What's the latest experience for NPN pricing?

Question

We've got another month of capital raising before we go into buying mode for NPNs. Our latest information is that NPN buyers are expecting 8-15% discounts from pre-pandemic pricing. Are sellers accepting that?

We know that our two main trading partners are selling again but we don't think they will accept discounts like that because they'll just hold what they have instead of selling.

Just curious to know what others are experiencing out there....

Dave Van Horn · Answer

@Andy Mirza We're seeing similar discounts already, but it also can vary based on size (we tend to buy $20MM and up) and the amount of equity in the trade, as well as the states where the notes are located due to foreclosure matrix costs and timelines.

And because of said discounts, we plan to aggressively be buying for the next 3 to 6 months. The low unemployment factor that Bob mentions certainly is something to consider but usually assets we buy today don't come to a resolution until 6 to 18 months later.

Chris Seveney · Answer

@Andy Mirza

I have seen a mix. I have seen some sellers want to minimize risk and sell distressed doubt now because they are tired of holding them and waiting out the moratoriums.

I have seen some that have actually increased pricing - when I questioned them on it they noted there is lack of supply on the market right now because funds are holding assets.

It has varied - I am still buying strategically and at right price / I don’t force a bid / buy assets

Bob Malecki · Answer

With the moratoriums still in effect, we've postponed acquisition of any new distressed mortgage debt. These moratoriums essentially lower the chances for successful loss mitigation. Instead we're focusing on our current portfolio and selecting loss mitigation targets that are in  low unemployment states which we think will have the best chance of a positive outcome.

For obvious reasons I think that there will be a good amount of inventory flowing through the secondary market in 2021 and we will shift into acquisition mode at that time.

Andy Mirza · Answer

@Dave Van Horn Good to know that you're still seeing the same discounts and sounds like we're on the same plan to buy. Funny, we use the exact same 6 to 18 month timeline when we describing the expectations the for the bulk of our note purchases!

Jay Hinrichs · Answer

with the foreclosure moratoriums and all these things still unresolved and states pushing out the time lines..  I would think there has to be some discount to account for potential foreclosure delays.

What's the latest experience for NPN pricing?

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