The financial crisis has created some great investment opportunities buying distressed mortgages off banks. The glut of nonperforming loans and bank failures has caused numerous lenders to sell off mortgage assets at deep discounts. This article will provide an overview of the distressed debt industry and various investment opportunities.
With the increase of foreclosures in recent years banks have an increasing need for liquidity. Most banks are not equipped to deal with non performing loans and do not have the staff or flexibility to work out loan modifications. Additionally, many failed banks and and mortgage back securities need to be liquidated creating more distressed mortgage pools for sale.
Why buy distressed mortgages?
Banks are selling these assets at deep discounts. An investor can typically purchase a non performing loan for less than 50 cents on the dollar. This provides a significant opportunity for an investor to make a profit by either foreclosing on the property or working out a loan modification with the homeowner.
Where to find distressed/discounted mortgages
Most of the large banks will sell large portfolios of distressed mortgages to hedge funds and large institutional investors. A number of banks will sell smaller packages of loans that individual investors and smaller investment funds can purchase portfolios as low as a few hundred thousand dollars.
There are a number of intermediaries and hedge funds that will break up large packages of loans and sell individual mortgages. This allows regular investors to purchase assets for as little as a few thousand dollars.
You can find information on available mortgage pools on various internet websites. Networking on LinkedIn and BiggerPockets internet forums is a great place to start your search for distressed mortgage opportunities.
Andrew Fritz is a real estate and distressed mortgage investor and advisor
Visit http://www.geminicapitaladvisors.com for educational resources and available distressed and discounted mortgage investment opportunities.
