2015 Bound to Be Slow for Note Buyers

As we enter 2015 it is worthy to note that the economy has recovered (while somewhat slowly) from the 2008 disaster we were in.  Real Estate values have revisited or exceeded the 2005-2006 peak prices in many areas of the country.  Here in Southern California, real estate values are at all time highs in most Cities.  Back in the day during the 1980′s and up to the mid 1990′s there were an abundance of seller-carryback loans.  Often ‘creative financing’ would take place upon the sale of a property.  In the mid 1990′s through 2005, it was so easy to obtain a bank loan that those seller-carryback loans all but disappeared.  Then from 2006 up until earlier this year there were many banks that wanted to sell their loans which were made between 2003-2007 or so and the market was flush with those bank loans to buy.  All during these times there were occasions whereby we and other mortgage companies would originate loans.  Borrowers that couldn’t or didn’t wish to obtain a loan through a bank would apply to an independent mortgage company for a loan and often we made those loans after underwriting them.

Now, on the last day of 2014, I can see that pretty much all of the bank loans that were being sold have done so and I don’t see the banks selling loans made in 2008, 09, 10, and on.  Those loans were made after the financial crisis and new banking regulations were in place.  Any of those loans today should be looking good for the banks and performing well.  Recently FNMA and FHA guidelines loosened and will allow borrowers to place just 3% cash down payment on a purchase of a home and the agencies will lend 97% of the valuation.  Also other guidelines have loosened recently making it easier to obtain bank financing.

There will always be some seller-carried loans, also there will always be some bank loan resales for one reason or another, however I don’t see a large amount of them in the future.  I do see loan originations to be active in the future, as well as loan brokerage, whereby we are a correspondent lender for institutional financing.   Happily, we will celebrate 36 years in this business in February and plan to roll with the changes taking place.  Being Diversified in the business isn’t just in our name, it is our business to be Diversified when the market shifts or changes with the times and conditions.

Happy New Year, may 2015 be prosperous, healthy and peaceful for all.

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