BEWARE Of The REO Bulk Portfolio’s And Note Selling Business
All,
Before you read this, please understand that this is not a bash on anyone on this site who initiates this topic in other posts, and my comments are only based on my past experiences….
I have been involved in the Bulk REO Portfolio circus for over 1 1/2 yrs. and have either been on the buying side or the selling side of 50+ transactions and to this day ONLY ONE has closed. The one that happened to close was a deal that was only 3M and I had contact with the bank personally. It was a local deal and there was no such thing as a TAPE.
You hear claims of these multi-million dollar packages, but NONE of them exist. Yes, you may hear someone claim that they are next to the seller, have direct connections, have real tapes, or "the tapes in escrow", but when the rubber hits the pavement, everyone’s gone in the smoke!!!!
Here are some of the reasons as to why these deals don’t close:
1. Buyer Misrepresentation (Principal never gets on the phone. You always talk to "his rep"
2. Seller Misrepresentation (Seller is always shielded by brokers)
3. Buyer fails to proof up (bogus POF)
4. Tapes are fraudulent (no way to know if they are real)
5. Everyone throws around a NCND (1st sign of a bogus deal).
6. Everyone throws around a Fee Protection Agreement (2nd sign of a bogus deal)
7. The banks 90% of the time go through their normal avenues of disposing of REO Assets via asset management companies. They have the time and money to send it to a Realtor and let him try to sell it first, before taking a greater loss on it. (I know, I use to work for the banks in Loss Mitigation).
I’m not here to knock anyone’s hustle and the majority of intermediaries saying they have direct access to banks and can get you these deals are unaware of truth about this niche. They are working by word of mouth and have no proof that what they are trying to sell. This Bulk REO Scheme plays upon the human appeal of “greed” and that’s why it’s still around. Buyers trying to get huge discounts in order to make huge profits, and middlemen lured by the thought of making huge commissions off of these deals with little to no effort involved.
My suggestion to anyone who is trying to solicit these REO’s and to the unsuspecting buyers that want to get into this niche….DONT WAIST YOUR TIME! Stick with the more traditional investments and/or work with REO’s that you can actually look at with your own eyes. Trust me, I have been in this business and know 1st hand that it DOESN’T EXIST!
The truth about the selling of Mortgage Notes...............
There are 2 types of mortgage loans: 1) Whole loans and 2) Securitized loans. Most mortgages made during the mortgage and housing boom, which are the ones today that are in default, were Alt A and Sub prime loans. Once these loans were originated, they were packaged up (pooled) and sold to investors in the secondary market as Mortgage Backed Security Bonds (Hence the term "securitized loan".
Lesson 1:
People who solicit these bulk note sells don’t realized that banks don’t sell these notes to the public. They are sold on an exchange platform as a mortgage back security as either a performing or non-performing note coupon to institutional investors. Non-Performing are sold around 80-85% of face LTV, and Performing Notes are sold around 90-100% of face LTV. There are no notes selling for any less than that. If you hear of one, it’s bogus.
Lesson 2:
Investors who want to purchase these securitized notes need to be approved by the institution that is selling them by submitting complete financials proving that they have the foundation and backing to carry these notes.
Lesson 3:
Only SEC licensed broker/dealer’s and registered investment advisors are the only ones capable of soliciting these deals. Anyone who comes to you and says that they can get you performing and non-performing notes and they do not hold a series 7 or a series 65 license is breaking SEC regulations and is subject to fines and/or prison. So if I were and legitimate institutional investor, I would stay clear of this mess.
Lesson 4:
With the falling of Bear Stearns (as well as other institutions), and all the write-down that the big financial banks who are trustee’s to these securities, the ratings of all Mortgage Backed Securities (MBS) have declined. Gone are the AAA Bond Ratings that these securities once carried, due to the fact that the majority of these pooled mortgages were originated poorly. They are no longer considered good investments.
Hope that I have educated some of you guys who are thinking about getting into the REO and Note selling niche…. THINK TWICE BEFORE JUMPING..
"Lesson 1:
People who solicit these bulk note sells don’t realized that banks don’t sell these notes to the public. They are sold on an exchange platform as a mortgage back security as either a performing or non-performing note coupon to institutional investors. Non-Performing are sold around 80-85% of face LTV, and Performing Notes are sold around 90-100% of face LTV. There are no notes selling for any less than that. If you hear of one, it’s bogus."
I think your figures are inaccurate. If you think that the going rate of a Non-Performing loan is only 5% less than a Performing loan.
Damion...Thanks for the details. I agree and appreciate your candor.
_________________
"BARGAIN KING"[ Edited by bargain76 on Date 07/23/2008 ]
I cannot agree with you more... This is very good information...I would like to talk with you a little more about the whole process......
.
Quote:
On 2008-07-23 20:30, damionwebb01 wrote:
All,
Before you read this, please understand that this is not a bash on anyone on this site who initiates this topic in other posts, and my comments are only based on my past experiences….
I have been involved in the Bulk REO Portfolio circus for over 1 1/2 yrs. and have either been on the buying side or the selling side of 50+ transactions and to this day ONLY ONE has closed. The one that happened to close was a deal that was only 3M and I had contact with the bank personally. It was a local deal and there was no such thing as a TAPE.
You hear claims of these multi-million dollar packages, but NONE of them exist. Yes, you may hear someone claim that they are next to the seller, have direct connections, have real tapes, or "the tapes in escrow", but when the rubber hits the pavement, everyone’s gone in the smoke!!!!
Here are some of the reasons as to why these deals don’t close:
1. Buyer Misrepresentation (Principal never gets on the phone. You always talk to "his rep"
2. Seller Misrepresentation (Seller is always shielded by brokers)
3. Buyer fails to proof up (bogus POF)
4. Tapes are fraudulent (no way to know if they are real)
5. Everyone throws around a NCND (1st sign of a bogus deal).
6. Everyone throws around a Fee Protection Agreement (2nd sign of a bogus deal)
7. The banks 90% of the time go through their normal avenues of disposing of REO Assets via asset management companies. They have the time and money to send it to a Realtor and let him try to sell it first, before taking a greater loss on it. (I know, I use to work for the banks in Loss Mitigation).
I’m not here to knock anyone’s hustle and the majority of intermediaries saying they have direct access to banks and can get you these deals are unaware of truth about this niche. They are working by word of mouth and have no proof that what they are trying to sell. This Bulk REO Scheme plays upon the human appeal of “greed” and that’s why it’s still around. Buyers trying to get huge discounts in order to make huge profits, and middlemen lured by the thought of making huge commissions off of these deals with little to no effort involved.
My suggestion to anyone who is trying to solicit these REO’s and to the unsuspecting buyers that want to get into this niche….DONT WAIST YOUR TIME! Stick with the more traditional investments and/or work with REO’s that you can actually look at with your own eyes. Trust me, I have been in this business and know 1st hand that it DOESN’T EXIST!
The truth about the selling of Mortgage Notes...............
There are 2 types of mortgage loans: 1) Whole loans and 2) Securitized loans. Most mortgages made during the mortgage and housing boom, which are the ones today that are in default, were Alt A and Sub prime loans. Once these loans were originated, they were packaged up (pooled) and sold to investors in the secondary market as Mortgage Backed Security Bonds (Hence the term "securitized loan"
Lesson 1:
People who solicit these bulk note sells don’t realized that banks don’t sell these notes to the public. They are sold on an exchange platform as a mortgage back security as either a performing or non-performing note coupon to institutional investors. Non-Performing are sold around 80-85% of face LTV, and Performing Notes are sold around 90-100% of face LTV. There are no notes selling for any less than that. If you hear of one, it’s bogus.
Lesson 2:
Investors who want to purchase these securitized notes need to be approved by the institution that is selling them by submitting complete financials proving that they have the foundation and backing to carry these notes.
Lesson 3:
Only SEC licensed broker/dealer’s and registered investment advisors are the only ones capable of soliciting these deals. Anyone who comes to you and says that they can get you performing and non-performing notes and they do not hold a series 7 or a series 65 license is breaking SEC regulations and is subject to fines and/or prison. So if I were and legitimate institutional investor, I would stay clear of this mess.
Lesson 4:
With the falling of Bear Stearns (as well as other institutions), and all the write-down that the big financial banks who are trustee’s to these securities, the ratings of all Mortgage Backed Securities (MBS) have declined. Gone are the AAA Bond Ratings that these securities once carried, due to the fact that the majority of these pooled mortgages were originated poorly. They are no longer considered good investments.
Hope that I have educated some of you guys who are thinking about getting into the REO and Note selling niche…. THINK TWICE BEFORE JUMPING..
I wish I had of found this before I went on the Bulk REO chase. I have investors ready to take down tapes and can not find one real seller or real product. I have lost so much time and integraty over this BS.
I do feel there are real deals on tapes to be made but they are investor tapes that normally have a high LTV. Anyone thinking they can get a tape with 30-40% LTV is dreaming just like so many of the investors we represent.
However if you know of any Real Tape Sellers/Mandate let me know. But if they can not proof u with a LOA they are by no means anyone we want to deal with.
If your a mandate and can provide a LOA lets talk.
Thank you for this post.
_________________
Gene Murphy[ Edited by JohnLocke on Date 12/07/2009 ]
One form of "bulk sales" that I know of are FDIC sales. Other members here have good posts on this (see http://www.thecreativeinvestor.com/ViewTopic66109-12.html and become a buyer!) Also see http://www.fdic.gov/buying/index.html and click on "Historical Sales" to find out the companies (under "FDIC Closed Loan Sales"
who are executing transactions. There are some interesting (closed) transactions, like MST-3-09-015 bought by Cincinnati Capital Corp for $1.6M... 230 performing residential notes with a $13.6M book value. Sounds like it may be a good investment for CCC, but not the taxpayer.
Not a "pure play," but First City Financial Corp (NASD: FCFC) is also a buyer of performing and non-performing FDIC assets. Do your own research before investing.
Such a good post. Before people get SCAMMED on their time. I knew it and have had come across a FEW and never GOT involved. I was once a bank VP and should knew better and you are 100% correct.
I have had another realization on this..
If anyone mentions "mandate" unless they are foreign, I would be suspect.
The term Mandate is rarely used in the US.
I REAL mandate as power of attorney to do the deal, ergo why so few people are mandates.
we get spreadsheets from Wells Fargo every once in a while with a list of about 20 notes they are looking to liquidate.
one of the problems we have encountered is that the bulk of those homes are worth close to nothing, the tax owed on them are sometimes more than the asset itself..
in order to bid for these assets the bidder must deposit 50K into a Wells Fargo escrow.
if you are interested let me know.
Loved the post!!! agree 100%
I have seen several fraud cases uplifted recently and so the SCAMS and due to this it is very beneficial for us to not overlook all the rules that are required for the agents that are licensed and instead of seeing bulk list, approaching to good agents will be much better.