How do you all finance your NPL portfolio's?

[Michael L.]

Trying to get a pulse on how NPL investors are using leverage for portfolio's ranging from $1mm - to $10mm. 

[Scott Carson]

Most of the $1M or less assets are being financed with private investor money.  Its either on a flat percentage or a joint venture (50/50) basis.  

We've financed several pools where we pre-sold a chunk of the pool above what we had it under contract for to help pay for the assets while walking away with the rest paid for.

In one case, I was buying a pool of 50 assets at 50% of FMV with 15 of the assets being located in CA. I was able to find a buyer for those CA assets at 80% of FMV which almost paid for the entire pool. I found another buyer to buy 5 of the assets at 70% of FMV which helped pay for the rest of the pool. Basically, for what I sold 20 assets off, I was able to keep 30 of them free and clear.

There are several funds rolling out NPN financing including Black Rock. They are looking at 75% ITV with a minimum loan amount of $150,000 on 5 loans with asset values of $40K or greater. 12-24 month time frame at a 6.5% rate with a couple of points. The stickler is on who will be servicing the loans as that will definitely determine profitability as some servicers are a lot better then others.