All Forum Posts by: Dan Deppen

I'm seeing pretty much the same thing. Payments on performing and subperforming notes have been holding up better than I would have expected so far. But I believe that has to change at some point. Starting to see more assets hitting the street, but most of it has been recycled junk I wasn't interested in the first place. Next week I'll start proactively reaching out to seller and then I'll have a better idea what the pricing is. For now I'm content to sit on my hands. 

@Haritha N., 

Private investors will trade both. But find out if they are using a loan servicer. I personally won't by loans that are self serviced because if they didn't fully comply will all of the laws you could run into trouble if you have to foreclose.

When buying a performing note, the price I am willing to pay ultimately comes down to the yield I am targeting and the interest rate on the note. My target yield will vary based on the riskiness of the loan. Personally, I would never pay 100% of UPB for a loan. What happens if it stops performing and you now have foreclosure costs?

Paperstac is a good place to look for loans to buy. You can also network with private investors who trade with each other all the time.

Most states don't require you to have a license, but a handful do.

When buying a note the main thing is verifying the value. This is tricky because you can't see the inside of the property. That's where a lot of the risk lies. You should have a realtor on your team to help with this. Also pull an O&E report from a title company, and have an attorney who is licensed in that state review the chain of title and alert you to any liens or other issues. Although talk to them about the process, length of time, and cost to foreclose in that state if you need to.

 How do the pricing levels they are willing to sell at compare to what they were 2 months ago? 

In the medium to long term I think it will benefit note investors by increasing the supply of non-performing notes. But for now it will result in missed payments, performing loans becoming non-performing, increased foreclosure and eviction timeslines, and lower values for the underlying real estate. 

In the medium term I think this is going to be worse for the mortgage market than some people seem to realize. So far a lot of my performing loans actually had payments in the last week which surprised me, but I expect that to change.

What do I think is next?

1. I think 25% of mortgages going delinquent is probably a good number. I wouldn't be surprised if it is a little higher.

2. I agree there will be a lot more foreclosure and eviction moratoriums. I think there will be some required mortgage forgivess like in Italy as well.

3. I agree the paycheck to paycheck folks won't be able to catch up after a few months of job less. I expect to mod a lot of loans and move missed payments to the back end.

4. I think we will see broader job losses than in 2008. But 2008 had more structural changes in the economy, and a lot of those lost jobs didn't come back. This time around I think the losses will be deeper but less structural. So you have a huge number of hourly workers losing jobs in restaurants, hotels, etc, etc, but then for the most part they should all come back once the quarantines eventually end.

In the meantime I'm re-pricing as well. I'm assuming that most paying loans will stop paying for at least a few months and some will go completely non-performing. For non-performing I'm assuming a much longer timeline, and ultimately a drop in the values of the underlying real estate. I put out a few bids in the last week and will probably continue to do so. But I don't expect to close on too much as it will take a while for sellers to adjust to the new reality. I'm still continuing FC's and debt collection, if borrowers have been affected by this I will obviously work with them.

It will be interesting to see where pricing ends up. I don't think it will go all of way back to where things were in 2008, but they will be very different from where they have been over the last 12 months. Ultimately there will be some great opportunities but I think it will take some time for the market to get there.

The math looks correct. Are the notes performing? 

I've had more than one buyer balk at buying a note because they were calculating the yield incorrectly and thought it was too low.

What are some of the reasons for rescheduling?

I would just make an agreement to buy him out. I'm not sure how the note is currently assigned, but then have it assigned to you.

How often have you made an FPI claim and been paid? To date I've tried to make a total of 2 claims. In one case the basement was flooded and they didn't cover it (long story). In the other there was some roof damage but based on what they would cover it didn't make sense to go forward given the deductible. I'm not considering reducing the amount of coverage I get and I have heard stories of homes burning down. But for those who have been at it for a long time I'm curious how often you have seen total disasters?