Lenders Sell Mortgages

Lenders Sell Mortgages

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Commonly, lenders sell mortgages. Federal banking laws allow financial institutions to sell mortgages or transfer servicing rights to other institutions. Consumer consent is not required when lenders sell mortgages. It might seem alarming because a mortgage is something very personal to a consumer, a symbol of your homeownership. Also, you may have a special relationship with your bank and bank manager. But banks and other financial institutions view your mortgage differently. To them, your mortgage is just another financial asset. And that means lenders handle your home loan much more differently than you might.

Lenders Sell Mortgages

There is another reason for a bank to sell a mortgage. Your mortgage is in default. Right now, we have 6 to 8% of all mortgages in forbearance because of COVID 19. Many of those mortgages may end up in default

For every loan in default, government rules require banks to have cash reserves of $7 per dollar of bad loans.  On $1,000.000 of bad loans, $7,000,000 is reserved. The banks can’t make new loans on that money. Selling distressed paper takes the weight off of their shoulders, improves their investor relations, and alleviates an aspect of unpredictability. How does it improve investor relations? No longer are they in the news for foreclosing on a family and kicking them out of their house. It is bad PR to see the borrower’s belongings out on the lawn.

Why Do Banks Sell Their Notes?

Banks are most definitely not in the business of real estate management, nor do they wish to be. It costs the lender a lot of money to own a house through foreclosure. Maybe, $50,000 per house, and that’s a loss. Banks are not in the business to take losses.

Bottom line, selling notes is vital to the successful operation of a bank. The overhead costs of surveying and maintaining properties are too costly and not beneficial for them, while the federal government’s regulations drive foreclosure costs sky high for the bank.

The buyers of non-performing have a lot of options to work with defaulted borrowers. They want the homeowner to start paying again on their mortgage. They can lower interest rates. They can reduce the debt outstanding for those underwater, bringing the mortgage more in line with the real market value.  They can forgive arrearages if the borrower makes timely payments for a period. The goal of the buyer of a non-performing note is to keep the family in their house.

In conclusion:

  • Banks must by law hold at least seven dollars for every defaulted dollar in cash reserves.
  • The goal is to sell the bad
  • Keeps the FDIC off of their back and cleans up their financial books.
  • Banks are not in the business of real estate management.
  • Regulations drive foreclosure costs for banks sky high.
  • Dodd-Frank regulation.
  • Banks got a massive hit when they foreclose on properties, to avoid negative press they will sell.

If you want to learn more or invest in non-performing notes, call us.

Paige Panzarello specializes in buying non-performing notes at a steep discount from a bank and turning those notes into a profit.

Paige Panzarello, the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts and in the Wall Street Journal as well.  She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training

Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, enjoy life, and be ready-not broken! Whether it is improving communities one house at a time, assisting borrowers in staying in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years, Paige potentially dedicates herself and her business to helping people improve their lives in every way.  For more information got to www.CashflowChick.com

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