How to Turn Defaulting Mortgages into Highly Profitable Assets

Jan 21, 2021

We are experiencing a huge boom in defaulting mortgage loans. How can investors turn these seemingly distressed assets into successful and highly profitable assets?

We are once again seeing a tremendous surge in mortgage delinquencies. Perhaps even a wave that may dwarf 2008. That isn’t necessarily a bad thing for everyone. In fact, there are a variety of ways to help borrowers and other investors, while being compensated well for your time and effort.

Financial Counseling

Many mortgage borrowers could get back on track with their housing payments in the next few months. Some will be able to catch up between a new round of stimulus payments and tax refund season. Others just need a few tips and advice on how to juggle their finances and find extra financial help for other bills, so that they can keep on top of their mortgages and save their homes. Providing you reach them before they believe it is too late to save their homes, most genuinely want to keep their properties and want to pay. 

Loan Modifications

Loan modifications or ‘workouts’ can be used to adjust the terms of a loan and get the borrower up to date and on track with a payment plan that they can sustain. This can be adjusting the rate and term temporarily or permanently, often without any net loss to the noteholder. 

Cash for Keys

A deed in lieu of foreclosure or ‘cash for keys’ arrangement enables the borrower to get out from under the stress and certainly more financial damage. This also helps the noteholder save funds and time, while taking control of the property.

Wait for Another Lienholder to Foreclose

Overall property prices appear to continue to rise sharply. This means that while defaults are increasing, asset values are going up and adding more equity. In contrast to 2008, when prices were crashing, second mortgage and junior lien holders may only need to wait for first mortgage holders to push the process of foreclosure. Let them deal with the process and cost, and wait to get paid off in one lump sum. 

Buy Notes at Deep Discounts

Instead of exclusively working to add value and speculating on making a profit on the back end, make your money when you buy by acquiring these currently non-performing notes at a discount. Then you will have multiple exit strategies. You can even flip these notes and sell them as is to other investors, who will handle the workouts or fulfill the foreclosure process.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Image by Gino Crescoli from Pixabay