What changes do you see happening in the note industry in 2019v

Question

Jay Hinrichs · Answer

I would definitely get chummy with the non QM lenders that portfolio their paper.. back in the day when a lot of this was done by Thrifts

like household finance and others.. I had a pipeline at one time in Oregon were i got a swing at all of their NOD's with the model for me to buy the note 30 days from the sale.. just do a substitution of trustee and normal assignment.. I would either end up with the asset or someone would buy it at the court house steps.. Now i never tried to get them performing like you guys do it was simply a strategy to buy deeply discounted real estate and not have to wait forever for the foreclosure time lines.. Sadly Mrs. Pickle ( her real name) was transferred and the new state manager would not play ball. but it was great while it lasted.

on Dodd Frank side I keep my NMLS license current although i am not active mortgage lender right now.. but i do the CE every year and read the periodicals.. don't see much of anything changing there. So many of the distressed notes were the 2nds that were given for no money down deals.. those have at some point have to finally flush through the system.

But this being merica there will ALWAYS be defaults.. its not Canada thats for sure.

Chad U. · Answer

Defaults will likely continue to decline or flatline, thereby diminishing distressed inventory. With the wave of wannabe note investors, demand will increase while inventory continues to decrease hence driving prices even higher. I believe 2019 will be a defining year and separate the wheat from the chaff for those who "dabble" in NPN investing from those who have years of experience and are well capitalized.

As for regulation, I don't see Dodd-Frank disappearing any time soon given the split congress. So this might pave the way for more Seller-Finance opportunities as it remains tough for those to qualify for QM loans. However, this will likely bring out many more lenders offering non-QM loans thereby increasing the pool of riskier loans, hence creating additional inventory in the ensuing years.

Melanie Raine · Answer

@Scott Kimberly and @Brian Mcmenamin -- just a friendly reminder that you don't need to sit it out and not make any money. I would suggest doing a joint venture with people like Chris Seveney or Chad Urbshott and get your money working for you. At least you'll be making money and learning from the more experienced guys as you prepare to start on your own. Building your network is an excellent use of time as well.

Scott Kimberly · Answer

@Chad Urbshott as a newbie learning the ropes, and as someone who would almost certainly consider themselves as "chaff", would you recommend "sitting this one out"? I know there is not much point in timing the Stock Market, but jumping into real estate just to say I did and buying crap Notes that lose me money while doing it, does not sound appetizing to me at all.

By "sitting this one out" I mean that I could spend the next year squirreling away capital to buy Notes and then buy some, OR I can spend the next year eliminating the vast majority of all my debt and start squirreling in 2020.

A lot of people seem to subscribe to the "just do it!" mentality, but, again, if "just do it" means I lose money from poor decisions, then why bother. Of course, that is also assuming that there aren't any deals worth buying.

Jana Prevatt · Answer

Hello all ---

Newbie here! I am kind of needing a bit of direction in finding a local seasoned Note Buyer in the Ocala/Gainesville, FL area.

I am familiar with a former longtime landlord of mine & my beau's who may have some notes to sell (so they can get out of the tenant/flipping/rehabbing headache, & possibly retire) , as well as a partially vacated plaza near us who may need some seed capital to cleanup the property & fill their longtime empty suites back up. This plaza has been partially empty for several years, with very little prospects in terms of getting any tenants or buyers.
I would like to refer them to anyone who is a seasoned Note Buyer in Central FL or even North Central FL areas. But the closest one I found so far is in the Dr Phillips area of Orlando, which is out of our range, distance wise.

Any help would be appreciated. Thank you.

Chris Seveney · Answer

Don

I agree with your assessment - 2019 will be interesting. Rising rates may not have as much impact on residential but job market and property value will. If borrower keeps there job rates shouldn’t make much difference on fixed loans and housing prices go up and down. Notes will be worth less because of higher LTV so non performers will be priced differently and will come down. I also think there will be more notes coming maybe not in 2019 but in 2020 as things take time and I don’t see it happening instantaneously

Don Konipol · Answer

@Chris Seveney

I have found that to get my desired return I have to “work” the note, or the situation. We do a lot of restructuring on notes we purchase. We are able to do this because (1) the notes we purchase have matured and so in lieu of immediate payoff we can modify to increase our return, (2) we do get some discount when we purchase a note, and (3) we can modify a note to get the borrower what’s most beneficial to him and what’s most beneficial to us (ROI).

If interest rate rise significantly and the economy slows down, then notes become riskier, more are available for sale, and hence price should go down. If real estate prices decline then de facto LTV is up making the note riskier. I may have a somewhat different perspective as I deal exclusively in commercial real estate notes

Brian Mcmenamin · Answer

@Scott Kimberly Just getting into the note space myself. There are deals out there, but I would say that the good one are harder to find now than they were 3-5 years ago. That could change in the near future with more borrowers becoming delinquent on payment. My plan in the near term is to build out my network of asset managers and potential investors so when I start to land good deals I have all the pieces in place to grow my business. Best of Luck

What changes do you see happening in the note industry in 2019v

What changes do you see happening in the note industry in 2019v

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