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From One Nightmare to Another

The USC defense is a big nightmare. But there is another nightmare, one I'm trying to figure out. Trying to figure out how to get ahead of it. Thank you Baby Jesus for giving me the foresight to diversify my business away from loan originations. Im so far away from where I was in 2008. Lesson learned. I'm back to buying non performing mortgage loans. Bought a few in August, few more in Sep and Oct . A few in Florida, a few in Michigan , a couple in California. One in Arizona. Lenders are closing, merging, or having massive layoffs right now. Volume is drying up like the water hole in the Serengeti during a drought. But real estate prices aren't dropping. I'm like the lion at the watering hole waiting for a prey but none shows up. Patience is what my gut tells me. Less buyers will eventually lead to more inventory which will lead to prices softening. The Fed can't blink and reduce rates, they have to hold firm until inflation retreats. Real estate jobs are in a world of hurt but when will it spread across other industries? What I really want to do is buy 1-4 unit residential, or small balance commercial properties. Patience. Oh yeah and Grinch will be gone soon. Patience.

13 comments

13 Comments

Java

Nov 05, 2023

How do you buy a non performing loan? And why would you ever take on a bad debt ??

BigBallss

Nov 05, 2023

Replying to

Yes. Pretty much. Loans get sold all the time.This loans has been sold 4 times. The original lender was Countrywide. People are used to their loan being sold or as it's normally put to the consumer "servicing has been transferred and now you make your payments to BigBallss Servicing Company". Current lender sends the consumer what we call a Goodbye Letter letting them know of the change, I send them a Hello Letter, welcoming them to BigBallss Financial and then I record an assignment of mortgage with the local county recorders office. And it's more like, " hey I'm you're new daddy, pay me or I'm going to take your fawking house". But using nicer words.

BigBallss

Nov 06, 2023

Replying to

Commercial loans are made by commercial banks and held on their balance sheet. They can't take the risk of keeping a loan on their portfolio at a fixed rate for 30years. A rapid rise in rates would make their portfolio worthless.

Residential loans without exception are sold to a government sponsored enterprise (GSE) like Fannie, Freddie or HUD who then pool the loans into an investment bond and sell it to institutional investors. These GSE's were created to make liquidity available for home mortgages. There is no GSE for commercial loans. Banks live or die with the performance of the loan and the rate they loaned it at. Risky stuff.

Edited

BigBallss

Nov 06, 2023

Replying to

Most people that invest in loans go to a hard money shop, hand over whatever you want to Invest say $100,000. The hard money shop will find a borrower who needs money, handle everything, paperwork, due diligence, underwriting and collect monthly payments. They guarantee you a return, usually 12% annual return and you don't get your hands dirty. For the $100,000 the hard money shop will charge the borrower about $10,000 in loan fees that they keep and a % of the monthly payment. I like the risk/return of buying non performing loans. And I enjoy it. I even like the negotiation with the borrower.

Edited