A. Banks
- Banks are glutted with hundreds of thousands of non-performing residential loans (NPL’s), representing billions of dollars
- Most NPL’s are underwater:
- Their collateral value is less than their outstanding balance
- Banks have already had to report a loss on their underwater NPL’s
- Foreclosure does not recoup that loss, but only salvages some liquidity
- Foreclosure is costly: loss of interest, litigation, bankruptcy, vacancy, management, vandalism, resale costs
- LANDCO is able to acquire underwater NPL’s at an agreed upon discount
- Banks can have immediate liquidity without having to foreclose
B. Borrowers
- Homeowners with an underwater mortgage are disadvantaged
- Home equity, their single greatest asset, is gone
- Their credit is at risk and they will likely lose the home itself
- LANDCO can help many of them reach a solution
- Avoid foreclosure
- Keep their home
- Refinance their mortgage
- Strengthen their credit
- Reduce their payments
- Rebuild equity
- Note: Some borrowers will be unable to qualify for a refinanced mortgage, and their homes will be rented and/or resold
C. Objectives
- Identify mortgages on qualified homes at imminent risk of foreclosure
- Capture a substantial built-in discount on each mortgage
- Earn a current yield, secured by deed of trust
- Share in future home appreciation
- Acquire mortgage assets within a 2-4 year window
D. Strategic Goals
- Offer a large-scale service and benefit to banks holding thousands of underwater NPL’s
- Offer an unusually safe and lucrative yield to institutional investors
- Provide a valuable service to thousands of borrowers by reducing their debt burden, and help them restore equity
- Whenever borrowers cannot qualify to restructure their debt, then offer good-quality homes to the public for rental and/or resale