2016 Predictions for the note industry?

Question

What are some of your predictions for the note industry as we begin 2016?

I am gathering up my thoughts about it, but wanted to see what the wider audience here on BP thinks.

Dion DePaoli · Answer

My prediction is:(a) there will be new loans made(b) there will be old loans which perform as agreed(c) there will be old loans which do not perform as agreed(d) there will be loans which are forbear, modified and foreclosed(e) we will repeat this in 2017 too

Bob E. · Answer

I keep hearing about the coming wave of NPN inventory but all my old sources have fewer offerings then last year, at higher prices, and worse condition.  I am sure there are exceptions and we will look for them this spring and summer as we start to grow our portfolio again.  But...

We are shifting our main focus to work with local partners to find and fix homes where we can force appreciation, then resell them with owner financing and splitting the the profit with our local partner.  Lately it seems like there are a lot of buyers for Performing Notes so we would prefer to be creating and selling them rather then getting in line with everyone else to buy.

Bob Malecki · Answer

well, according to Cade Thompson with Halo who did a very good presentation at Note Expo, he pointed out that in addition to the institutional lenders continuing the liquidation of their NPL assets to the secondary market, the GSE's are also beginning liquidation in 2015 and will carry to 2016:

Government Inventory

Recently Listed Pools of NPL will be worked-out over next 2 years with Low Value NPL sold into tertiary markets and direct opportunities for smaller investors.

Origination Programs

New affordable housing targeted loan programs are being rolled out which should provide liquidity opportunities for smaller investors.

Curt Smith · Answer

@Linval T.  I posted on that thread you gave the link to, re lest we not forget what the gurus never mention; that taking an NPN to performing, post Jan 1 2014, is now a full Dodd Frank loan origination process.  No longer can NPN investors just mail off a marked up mortgage agreement for the non-paying borrowers to sign and start paying on.  I wonder how many NPN investors in 2015 did full doc with a licensed loan originator for the note re-writings?

Even prior to this 12 month hold rule, there's been un-spoken of typically the Dodd Frank requirements injected into the re-performing legal steps.

The NPN tapes I once looked at where all tear downs.  I hope there's some pretty houses in what trickles down to make all this risk (and investor's time) worth it?

Czarina Harris · Answer

@Linval T. I tend not to fall for the doom and gloom reports, even if they do come true like the case of Dodd Frank. I actually see a positive in something like this coming to pass because prices for NPLs will have to drop significantly to compensate for the extended timelines.

At least it should.

However, even without that setback, we still have a significant amount of inventory to wade through, at least 4 years worth at the pace we're going now.

Linval T. · Answer

@Czarina Harris - Good question and one that I am pondering as well, due to the fact that I saw a recent post at the link below regarding challenges ahead for NPNs.

I am looking to expand my business to include notes and will be closely watching this red flag.

https://www.biggerpockets.com/forums/70/topics/261...

2016 Predictions for the note industry?

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