In Q1 2010, Fannie, Freddie and FHA backed 96.5% of all home loans . . . government backed loans are expected to decrease by 17.2%, because even taxpayers can’t be soaked to stop losses forever.
The government is having a hard time stopping the bleeding:
- Alt-A - 12.84% delinquency rate
- Interest Only - 18.5% delinquency rate
- Option Arm - 19.8% delinquency rate
And the reason that only the government is out there buying/making loans? Because the big bankers make safe secure returns borrowing money at 0% from the Federal Reserve. They don’t make loans to people with these subsidized funds . . . no, that would be too risky.
Instead, they just buy U.S. Treasuries and make a nice, safe 3% return. If you could borrow unlimited amounts of money at 0%, and invest it at 3%, would you be doing OK?
So, all that means is that the credit markets are probably going to get worse, so we’re increasingly going to need strategies to fill in the gap.
Hedge funds and private equity funds (that have nothing to do with the traditional banking community - and are not backed by the FDIC), are making many of the loans that the banks are not (have you noticed that many banks are still pretending to be in the lending business, but pull funds at the last minute?)
Owner financing (with subsequent note sales) is another strategy that will help many transactions come together . . . as long as the transaction is engineered appropriately, the documentation and underwriting is complete, and the note contains no errors (sadly, this happens more than you would think).
If you have SBA or commercial loans that you can’t get funded, contact me to see if I can help you bridge the gap. Good luck out there!
When banks say NO, I say YES!
- Title Holding (Land) Trusts
- Owner Financing and the Title Holding Trust Helps High-End Home Avoid Foreclosure
- Sign up for Seller Financing on Steroids
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