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CA BRE #01904379

NMLS/MLO #355855

Bond #92F388716F

How Re-Performing Trust Deeds Got That Way

Leading up to the Great Recession, banks and other lenders made risky home loans on real estate with little or no borrower equity. When borrowers couldn’t, or wouldn’t make their payments these loans went into default, which led to the crisis. Now banks and other lenders are selling those non-performing loans to private equity and hedge funds at huge discounts to the unpaid balances.


The lahedge funds buy these non-performing loans by the thousands for as little as fifteen cents on the dollar of the unpaid balance. They then re-sell them by the dozens to specialty real estate funds at maybe twenty-five cents on the dollar. Thanks to these heavily discounted prices the specialty real estate funds can negotiate with the homeowners/ borrowers to get these non-performing notes re-performing.


The specialty real estate funds review the borrower’s current financials and analyze the reason they defaulted. If they qualify, the specialty real estate fund will modify the defaulted loan to make the monthly payments affordable to the homeowner/borrower. They do this by lowering the interest rate, extending the term (number of payments), reducing the unpaid balance or a combination of the above. Once the loans are re-performing they become more valuable. At that point the specialty funds sell them to individual investors, like us, to earn attractive yields.


The result is a win-win-win situation. The homeowners/borrowers get to stay in their homes at payments they can afford, the individual investors like us get high returns on investments secured by real estate and the entire economy benefits because bad debts from the housing crisis are being resolved. However, it’s important to know this opportunity for the individual investor will not last forever.  As the backlog of non-performing notes from the housing crisis gets resolved, the business of buying and selling notes will eventually revert back to the domain of institutional investors.  That’s why this is the time for the individual investor looking for high returns on secured investments to act!

The information contained herein is for informational and educational purposes only and does not constitute an offer or solicitation to buy or subscribe for any securities, nor should it or any part of it form the basis of, or be relied on in any connection with, any contract or commitment whatsoever. The information herein does not constitute legal, accounting, tax or investment advice; such advice should be obtained from a competent professional authorized to provide such advice.