgage modifications were rolled out to enable millions of delinquent homeowners to avoid having their home foreclosed. In its latest report, the nonprofit Hope Now consortium — the major source for modification data — estimated that 8.7 million permanent mortgage modifications have been implemented in the U.S. since the end of 2007……….The 8.7 million permanent modifications do not include the temporary fixes that lenders have provided. According to Hope Now, roughly 17 million temporary solutions have been rolled out under what’s called “Other Workout Plans.” The two most important ones are called forbearances and repayment plans. Under these plans, millions of delinquent borrowers were provided a temporary deferment or reduction of the payments due until their financial condition improved. These temporary solutions are not reported under permanent modifications. Nevertheless, owners given temporary workout solutions are considered current on the mortgage……………………….
In its most recent report for the first quarter of 2019, the OCC noted that 21% of the most recently modified loans had re-defaulted within six months.
More than 3 million loans guaranteed by the Federal Housing Administration (FHA) that were in Ginnie Mae pools had been modified between 2008 and 2013. A 2014 report found that they had performed badly. Roughly 57% of these modified loans had re-defaulted by 2013
Two days ago a very close friend called me with a market alert. He said for the first time sine 2008, for 4 
days in a row, the overnight lending market rate between banks utilized to keep bank liquid jumped to 10%. He asked me, “What is the normal hard money lending rate in real estate?” I answered 10%. To that point, that is a significant occurance. Does that mean banks liquidity is not there? Yes.
Then today I noticed an article on wallstreetparage.com discussing the very same topic. In escense, the FED is buying up bank debt to keep up the banks liquidity. These are not small time banks–rather the big ones like Bank of America, Goldman Sachs, Citigroup, JPMorgan, Morgan Stanley.
Also, Deutsche bank is leading the pac of il-liquidity.
“The worst of it is that regulators on neither side of the pond have seen fit to rein in the dangerous interconnections that Deutsche Bank has as a major derivatives counterparty with mega banks on Wall Street as well as other European banks. (See After a $354 Billion U.S. Bailout, Germany’s Deutsche Bank Still Has $49 Trillion in Derivatives.)
According to a 2016 report from the International Monetary Fund (IMF), Deutsche Bank is heavily interconnected as a financial counterparty to JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley and Bank of America as well as to big European banks. The IMF wrote that Deutsche Bank posed a greater threat to global financial stability than any other bank as a result of these interconnections. When the IMF made that assessment in 2016, Deutsche Bank had tens of billions of dollars more in market cap than it does today.”
Bottom line for the reason of his call–watch what youpay for assets. Some hedge funds/banks are dumping assets to achieve liquidity.
Capstone has always been a value buyer, NOT a speculative buyer. To that point, we only buy if there is a large safety net. THE WORD OF THE TIME IS–“SAFETY”
The following article is from www.wallstreetparage.com.
According to the New York Fed, the program has now been extended to at least October 10 and likely thereafter in one form or another. The Fed will be pumping in $75 billion daily in overnight repo loans while infusing $30 billion in 14-day term loans three times this week for a total of $90 billion in term loans. Click Here For the Full Article
This article was just posted on Housing Wire.com.
Interesting remifications for the Seller Finance business and the Note Buying business.
Draw your own conclusions.
For the first time since 1994, certain home sales of $400,000 and under will soon not need an appraisal after federal regulators approved a proposal to increase the threshold at which residential home sales require an appraisal.
Last November, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve released a proposal that would increase the appraisal requirement from $250,000 to $400,000, meaning that certain home sales of $400,000 and below would no longer require an appraisal.
The agencies deliberated the rule for nearly a year, taking into consideration the more than 560 comments the agencies received about the rule change.
Last month, the FDIC and OCC signed off on the rule, but were still waiting on the Fed to approve the rule change as well. Read More…
This past weekend I was the keynote speaker for the Saturday NoteWorthy Convention. My goal was to demonstrate to the attendees just how simple notes can be. Just how easy and simple it is to get started in the note business as either a passive investor or an active investor.
To JUMP UP TO THE NEXT LEVEL.
I was able to articulate that the basics can be broken down into how one buys a note with a sense of security in mind.
What that means is focus more on Investment to Value (ITV) and Loan to Value (Loan to Value) vs just the ROI(Return On Investment) aka—yield.
An investor should focus on acceptable ITV or yield, WHICHEVER IS LOWER.
LTV tells a note buyer how much “skin in the game” the mortgagor has, or how much monetary or emotional attachment they have in the property.
ITV, on the other hand, tells the note investor how much he or she will invest in the note in relation to the value of the property. Yield is determined by the best and safest use of the note buyer’s money.
The amount of the mortgagor has invested, along with the value of the collateral and their credit score, will determine the ITV of the note buyer. Yield is the rate of return a note buyer demands when considering mortgagors’ credit, property value, and mortgagor’s equity and other risks.
When applying LTV, ITV and yield to the purchase of a note, all three are important and should be tied to one another. In other words, the down payment, credit score, value of the property, equity in property should be tied to the ITV and yield a note investor demands.
The more risk an investor incurs because of high LTV, the lower must be the ITV, and the yield must be higher. The note buyer will offer the lesser of the ITV vs. yield.
So, which is most important, LTV, ITV or yield?
The answer is that all are important and interrelate to one another.
Yield is determined by the best and safest
use of the note investor’s money. BUT….
YIELD IS NOT REALIZED UNTIL THE NOTE IS PAID OFF.
We’ll drill down with case studies into a simple strategy of Risk vs Reward, aka Risk Tolerance when looking at the options / variables available to both
new or seasoned note investors.
At the end of the meeting you’ll say, “Yep, I get it!!”.
|
PERFORMING CFD
CHOUTEAU, OK
ITV 46% | LTV 50%
VALUE $74,759
UPB $37,881.73
INTEREST RATE 10%
P & I $365.00
SEASONING 122 MONTHS
SOLID PAY HISTORY
REMAINING TERM 238 MONTHS
PURCHASE PRICE $34,092
Additional Assets Available
Contact:
Dave Franecki
Capstone Capital USA, LLC
Dave@CapstoneCapitalUSA.com
www.CapstoneCapitalUSA.com/notevault/
As a seasoned real estate investor, one who has felt the pain with the 2008 downturn, I found this article very interest and timely. Many of my older RE cronies feel the same way. Only time will tell. None the less a very interesting and perhaps insightful article from marketwatch.com. Notice the ominous position Phoenix has in the rankings as well as California and Florida.
What does this mean? Be conservative on what you buy. Watch the LTV(Loan To Value) and ITV(Investment To Value) PLUS other DUE DILIGENCE FACTORS. CLICK HERE FOR WHAT TO CONSIDER
Some housing markets haven’t seen the notable price increases that others have in recent years — and that could be a good thing when the next recessions rolls around.
The Federal Reserve may not be currently forecasting a recession, but sooner or later the U.S. economy’s fortunes will turn for the worse.
And when that happens, home owners in Rochester, N.Y., can rest easy.
A new study from Redfin ranked Rochester as the city least at risk of a housing downturn during the next recession. Redfin RDFN, +3.83% computed the downturn risk for the 50 largest cities across the country using the following metrics:
• Median home sale price-to-household income ratio
Rochester had the lowest score of any city studied at 30.4%, followed by Buffalo, N.Y. (31.9%) and Hartford, Ct. (33.9%). Overall, the top 10 cities that were least likely to see a recession-fueled housing downturn were all located east of the Mississippi River. (NOTE: PHOENIX, VEGAS AND MANY CALIFORNIA cities are where they were in THE GREAT RECESSION)
| Rank | Metro area | Average home loan-to-value ratio | Home price volatility | Flips share of sales | Exports share of GDP | Overall score |
| 1 | Riverside, Calif. | 65.3% | 17.9% | 6.3% | 5.6% | 72.8% |
| 2 | Phoenix, Ariz. | 64.8% | 17.7% | 8.1% | 5.4% | 69.8% |
| 3 | Miami, Fla. | 50.4% | 15.2% | 7.5% | 10.1% | 69.5% |
| 4 | San Diego, Calif. | 65.6% | 16.9% | 5.9% | 8.0% | 68.2% |
| 5 | Providence, R.I. | 70.6% | 16.8% | 4.4% | 8.6% | 67.1% |
| 6 | Tampa, Fla. | 59.2% | 17.1% | 7.5% | 4.3% | 66.8% |
| 7 | Las Vegas, Nev. | 61.0% | 16.7% | 8.3% | 2.4% | 64.6% |
| 8 | Los Angeles, Calif. | 62.6% | 15.7% | 7.7% | 6.1% | 63.7% |
| 9 | San Antonio, Texas | N/A | 15.7% | 5.8% | 7.1% | 63.2% |
| 10 | Orlando, Fla. | 61.2% | 16.0% | 6.1% | 2.4% | 59.1% |
Note seasoning and verifiable payments make up the two most important factors of Due Diligence. As such, I’ve created this video to help walk you through the ins and outs of good NOTE SEASONING so that you can really capitalize on good investments, and make sure your notes retain maximum value.
It’s our job to make sure that as a buyer, AND as a seller, that you have the right tools for the job. That’s why we’ve dedicated an entire youtube channel just for you!
Note seasoning is simply – how long the buyer has been paying on the note. What does their payment history look like? Is it steady and consistent? Do they have repeated late payments? Is there missing documentation to prove the payments have been made on time? Taking all of these into account will make for a much stronger note buying and selling experience – and will maximize the value of your note! As part of the due diligence on both ends, it’s important as a buyer AND a seller that you know this information.
Are you looking for help with note seasoning? Let us help! Head on over to or contact page and let’s get in touch! I’d love to help speak to you about how we can make your note buying or selling experience a success! CLICK HERE.
SO LET’S GET STARTED. Click the video above for more info on the importance of note seasoning. Note investing doesn’t have to be hard – with the right tools for the job, and the right people on your side, you can ensure that your cake will be baked to perfection! Talk more soon!
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