The secondary market thats why! and I'm not talking about the Wall Street guys that are no longer willing to provide funding.
Right now there is allot of quiet buying going on. I'm not talking about these guys and gals who post about REO bulk sales, most of them are brokers, not real and if your a real buyer with real money, over 5 million, your stock brokerage has a private label or private bank group that can place this stuff.
I'm talking about purchasers of non performing loans. Right now the guys that were buying loans before the wall street investors in the early to late 90's are starting to buy assets again. This was my former industry and i was recruited over the weekend to join such an entity again.
These investors, all extremely wealthy, form LLC's and "Buy Paper" as its called. The paper is sold in bulk as a non performing asset before it goes to foreclosure, way before. The asset may only be 120 days delinquent, but the lenders want it off of their books so they pool these assets and sell them to investors.
These investors in turn do only a few things.
1) Attempt to do loan workout. The may modify the loan, reduce the interest, reduce the principle, waive payments, place arrears to the end etc.. Anything to get the assets to perform again that is legal. These investors then hold the asset or resell the asset for a profit. For those borrowers who are unwilling or unable to work something out it means Foreclosure.
2) Foreclosure. The new owners will foreclose on the asset. They usually foreclose in the name of the original lender or last servicers, and yes that's legal, because there is a written contract allowing them to do just that if need be. This makes these investors almost impossible to locate as only the foreclosing attorney and borrower may know about the asset transfer.
3) Attempt the collection of the deficiency of any shortage. At this stage its do or die for the borrowers as these companies will push a borrower to bankruptcy by any means possible unless the borrower agrees to pay something if a deficiency is owed.
The asset managers of these private equity groups look at the bpo's that were ordered by the lender from whom they purchased. The bpo is usually transferred along with every other piece of paper and information on the borrower. These asset managers are a bit more savvy than the bankers. They are not going to pay Clear Capital for another BPO as Clear Cap makes a margin on the price of what they pay us brokers. These asset managers will call the broker(s) who have done prior work on the asset and ask them to do another BPO for free in return for the listing. These asset managers and these companies know how to squeeze every nickel out of an asset. Most of them will pay you so don't worry.
For you brokers and agents doing short sales, you will be the first to know of these new players. For both you and your client its a windfall. Most of these loan buyers will not paper the deal to death and will negotiate the balance very easily. For these loan buyers time is money.
So do as many BPO's as you like, if you do you should eventually get a call from some company you have never heard of that has 3 employees in a small town somewhere in America.
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