PAST PREDICTS FUTURE
Borrowers are similar. The big hedge funds and even Fannie Mae and Freddie Mac are convinced that borrowers with a track record of habitually defaulting can be redeemed.
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November 2019
GOOD FENCES BUILD GOOD NEIGHBORS
So you’ve found a borrower for your IRA funds. He’s a great guy and the purpose for him borrowing from you sounds great. He needs the money right now, but it will take time to get the proper agreements drawn up
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IF YOU DON’T KNOW, FIND SOMEONE THAT DOES.
Every time I turn on HGTV there is another fix-n-flip show gracing the airwaves where regular people seemingly make huge profits by putting granite in a bathroom. Do these people ever lose? Yes…yes they do, but it’s a TV show.
IF YOU DON’T KNOW, FIND SOMEONE THAT DOES. Read More »
Thoughts on Lending Risk
Managing portfolio risk is critical to the success of any loan-based fund. It is important to understand that there are many types of risk associated with lending that differ from other types of investing.
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DON’T DO A DEAL JUST BECAUSE THE LTV IS GOOD!
You’ve probably heard of the three C’s of credit; Character (Credit), Capacity, and Collateral (Capital). You also might be aware that most private lenders and note buyers ignore sound underwriting principals in order to get money out the door.
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TRUSTING THIRD-PARTY VALUATIONS
Whether you purchase notes or you are a hard equity lender, understanding the value of your collateral is critical to creating a good loan for your portfolio. Banks and GSE lenders use the good, old-fashioned appraisal to determine value.
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Don’t Miss Back Taxes
Most lenders and investors rely on on-line data and title reports to determine the real estate tax delinquency status of a collateral property. Simply looking at the title report or pulling up the local tax assessor’s web site isn’t as reliable as one might think.
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Real Estate Investors Bank on Technology to Deliver Profits
MIAMI – In the future, potential renters may visit available units, apply for leases and execute paperwork without ever seeing a human being.
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The Three Most Important Aspects of Lending
Most lenders will lean on the “Three Cs” of Credit – Collateral, Capacity, and Character as the pillars of underwriting a loan, but it’s become clear
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NY Landlord Paying $1M for Denying Ex-Felon Renters
A Queens landlord who allegedly denied renting to any ex-convict will pay $1.187 million, based on a lawsuit initiated in 2014 that claimed it violated the Fair Housing Act. The Fortune Society, which sued, says it’s possibly the largest settlement ever for this type of allegation.
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Game Theory
During the first part of my career, I bragged about the fact that I had never had a real estate loan go into default. It was a sense of pride to me until one of my mentors retorted “that just means you aren’t making enough loans!” He was right.
WHY WOULD A BANK SELL A LOAN?
When a bank finds its earning down, it usually is directly attributable to issues within its loan portfolio. Many investors reach out to banks with the delusion that the bankers are stupid and can’t solve their own problems.
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THE POWER OF DISCOUNTING
Discounting a loan is where a loan is purchased for less that the loan balance. A lender does this when the need to move a loan off the books to raise more cash or if the loan does not fit in their long-term plans. We’ll talk more about why a lender would do this later, but back to how a discount works.
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Separate People from the Problem
A seasoned negotiator will recognize that there is a difference between the problem at hand and the person on the other side of the table.
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MBS, CMBS, and Bank Loans
In order to fund large amounts of fixed-rate, longer-term loans, conservative investors would purchase a portion of a large pool of loans. The investment works a lot like a bond where an amount is invested…
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