Mortgage Loans Competitor's Competition

There are other Fund Companies out there buying sub and non-performing bank mortgage notes. I have had portfolio managers send me spreadsheets full of these types of loans - one portfolio manager even pleaded for me to help him find someone to buy his portfolio of mortgage notes. He has been for months trying to sell these loans to get some of his investor's money back. Poor credit due to banks reporting mortgage delinquencies for months, sometimes years, before they sold mortgage notes to the investor was one hurdle. Another hurdle was values even with reworks to lower mortgage balances, some of these people were so upside down, it did not help them because the payers continued to default on the loans.

I have intentionally stayed away from bank mortgage notes because we are simply not set up to underwrite these types of loans. With the ever-changing federal and state regulations, we run the risk of buying a non-compliant mortgage note. Another problem we could run into is if we rework these loans once purchased, would we be in compliance with state and federal regulations? Also, did the banks work with borrowers to give them every opportunity to qualify for federal programs before they sold the loan to us?

The biggest issue is with servicing a lot of these types of mortgage notes are the foreclosure process. There are state regulations that contradict with federal regulations. Each state is constantly adding new regulations benefiting the homeowner. There are some states where payers have managed to stay in their property for years because of the legal road blocks lender's keep running into (at State levels) to take back the property. On loans these banks were able to modify (via federal programs), it seems many borrowers default on the modifications - their credit is screwed so they have nothing to lose by going into default again and again. That is why the banks are dumping these mortgage loans - they either have run into road blocks by foreclosure process or they have a borrower who continues to default over and over, no matter what type of modification they work out with them.

Trust me, the banks are holding on to the mortgage notes they were able to get qualified through a federal government program - the ones they are dumping are the ones that have no hope!

Is this fund a competitor of AmeriFunds? - Definitely not. They don't buy single transactions between 2 parties - they invest in pools of bank/institutional loans.