Desperate non-performing note buyers beware! More hurdles ahead

[Rick H.]

Federal policy makers want to keep you from buying and profiting from openly traded non-performing notes (NPN).

The bias is against private investors who purchase 1st and 2nd mortgages of delinquent homeowners in favor of non-profit entities who are deemed to be more likely to find ways to mitigate or negotiate favorable modifications or forgive debt entirely.

During this phase of real estate cycle, investors tempted to buy from the remaining inventory of bad paper must consider practical side of their profit and exit plan as lawmakers conspire to make it more difficult for you to benefit from loans you've acquired.

Read the full article from an industry newsletter here:

http://www.dsnews.com/news/09-30-2015/elizabeth-warren-leads-protest-of-agency-npl-practices

[Dion DePaoli]

Yea, well non-profits are not all cracked up to be what the article portrays them to be. The more you try and place these loan sales into those non-profits the more you will see private equity form non-profits buy the assets.

I personally feel, as stated in the article that the new sale guidelines offer a fair administrative solution to making sure the borrowers are getting a fair shake on debt forgiveness, restructuring and if all else fails foreclosure.

The other thing I don't like, in my experience I have had many supposed non-profits and even private investors romanticize the idea of investing in NPN's. It's all about how they will change the landscape and save borrowers, etc, blah, blah. The problem is, most of that is pie in the sky. The fact of the matter is many loans simply need to be foreclosed. In addition, a distressed family probably can't afford principal forgiveness. And third I am not sure there is a bunch of actual competency in the non-profits when it comes to working with distressed loans.

The senator's heart may be in the right place but the plan of attack is less than desirable.