BANKS ARE IN THE BUSINESS OF LENDING MONEY, NOT OWNING AND OPERATING REAL ESTATE. By selling the note rather than going through the expensive and sometimes drawn-out process of foreclosing, a bank stays out of the chain of title, doesn’t become liable for the property’s environmental conditions and doesn’t have to worry about the time—and expense—of other property management and ownership issues. Add in the cost and effort of marketing the property to potential buyers following the foreclosure and the numerous existing properties already being carried on their books, and you can see why banks were looking for an alternative to foreclosures. Selling its debt has provided that alternative avenue.

Once a bank adds up all the costs and time required to deal with foreclosing on numerous non-performing loans, simply selling the notes seems like the most cost effective, expeditious option.

A bank can sell and close on a non-performing loan sale in under a month. They’re able to refill their coffers and eliminate working-hours, legal fees, compliance costs, and months of effort.

PURCHASING NOTES PROVIDES THE OPPORTUNITY TO OBTAIN THE LOAN AND UNDERLYING PROPERTY AT A STEEP DISCOUNT from its initial price. This discount provides a high margin for potential profit on the note depending upon how we reposition the debt with the borrower and provides the borrower an opportunity to remain in their investment and avoid foreclosure.

As a result, the nonperforming note can be purchased at a discount, which can range, based on who’s selling the loan, from a 40% to 80% discount off the current market value or unpaid balance of the mortgage, whichever is less. This helps reduce the burden of the delinquent loan while providing much-needed liquidity to the seller.

When a note is owned in the private market, investors have more flexibility because of the discount they received when purchasing the note. In most cases, this results in better borrower outreach and adaptable loss-mitigation resolutions for both parties.