RECENT MORTGAGE MARKET DEVELOPMENTS...

The information in this post is to bring note holders and investors up to date with the most recent revisions and events within the secondary mortgage market:

The current secondary market for note purchase funding has changed dramatically in the past 18 months. There are far fewer institutional buyers and those remaining do not buy at the old sub-prime discounts and yields.

Higher payor credit, better collateral and property demographics, along with the purchase of more partials than full purchases is now the market. We use a lot of private investor funding for those notes that we do not buy and retain in our own portfolio.

All investors – private and institutional - are expecting higher inflation and higher interest rates within the next few years. These are the basic reasons that real estate notes are being quoted either as partials or when full, at much higher discounts than you were used to in the past.

Payor credit FICO scores below 650 will always incur a higher discount or more often, require a partial purchase quote to offset risk.

Institutional investors won’t touch a note with FICO scores less than 650 and some not less than 680 – we then have to go to private funding sources who will buy these notes, but again, expect higher discounts or partial purchase only.

In some of the "rust belt" states, we need minimum FICO scores of 700 and higher due to falling property values.

The other issue that is creating problems for note sellers is the fact that appraisals are coming back time after time significantly lower than the note seller expected.

In other words, current real market value is less than they thought – and that obviously affects the final purchase price – we are having to re-quote many initial quotes because of this factor.

Sellers creating new notes should download our latest Free Financial Report, and contact us in order to structure the right note for maximum cash out when sold.