Strategic Opportunity: Distressed Mortgages

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