How Do Private Lenders Underwrite Post-Judgment Portfolios?

Question

Curious if anyone here has experience with this.

I've been acquiring fully adjudicated civil judgments at a discount where real property collateral has already been identified in the debtor's name. No case outcome risk - judgment is already won. Record the abstract, enforcement attorneys handle execution, collection typically happens within 45-60 days.

Collateral is tangible recorded real property. Short duration. Multiple enforcement paths. Pretty clean asset class on paper.

The financing piece is where I'm stuck. Traditional lenders don't really know what to do with this. It's not a standard loan - more like a revolving facility secured by a portfolio of judgments backed by real property.

Three questions:

• How do lenders typically underwrite this - collateral equity or judgment face value?
• Anyone seen portfolio-level credit facilities structured around judgment acquisitions?
• What deal size gets lenders interested in this space?

Not pitching anything - just trying to figure out how the capital side works for this model. Happy to share more on the acquisition/enforcement side if useful.

Austin Johnson · Answer

@Brett Synicky may be able to provide some insight here, great comments from everyone above!

Matthew Chase · Answer

This is a real asset class, but it sits in a blind spot between litigation finance, specialty credit, and private RE lending which is why banks usually shrug. From a lender’s perspective, we underwrite based on real estate equity, not the judgment amount. Portfolio lines do exist, but they’re mostly handled by litigation finance or specialty credit funds, usually structured like borrowing-base or warehouse facilities.

Toby T. · Answer

Matthew - this is exactly the kind of clarity I was looking for. Thanks.

The blind spot framing nails it. It's why traditional lenders shrug and why I've been looking at the litigation finance / specialty credit side instead.

Borrowing-base or warehouse facility structure makes sense for this - short duration assets, identifiable collateral, predictable enforcement timeline. Checks the right boxes.

Out of curiosity - from what you've seen, do these facilities typically require a minimum portfolio size before a fund will engage? Or is it more about the quality of the underlying collateral?

Patrick Roberts · Answer

This is a long shot, but reach out to some factoring lenders. Theyre in the business of financing receivables and other paper. You might have to shop around, but you may find a firm that will take this on. I would even ask the factoring lenders for referrals on lender-finance private credit firms. This is a bit more sophiscated than many private lenders are equipped to deal with; you'll likely have to go further up the chain to a more formal institutional lender.

Very interesting concept, though. Out of curiosity, are you able to perfect and record a mortgage/DoT or UCC to formally establish the lien once the judgment is rendered?

Toby T. · Answer

Patrick - factoring is an interesting angle, hadn't considered that. Will definitely explore.On your question - yes. Once the judgment is rendered, we record an abstract of judgment in every county where the debtor owns property. Some debtors have assets spread across multiple counties or even multiple states. Each recording perfects the lien against that property - title can't clear on any sale or refinance without it being satisfied first. So it's a formal, recorded lien position across the full asset footprint.

The institutional angle is where I'm leaning. Already had some early conversations with litigation finance firms on the portfolio funding side. Appreciate the nudge to go further up the chain.

Doug Smith · Answer

In 35 years of both extremes of bank lending and private lending, I've never seen anyone finance judgements. While I think your question is a good one...and interesting...the person/lender that decides to back a deal like that is basically going to be making up the rules for themselves. To my knowledge, there is no standard set of underwriting guidelines around such a scenario. I will suggest that this will likely be an individual and not an institutional investor that will likely lend on this. I will be interested to hear how this turns out.

Toby T. · Answer

Doug - appreciate it. And you're right - there's no standard playbook here.

The "making up the rules" piece is actually where I think the opportunity is. The asset class is real - fully adjudicated judgments backed by identifiable real property collateral, short duration, multiple enforcement paths - but nobody's built the financing infrastructure around it yet.

I've actually had some early conversations on the institutional side - litigation finance firms that do portfolio-level funding. It's not traditional lending, but the structure is closer to what you're describing than a standard loan. Still early though.

Will definitely keep the thread updated on how it develops.

Toby T. · Answer

Chris - fair point, and you're right that traditional lender financing doesn't fit here.

Two distinctions though:

Most of these aren't subordinate liens competing with first-position mortgages. They're judgments on non-homestead property with identified equity and no senior liens - or where an asset transfer is already in motion. The abstract intercepts at closing. Title can't clear without it being satisfied. So collateral-wise, it's closer to a first-position story.

And the financing I've been exploring isn't traditional debt - more along the lines of litigation finance or specialty portfolio funding. A few firms in that space do fund post-judgment portfolios, though it's not common.

Have you seen anything on the litigation finance side that might apply?

How Do Private Lenders Underwrite Post-Judgment Portfolios?

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