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Posted over 5 years ago

Foreclosures: What to Expect Now

Are we headed to a new foreclosure tsunami, or will the market work differently this time around?

Done right, investing in distressed real estate assets is one of the best money moves to make right now. It’s all about knowing the right moves to make and how the market is going to play out.

A New Foreclosure Tsunami?

Far before the COVID-19 coronavirus hit the news we were already seeing foreclosures and mortgage defaults scale up in some niches and pockets of the country.

AM NY reports that NYC foreclosures doubled in 2019 alone, with Manhattan foreclosure rates rising 39% in 12 months.

Back in February 2020 BisNow reported that dozens of NYC hotels were already defaulting on debt. Often on properties worth hundreds of millions of dollars. Manhattan has been especially hard hit, with big developers struggling on luxury condo buildings.

The blow to incomes and jobs from COVID-19 could certainly throw many into risk of default, if it isn’t staved off soon. However, it could look different this time. Some foreclosures would probably take a lot longer to process and borrowers may have more protections than they did in 2008. However, with recent low rates, while many may fall late, they should be able to manage payments if that gap is fixed. So, in the short term we probably won’t see a big wave. Though we could see an elevated number of foreclosures emerging over the next 24 months.

Managing Mortgage Loan Performance

There will be great mortgage note acquisition opportunities coming up, and the demand and value of mortgage notes is likely to rise substantially. This is especially considering government funding and the need to get out of the stock market.

However, it is true that unless managed well some may face some additional challenges in mortgage payment performance. At least in the short term.

Fortunately, high levels of defaults and additional costs shouldn’t be necessary if note holders are proactive and have great experience with workouts. Most banks and lenders won’t and don’t do this well. That makes it even more important that we step up to help and fill that void, just as we did in 2008.

This probably includes granting some borrowers a temporary reprieve, until they get back to work or they have insurance claim checks coming in.

The Best Way to Invest & Acquire Deals

So, what is the best way to grow your portfolio during this time?

It may not be banking on traditional foreclosure pipelines and short sales as in 2008. It could be tax liens, REOs already in the pipe, deed in lieu of foreclosures, and through funds with access to pools of notes and the best discounts on these assets.

In terms of the best types of deals to focus on, we may see workforce housing, deep discounts on prime property, and the types of housing that will be most in demand in the months and years ahead.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Image by Andrew Khoroshavin from Pixabay



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