Selling your mortgage note is not all about or just about price. It is also about working wit a buyer who will follow through and actually close at the agreed price. If you have a note to sell and you are not sure who to call, who to trust or what to look for yo will want to watch this short 9 minute video
What’s My Note Worth?
A question all note sellers have and have a right to know.
Timing Your Mortgage Note Sale is everything.
So, when is the correct time to sell your mortgage note?
The following utube video with my friends Walter Wofford and Jim Ingersoll is so to the point as to the value of trusts in any form of a real estate transaction.
They discuss the ultra importance of transactional privacy and how that helps with asset protection.Under what circumstances would you want the general public to know the properties you own?
Trusts provide privacy and effectively separate all of your investment assets. They are not hard to use and provide tremendous privacy in your deals as a trustee is used to hold title and the trust agreement is not recorded at the courthouse.
Under what circumstances would you not like the public to know that you own a property?
What are the benefits of using trusts?
1. Privacy – Keep your name and LLC out of public records
2. Liens and judgments
3. Probate benefits
4. Sell the entity, not the property
5. Personal property trusts for IRAs, cars, boats, etc
Today I cam across this article title,” The Three Ds of Doom: Debt, Default, Depression”. Without sounding negative, it certainly makes one think about the current economy. Everything appears to be booming, at least here in the greater Phoenix Metroplex. But………..what is under the covers. What goes up always comes down. It is a fact of life. Now apply this to the niche business. It is the paper side of real estate.
In the very near future, Capstone will be launching a Utube note training series on buying Notes. One of the topics as part of the due diligence series will be a deep dive into Investment to Value and Loan to Value. In other words, what is the note buyers safety net in the event of a downturn. How to minimize the pain in your portfolio. The only way I know is to have an EQUITY SPREAD. For instance, if a note has a $100,000 unpaid loan balance (aka UPB), what is your risk tolerance. What safety net do you require? The Capstone safety net is an Investment to Value (ITV) not exceeding 65% and a Loan to Value not exceeding 70%. Some say this is too big a filter. I guess time will tell. Anyway–moving on to the article.
The Three Ds of Doom: Debt, Default, Depression
July 17, 2019
“Borrowing our way out of debt” generates the three Ds of Doom: debt leads to default which ushers in Depression.
Let’s start by defining Economic Depression: a Depression is a Recession that isn’t fixed by conventional fiscal and monetary stimulus. In other words, when a recession drags on despite massive fiscal and monetary stimulus being thrown into the economy, then the stimulus-resistant stagnation is called a Depression. Read more
The August 7th Note Investors Forum Meetup focus on:
TOPICS: Several New Case Studies
Where Does a New Note Investor Begin
Bring your questions, This will be an interactive meeting.
The Next Note Investors Forum Meeting will be
Wednesday, August 7th 11:30am-1:30pm
La Famiglia Restaurant, SE corner of Dobson & Guadalupe, Mesa
S&P/Case-Shiller released the monthly Home Price Indices for March (“March” is a 3 month average of January, February and March prices).
This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.
Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.
From S&P: S&P CoreLogic Case-Shiller Index Shows Annual Home Price Gains Continue to Weaken
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.7% annual gain in March, down from 3.9% in the previous month. The 10-City Composite annual increase came in at 2.3%, down from 2.5% in the previous month. The 20-City Composite posted a 2.7% year-over-year gain, down from 3.0% in the previous month.
Las Vegas, Phoenix and Tampa reported the highest year-over-year gains among the 20 cities. In March, Las Vegas led the way with an 8.2% year-over-year price increase, followed by Phoenix with a 6.1% increase, and Tampa with a 5.3% increase. Four of the 20 cities reported greater price increases in the year ending March 2019 versus the year ending February 2019.
(NOTE: The Phoenix Market did a complete u-turn NORTH. 45% of all inventory was sold in April. What was a down turn, is now back on track. The Phoenix area is growing by 86,000 people every year. Maricopa County is the fasted growing county in country. CLICK HERE FOR THE LOCAL REIA STATS
IL IN MI OH TN
BPO Range: $33,000 – $70,000
UPB RANGE: $17,785 – $34,860
PURCHASE PRICE RANGE: $19,000 – $26,200
PRICING RANGE: 76% to 90% of UPB
Re-Performing Loans & Seasoned Performing Loans
Click Here to Access
CASE STUDY 3
This post is a 3rd in a series of 4 regarding how a perfectly good performing note goes south due to life event situation.
This particular note was in the small town of Marshall, IN. The note -Contract for Deed- was originated in 2009. The payors significant other passed in 2010. My IRA purchased the note in 2015. The note was scheduled to mature in June, 2019. I was unaware of the loss of the male payor. The payment history evolved into a rolling 120 days, meaning after 4 months the payor paid the balance or part of the balance to stay out of the forfeiture procedure. However this payment history caught up with the payor in that there was a $5,000 unpaid balance balloon that went beyond the due date of the note.
Fast forward to February, 2019, I was tired of constantly contacting the payor. I did not want to go thru the forfeiture process as to take back the house –due to condition, was not a viable option. Plus 9 months and $3,000 in attorney fees were not viable. In prior conversations, it was discovered she was the caregiver of her mother and was not working. He current husband was not working. After multiple conversations, she realized she needed help. Her Dad was brought into the conversation. He agreed to help her out. They agreed to bring the payments current. In exchange to removing the deceased payors name from the CFD, they agreed to a loan modification which extended the term 12 months, and stay current. If they ran late past 15 days, the newly executed Quit Claim deed would be recorded and my IRA would own the house.
It was a win-win. The payor benefited by having the deceased partner removed from any claim of ownership, the loan was brought current, I avoided the possibility of a 9 month forefeiture procedure and the payor will own her house free and clear in 12 months with the extension of the balloon due date.
Even though the remaining balance was small, the solution was perfect for all.
I have learned, if one works with the payor and developes a dialog, future unfortunate events can be worked out much easier. But, it is all about how can the payor feels and appreciates that they are being helped so they will be open to a solution which also benefits the note holder in the event needed.
This case study was presented at the May 1 Note Investors Forum Meetup
Delinquency rates climb on debt, pointing to downturn in $11 trillion market.
Defaults are rising in a key corner of the commercial real-estate debt market just as borrowing costs are set to jump, raising the likelihood of a slowdown of the $11 trillion U.S. commercial property sector in 2017.
A financial crisis-era regulation is about to take effect that is expected to make some commercial real-estate borrowing more expensive and complicated, analysts said.
At the same time, interest rates have increased since the election of Donald Trump as the nation’s 45th president last week and seem poised for a sustained rise from recent historic lows, which would further squeeze an industry built on borrowed money.
“I can paint a picture that it could be disastrous, with runaway inflation and high interest rates,” said Charlie Bendit, co-chief executive of Taconic Investment Partners LLC, at a New York industry luncheon last week.
The worries raise fresh concerns for the commercial property market as it enters its eighth year of expansion.
Already, landlords are battling a slowdown in sales and rising vacancy rates of multifamily housing units across the U.S. and of office space in Houston, Washington, D.C., and other big markets. Commercial property sales volume was down 8.6% in the first nine months of 2016 to $345.4 billion, according to Real Capital Analytics.
Now defaults are on the rise as well. More than 5.6% of some $390 billion worth of commercial property mortgages that have been packaged into securities was more than 60 days late in payment in September, according to Moody’s Investors Service. That was up from a 4.6% delinquency rate earlier this year.
The culprit: loose lending before the financial crisis. Ten-year loans issued in 2006 and 2007 are now coming due, and many borrowers aren’t able to pay them off despite rising property values.
In all, Morningstar Credit Ratings LLC predicts borrowers won’t be able to pay off roughly 40% of the commercial mortgage-backed securities loans coming due next year. Suburban office properties and shopping centers are being hit particularly hard, said Edward Dittmer, a Morningstar vice president.
“We’re seeing a lot of stress,” Mr. Dittmer said.https://capstonecapitalusa.com/financing-a-business-acquisition/
As Posted in mybudget360
“Definition of economic bubble: A market phenomenon characterized by surges in asset prices to levels significantly above the fundamental value of that asset.” We are definitely in another housing bubble. First, most Americans can’t afford to buy a home without utilizing artificially low interest rates and even then they are stretching their budgets like spandex. Second, home prices are surging in the face of stagnant household incomes. That is the biggest sign of a bubble. The underlying asset in housing is moving up even though incomes are not. So what is driving prices up? Speculation, flipping, investors, and what we would categorize as fickle money. This is the ultimate sign of a housing bubble. Homeownership is near a generational low because most households are living month to month unable to buy. If you want to see the housing bubble in one chart look no further.
The scariest chart in housing
Home prices are up a stunning 34 percent from 2012. That is an incredible increase but this is not being driven by families buying homes. It would also be different if household incomes were going up. They are not. Take a look at this chart:
This might even be scarier than the years before the last bubble. Why? Take a look at the chart. From 2002 to 2008 housing prices and incomes went up together (but of course home values were already on an upward trajectory). The bubble hit and both home values and incomes went down. All of this makes sense. In 2012 housing prices and incomes went up. But that jump in income only lasted a brief period. Now, you have home prices surging 34 percent yet incomes are stagnant. That is a big problem.
You can even see this problem between new home prices and new homes sold:
New home sales are in the dumps yet prices are moving up dramatically. Most of this is speculation and of course the financial sector in our economy is thriving on the backs of the middle class. But are we in a bubble?
“Bubbles are often hard to detect in real time because there is disagreement over the fundamental value of the asset.”
This is where we stand today. We are in the bubble. It is hard to assess value because people are disagreeing on whether this is a bubble or not. But take a look at commercial real estate values as well. This is definitely a bubble. You need to continue to have speculative money flowing in to keep values at their current levels.
Will the housing bubble pop this year? Bubbles can last longer than most people think. But there are already cracks in the system. You saw the market briefly correcting this year. Suddenly stocks are up on low volume and current prices are still overvalued. The same can be said for housing. Low supply, low demand, yet prices are going up. The Fed is completely afraid to raise rates knowing that it has no other option but to keep rates low. This policy move has made the middle class a minority.
Here is a good summary of where we are going:
“(The Sovereign Investor) I see one of two scenarios at play. Which one do you think will ring true?
- Homebuyers continue to fork over more dollars to buy properties while we sit with stagnant wage growth, stagnant economic growth and low-wage jobs being about all that’s created.
- We are on the edge of a bubble larger than the one we experienced less than a decade ago as housing prices race back down to where it is affordable and sees demand from new buyers.
The Federal Reserve is held accountable for this fiasco. If it goes forward with a rate increase in the near future, it will be us who pay the price of another bubble.
There’s only one action to take if you ask me — lower your exposure to the industry.
In stocks, that’s homebuilders and mortgage originators. Avoid them at all costs. In your personal investments, that’s being prepared for another real estate shock.
These prices are unsustainable and due for a correction.
Once that happens, opportunity awaits you to pick up houses and housing-related stocks on the cheap.”
You have been warned.
If the above is true, and we believe it is, seller financed notes should be purchase at no greater that a 70% Loan to value or no greater than 65% investment to value
Capstone Capital USA