Archive for April, 2012

Recent loans we were able to purchase…

Friday, April 20th, 2012

Recently we made 6 bank loan purchases. Bank loans are less often available to us, however when they do become available, as my dad used to tell me when I first started over 30 years ago in this business “make hay while the sun shines”, so we bought all of the loans that were attractive to us.
Bank loans have extensive paperwork associated with them. 6 very thick files of paperwork was a very time consuming job to accomplish. I was unable to post to our blog in March because we were so busy here, working 6-7 days a week to meet deadlines.
Now that the rush has settled down, I can tell you about it. Firstly banks sometimes sell performing loans off because the bank has a perceived risk. Sometimes the borrowers don’t provide their annual financials to the bank as required in their loan agreement. This makes bank regulators nervous. Also many borrowers contact their bank asking for a rate reduction or other concessions because they hear on the news that banks are making loan modifications and the borrowers feel entitled to something because their loan was made in 2008 or 2007 and the rate is a bit higher than what today’s rate would be. The bank is under no obligation to modify a loan, but has a hard time telling the borrower to perform to their contractual obligation for some reason. I guess the bank doesn’t want any bad public relations or have the “99 percent” protesters show up outside their corporate headquarters.
We buy almost exclusively multi-family and commercial loans from banks. Those loans are my favorite because when there are many tenants paying rent, it’s very easy to make the mortgage payment from those rents collected and even if you have a vacancy or two, the likelihood of the loan going bad is low. Of course the correct LTV, good credit of the borrower and location of the building is very important. But in general it has been my experience in my 33 years in the business that apartment building loans in almost never go into default. On the few occasions that we have had an apartment building 1st t.d. default, we have been able to take the building back and either resell it or set it up with a management company to run it while we wait for a better market to sell it.
Well, out of the 6 loans totaling over $4,000,000 5 of them were on apartment buildings here in So. Calif. The 6th one was on a commercial building here in Orange County. I’m glad to say that all 6 that we purchased are solid loans, all the payments are in for April and we still have plenty of funds available to buy private party loans.
If you have a loan that you would like to get a quote on, please feel free to give us a call or click on “get a quote” on our website.