HOUSINGNEWS REPORT
ENCORE PERFORMANCE
U.S. MEDIAN SALES PRICES
$233,000
$236,026
$250,000
$200,000
$150,000
$100,000
$50,000
$0
While a few of these investors bought NPLs with plans to quickly execute foreclosures and either sell off or rent out the properties attached to the loans, others found a more lucrative approach that constituted a win/ win scenario for the investor and the delinquent borrower. It turns out that in many cases, the best outcome is to turn an NPL into an RPL — a re-performing loan. Many of the companies who bought NPLs (including my employer, Carrington) have mortgage servicing operations that specialize in helping borrowers with financial challenges. They share a mutual goal with the customer: to keep the borrower in the home. While this provides the borrower with another chance at homeownership, it also provides the investor with multiple opportunities for return — holding the loan in its portfolio and collecting interest over time, or packaging and reselling
“While a few of these investors bought NPLs with plans to quickly execute foreclosures and either sell off or rent out the properties attached to the loans, others found a more lucrative approach that constituted a win/win scenario for the investor and the delinquent borrower.”
A decade after the bankruptcy of Lehman Brothers marked the unofficial beginning of the financial market meltdown, the pipeline of NPLs is finally drying up — unsurprising, since delinquency levels are back to normal levels, and the number of loans in the foreclosure process is roughly a third lower than normal. Many of the formerly non-performing loans are now performing nicely, and RPLs are becoming a hot commodity in the institutional investment community. By Carrington’s estimation, RPL purchases now surpass NPLs.
the loan, either to investors who buy whole loans, or as part of a securitized transaction. To help ensure success, NPL purchasers very often offer principal balance reduction to borrowers who successfully make on-time payments during a trial period. Companies who are successful with this approach often help as many as two-thirds of these borrowers avoid foreclosure — quite an outcome, considering that typically almost 100 percent of the loans in an NPL pool are already in foreclosure when they’re purchased by the investor.
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MAY 2018 | ATTOM DATA SOLUTIONS
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