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No question, the most often asked question we get from investors and would be investors in the NPL niche is “How long is this opportunity going to last”. While we are not prophets and certainly cannot predict the future, there are assumptions we can make based upon facts we glean from the market place. I do a great amount of study on this industry and try to talk with a variety of people in the know; lenders, hedge fund operators, other investors and servicing companies and not one is predicting it will end soon.
I often hear the amount of delinquent or troubled loans being above $550,000,000,000 (that’s billion), an immense amount and one not likely to be absorbed anytime soon.
Just last week I was on the phone with a large hedge fund in New York who is and has been a large buyer. He provided me with some staggering numbers. He told me (and I believe him to be in the know) that the GSEs,( Fannie, Freddie and HUD) have over $900 Billion in delinquent loans on the books that they need to get rid of. Recently they unloaded $37 Billion in one sale. Unfortunately, most of the hedge funds we deal do not qualify to buy under the strict guidelines of these sales.
Another cumbersome burden is that the minimum sale was $2 Billion.
While we do commend the requirement to prioritize the modification process most of our sources don’t buy at the $2,000,000,000 level and none are non-profit organizations. And then what about all those homeowners who do not want to modify or don’t qualify to modify. Add these to those who have already left the home and I see some difficulty in maintaining the 70% ratio even with a real, genuine effort. We will have to see if the regs on these purchases change.