Payment and LTV percentages

[Peter Halliday]

I’ve heard investors say you should stay away from low payment notes. I’m wondering the rationale. As long as the yield is acceptable, I’m thinking what does it matter? I guess it could limiting because of you want to accelerate your notes, could you do a partial?

A related question is is there a risk for buying a performing note with very low LTV? It would seem a borrow would likely not want to walk away with that equity.

It seems suspicious to me if there are still a lot of years left though.

[Chad U.]

With low payments, the servicing fees can take a large bite out of your yield.  

As for low balances, some  borrowers seem to be less inclined to pay the entire amount off since it's a pain to pursue them and expensive to foreclose.  However what some of these borrowers do not realize is that they cannot sell the property until the lien is released.