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Private Mortgage Funeral? Long Thread
Week ago I called for the death of private mortgages
And yet we still see offers for private mortgages?
Dead Lender Walking?
Let's break it down
There are some really old, really strong MICS (Mortgage Investment Corps) out there
2/
Week ago I called for the death of private mortgages
And yet we still see offers for private mortgages?
Dead Lender Walking?
Let's break it down
There are some really old, really strong MICS (Mortgage Investment Corps) out there
2/
/2 They are well managed were always careful and mainly Private First Mortgages, some have billions under management, many over $100M
They never lent over 75% loan to value, some averaging much lower
They're okay, there will be pain but they're going to be fine
3/
They never lent over 75% loan to value, some averaging much lower
They're okay, there will be pain but they're going to be fine
3/
3/ Then there are "the others"
Range in size from as small as $5M up to big ones, common feature: New
Founded last 5 years mainly by mortgage brokers
So: no previous mortgage admin background, no legal expertise, no experience in loan defaults, nada
Just selling loans
4/
Range in size from as small as $5M up to big ones, common feature: New
Founded last 5 years mainly by mortgage brokers
So: no previous mortgage admin background, no legal expertise, no experience in loan defaults, nada
Just selling loans
4/
/4 Good at roping in investors too, many Acredited, many NOT, some Mom &.Pop
I am NOT saying these MIC operators had bad intentions at all
But many liked the high 14% to 18% yields of second mortgages and the ease of selling them
And some went to 85% loan to value
5/
I am NOT saying these MIC operators had bad intentions at all
But many liked the high 14% to 18% yields of second mortgages and the ease of selling them
And some went to 85% loan to value
5/
/5 Queue the funeral music
Oh and BTW some of them lent to small developers and on raw land: Yikes
90% of second mortgages were refinances so they were for people in debt already, now those folks take deferral from their bank on the first mortgage
Yowsers! TROUBLE
6/
Oh and BTW some of them lent to small developers and on raw land: Yikes
90% of second mortgages were refinances so they were for people in debt already, now those folks take deferral from their bank on the first mortgage
Yowsers! TROUBLE
6/
/6 Deferral causes the first mortgages to GROW eroding equity
Top 3 Bad Things for Mortgages:
Unemployment
Unemployment
Unemployment
Oh 4th Thing: Property Value Decline
Payment default only has one effective remedy: Power of Sale Action
The Courts are Closed
7/
Top 3 Bad Things for Mortgages:
Unemployment
Unemployment
Unemployment
Oh 4th Thing: Property Value Decline
Payment default only has one effective remedy: Power of Sale Action
The Courts are Closed
7/
/7 So why still lending? Because there's still cash in the MIC and they need to pay their bills
Some HAVE suspended lending, we have
Some are flogging 6 Month Prepaid Second Mortgages as DEFERRED mortgages, love the stones on them
One thing I don't know: values
8/
Some HAVE suspended lending, we have
Some are flogging 6 Month Prepaid Second Mortgages as DEFERRED mortgages, love the stones on them
One thing I don't know: values
8/
/8 Do property values drop? Don't know. But likely some erosion and when it happens BOOM 85% seconds are chewed up just when the MICS are facing redemptions
I saw this movie once before in 1991
Here's something the second mortgage MICs don't know about: Investor Litigation
I saw this movie once before in 1991
Here's something the second mortgage MICs don't know about: Investor Litigation
