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There are many reasons for participation in the delinquent mortgage niche, profit potential, benevolence to home owners in distress, and large availability of product being just three. However, for me, the most attractive feature is the huge potential for creativity. I have been a business owner for over forty years and believe one of the keys to remaining an entrepreneur is the satisfaction of building a business based on utilizing one’s creative ability. And no business I’ve found offers more opportunity for that than the delinquent mortgage note business.
The purchase of delinquent mortgages at large discounts is the key. Banks typically have no creativity to offer. Whether the reason is regulation and just a stodgy, stuffy, non-creative mentality could be a matter of opinion. But, when a homeowner becomes delinquent in their mortgage payments the normal response from the bank is a demand for all back payments and penalties and a reinstatement of the original terms. While there are more bank modifications being completed today, the numbers are still small compared to the number of delinquencies. Unfortunately most homeowners who find themselves in this dilemma simply cannot come up with the cash to pay all the arrearages and may still not be able to meet the payment demands of the original mortgage.
As a private investor who purchased the mortgage at a discount, there is a huge opportunity to work out a solution with the homeowner that is beneficial to both parties. There are a number of opportunities available to the investor; discounted payoff, lower payment, lower interest rate, lower principal, etc. and depending on the homeowner’s situation, short sale assistance. Sure, there are times when foreclosure is used as a last resort: vacant house, uncooperative homeowner etc. But really, that should be the exception. Creativity is the key and, quite honestly, the source of the pleasure from this business.