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Mortgage Defaults

By Stephanie Mojica

With an unprecedented national and global economic crisis, real estate industry experts have varying opinions on how the situation will affect mortgage defaults.

group-2822423_1280“The pandemic-induced closure of non-essential businesses caused the April unemployment rate to spike to its highest level in 80 years and will lead to a rise in delinquency and foreclosure,” Frank Nothaft, chief economist at CoreLogic in Orange County, Calif., said in a press release.

“By the second half of 2021, we estimate a fourfold increase in the serious delinquency rate, barring additional policy efforts to assist borrowers in financial distress.”

Paul Cooper is manager of the Kansas-based Totes of Notes. The company buys and sells distressed real estate debt throughout the United States. In a recent email interview with Realty411, Cooper said mortgage defaults have significantly increased.

“In fact, April 2020 had the highest rate of mortgage defaults for any given month on record,” Cooper said. “It took the last recession a long time to hit its peak, which was lower than this April.”

chart-5061484_1280Cooper added that many of his real estate notes have not been paying regularly for the last few months.

“It’s going to get much, much worse before it gets better,” Cooper said.

However, Jay Tenenbaum, founder and president of the Arizona-based Capital Development of Scottsdale Rei, LLC said in a recent email interview that mortgage defaults are not on the rise. His company is a private equity real estate investment firm that specializes in acquiring assets nationwide.

“Based upon information and articles I have read, mortgage defaults are not on the rise — at least not yet,” Tenenbaum said. “The multitude of mortgage forbearance relief, has, at least for now, prevented the dramatic increase in defaults that we saw in 2008.”

While Tenenbaum emphasized that he does not wish to downplay the economic and social impacts COVID-19 has had on the country, he said there are people taking advantage of government programs to the detriment of real estate investors.

“The local, state and federal programs are/were necessary,” Tenenbaum added. “Having said that, these programs, etc. allowed many others to take advantage. We have all heard stories of furloughed employees who’d rather collect unemployment than go back to work.

“With regard to the issue of mortgage defaults, the federal/state forbearance programs were intended to minimize the risk of foreclosure, i.e. avoid a repeat of 2008, etc.

“Yet, a recent article stated that only 5% of those receiving mortgage forbearance relief did not have sufficient income to make their mortgage payments. Conversely, 95% of homeowners who were approved for forbearance relief can make their mortgage payments.”

percent-226314_1280Fuquan Bilal, CEO and founder of NNG Capital Fund of New Jersey, echoed similar sentiments.

“A lot of people, even if they didn’t suffer from COVID, still took advantage of not paying the mortgage or going into some type of deferral program,” Bilal said. “And then there were people who were genuinely affected by it. So, you have a mixture of that.

“Plus, people who are not working — even though they’re collecting unemployment, some people are still going to try to opt to see what programs the banks have and/or push the banks to see what they can get out of them.

“We saw the same thing happen with loan mods. When the market crashed, a lot of people strategically defaulted. So, you have a lot of strategic defaults that are happening.”

What does all this economic chaos, whether intentional or unintentional on the part of borrowers, mean for real estate investors?

“If you’re looking to buy distressed real estate notes, then all this is music to your ears,” Cooper said. “Because this means there will be plenty of inventory for non-performing note investors.

“You could also look at offering loans to people that are out of work. This would be riskier, but you could charge higher interest rates.”

According to Cooper, opportunities will also increase in the coming months and years for tax lien/deed/certificate investors as well as those interested in short sales and foreclosure deals.

banner-1165975_1280However, Cooper emphasized caution — especially during a global economic crisis.

“If you’re looking to invest, then I’d sit on cash until really good deals come around.

“If you don’t know what you’re doing, then I’d spend a lot of time trying to find somebody you can trust that you can invest with and learn from. More fortunes are made during bear markets than bull markets. You need to know how to protect yourself and take advantage of the situation.

“Be careful shelling out big dollars for an investing or real estate education. There are all kinds of con men coming out of the woodwork who have only done a handful of deals and only know how to sell you a course.

“Most successful investors are happy to teach you the game if you get in a deal or partner with them. It’s a good way to earn and learn. This way if you don’t understand the investment or like it, then you have a professional to handle it for you.”

Tenenbaum noted that when mortgages default, it creates a buyer’s market because of the increased supply of available inventory.

“Investors are nimbler and more equipped to obtain access to distressed homeowners and seek to acquire such properties. Also, in a distressed market, acquisition price is at a greater discount, thereby allowing investors to achieve greater profits.

“Last, banks and hedge funds are motivated to sell their assets as maintaining non-performing assets on their books puts their balance sheet and lending capabilities at increased risk.”

bad-19907_1280According to Bilal, unemployment is the number one indicator of an abundance of opportunity for note investors. However, he believes opportunities are scarcer now than they will be in the coming months.

“I believe that the banks really don’t want to take a position of foreclosing on people,” Bilal explained. “So, they are going to try to work it out; they are going to try to come up with modification programs.

“We’re seeing some of the defaults now, but I believe we’ll start to see some of the foreclosure activity maybe nine months to a year from now. They (the lenders) will probably run them (the borrowers) through a process to try to work it out, and if they’re not able to work it out they’ll start the foreclosure process.”

Cooper echoed similar sentiments about long-term plans paying off better for investors.

“The next 6 to 12 months could be rough as far as seeing good returns,” Cooper said. “However, there are good deals that are currently available that will pay off within a year or so. So, make sure to get a good price when you buy and patiently work through the investment.

“If you need money within the next 90 days, then you need a job not an investment.”

VA and FHA Mortgages & the Housing Boom (Part 2)

Military Experience Eligibility for VA Loans

How does a retired or active military personnel member qualify for a VA loan based upon their military experience?

table

* An earlier discharge date for a service-connected disability may still qualify you.
** Officers who separated from service after 10/16/81 may be eligible.

For more details, please visit The U.S. Department of Veteran Affairs’ website to learn about VA mortgage loan eligibility benefits:
https://www.va.gov/housing-assistance/home-loans/eligibility/

Once an active or retired military person meets the minimum qualifying guidelines, he or she will be given a Certificate of Eligibility that’s issued by the Department of Veteran Affairs. The VA mortgage loan applicant will then send a copy of the VA Certificate of Eligibility (VA Form 26-1880) to their mortgage broker or banker. For VA loan applicants who do not have a copy, they may complete a form entitled Request for a Certificate of Eligibility (Fillable) that’s linked here:
https://www.vba.va.gov/pubs/forms/VBA-26-1880-ARE.pdf

The Evolution of VA and FHA Loans

veterans-day-4653841_1280Near the end of World War II, the VA home loan program was created in 1944 as part of the original Servicemen’s Readjustment Act that’s also referred to as the GI Bill of Rights. The VA loan benefits were signed into law by President Franklin D. Roosevelt. A portion of each funded VA mortgage loan was guaranteed by the federal government in the event that the VA borrower later defaulted on the loan and lost the home in foreclosure. This way, each bank that funded the 100% loan for qualifying VA borrowers had much less financial risk.

Specifically, there were two types of government-backed or insured mortgage loans that stimulated the housing market and helped the U.S. economy prosper and rise up out of the previous negative Great Depression (1929 – 1939) years – VA and FHA (Federal Housing Administration) loans. These more flexible residential mortgage loans were part of President Roosevelt’s New Deal plan and the National Housing Act of 1934 that were designed to create more jobs and boost home values and the economy once again.

Since 1934, FHA has insured over 34 million home mortgages nationwide. As per the U.S. Department of Housing and Urban Development (HUD), FHA has active insurance on over 8 million single-family mortgages. In total for both residential and commercial real estate properties, FHA’s insurance portfolio exceeds $1.3 trillion.

To learn more about the Federal Housing Administration (FHA), please visit HUD’s website:
https://www.hud.gov/program_offices/housing/fhahistory#:~:text=Congress%20created%20the%20Federal%20Housing,workers%20had%20lost%20their%20jobs.

VA and FHA Loans for Buyers, Sellers, and Owners

calculator-723925_1280The main difference between FHA and VA is that the government insures a portion of the FHA loan while guaranteeing a portion of a funded VA loan. The vast majority of home loans funded nationwide over the past 10 years, directly or indirectly, were either government-backed (VA) or insured (FHA) and/or purchased in the secondary markets by other government-sponsored or federal entities named Fannie Mae, Freddie Mac, or Ginnie Mae.

FHA loans allow borrowers to qualify with 3.5% down on average (96.5% LTV) with lower FICO credit score options near 580 and easier overall underwriting allowances. FHA also allows seller credits and gifts from family members toward down payments that can effectively make a purchase loan become near 100% LTV also. However, borrowers will have to pay an additional monthly insurance premium along with their mortgage payment that can reach a few hundred dollars per month, depending upon the borrower’s FICO credit score, loan amount, debt-to-income (DTI) ratios, and LTV (loan-to-value). There are more flexible FHA Streamline refinance programs available as well that are similar to the VA Streamline.

For qualified VA borrowers, there is perhaps no better mortgage loan option available while FHA loans might be the second best option for high LTV loans. This is especially true as 30-year fixed mortgage rates continue to hover at or near all-time record lows while making many mortgage payments more affordable than rent even when the home is financed up to 100% of the purchase price.

To date, VA and FHA have guaranteed or insured over 58 million mortgages for homeowners. Home sellers should welcome any VA or FHA buyer prospect who has a pre-approval letter from a mortgage lender. This is because the lender is prepared to provide up to 96.5% LTV for FHA or up to 100% LTV for a VA loan. Amazingly, both FHA and VA loans can close in a few weeks or less due to expedited online application processing options.


 

Rick-Tobin-Professional-Pic-sharperRick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at RealLoans.com for more details.

VA and FHA Mortgages & the Housing Boom (Part 1)

By Rick Tobin

The most flexible and easiest qualifying mortgage loan product in America is the VA (US Department of Veteran Affairs) mortgage loan. Between 1944 and 1966, approximately 20% of all single-family homes built or purchased were financed by the VA home loan program for active military or retired veterans of World War II (1939 – 1945) or the Korean War (1950 – 1953). From 1944 through 1993, the VA mortgage loan program guaranteed almost 14 million home loans. By 2013, the VA had guaranteed over 20 million loans. As of 2019 in the VA’s 75th anniversary year, VA had surpassed 24 million loan guarantees for borrowers.

investment-4737118_1280Did you know that there are 100% LTV (loan-to-value) mortgage loans available to qualifying active or retired military personnel up to $1.5 million dollars for owner-occupied homes as of 2020? Yes, a qualifying VA mortgage applicant has the option to purchase a home priced as high as $1.5 million with no money down. These 100% LTV loans have no additional monthly mortgage insurance payment requirements like required for most other mortgages with a loan-to-value range above 80% of the purchase price or appraised value.

VA Loan Guidelines

Purchase

Mortgage loan underwriting guidelines are subject to change and may have some exception allowances for mortgage borrower applicants due to factors such as credit scores, income, job history, debt-to-income ratios, and property types. However, these are common VA loan terms or guidelines that were available as of June 2020:

  • No money down up to $1.5 million for owner-occupied borrowers (not second homes or investment properties)
  • Historically, a debt-to-income ratio of up to 41% DTI* was typical for VA borrowers. However, some VA loan programs allow up to 60% DTI or higher
  • No monthly mortgage insurance premium requirements
  • FICO credit scores as low as 620

* Debt-to-income ratio (DTI) = Borrower’s proposed mortgage payment plus monthly consumer debt obligations that are divided by monthly income. A borrower with $2,500 in monthly debt payments and $5,000 in monthly gross income (before taxes) will have a 50% debt-to-income ratio ($2,500 / $5,000 = 50%).

VA Loan Refinance

percent-226357_1280For existing VA mortgage borrowers under newer 2020 rules, VA borrowers can pull cash out of their property up to 100% of their property value. For example, a homeowner with an existing $250,000 mortgage loan secured by a property valued at $500,000 could apply for a new $500,000 cash-out loan that gets them upwards of $250,000 additional cash-out that they could use to pay off credit cards, student loans, automobile loans, business debts, or use the funds to make new property or stock investments.

A mortgage borrower in a non-VA loan can refinance from a conventional bank loan or an FHA loan with costly monthly insurance premium (MIP) payments into a new VA loan if one or more of the borrowers has VA eligibility.

Another easier qualifying VA refinance loan option is generally referred to as a “VA Streamline” (IRRRL – Interest Rate Reduction Refinance Loan). With some non-credit qualifying VA Streamline loan programs (subject to change), the borrower’s application process includes:

  • No minimum credit score
  • No appraisal required
  • Primary and non-owner occupied properties may be allowed
  • Must be current on existing mortgage loan about to be paid off
  • Manufactured homes attached to the foundation may be eligible

To learn more details about qualifying for VA refinance loans, here is a link to VA Pamphlet 26-7, Revised, Chapter 6: Refinancing Loans

https://www.benefits.va.gov/WARMS/docs/admin26/pamphlet/pam26_7/Chg_17_ch_5.pdf


 

Rick-Tobin-Professional-Pic-sharperRick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at RealLoans.com for more details.

Junior Liens Who Choose to Foreclose

By Edward Brown

Many lenders opt to only fund first mortgages because they believe that second mortgages are too risky, but is that always the case? Not always. Not all second mortgages are equal.

Many private lenders may choose to fund a junior lien where the first mortgage is relatively small in comparison to the second. For example, a $200,000 second behind a first of only $40,000 on a property worth $500,000 would be an attractive loan to fund for many lenders, especially if they can command a higher interest rate due to the fact that the loan is in second position. However, if there is a foreclosure in the future, the second will somehow have to deal with the first mortgage. This can be troublesome if the first is very large; especially if the second is relatively small in comparison to the first. Why?

In looking at a foreclosure, a lender has to strategize. In the case of the second mortgage, it is imperative that the first does not foreclose out the second as there is usually nothing left over from the foreclosure to pay the second. In California, the foreclosing party gets to “credit bid” its loan. This means that it can simply bid [at the auction/trustee sale] what it is owed. Non foreclosing parties need to come up with cashier’s checks in order to bid. This can be a potential hardship for the second mortgage if the first is the foreclosing party.

For example, if we look at a situation where the property has a value of $1,400,000, the first is $800,000 and the second is $200,000 and the first is the foreclosing party, the first would most likely credit bid its entire $800,000 [it does have the right to bid less than what it is owed, but, if the value is reasonably higher than what is owed to the first, it will normally credit bid what it is entirely owed. The times where the lender bids lower than its entire principal balance is when the lender does not want to own the property and is willing to take a loss just to get the loan off of its books, or the value of the property does not substantially exceed the balance of the first mortgage].

Any bidder at the auction/trustee sale would need to come up with $800,000 at the auction itself or more should any bid exceed $800,000 if the bidder wants to be the highest bidder. In this instance [where the first mortgage is the foreclosing party], the second is not allowed to credit bid its $200,000 balance. It would need to come up with the $800,000 to pay off the first and its $200,000 second mortgage in order to be made whole. True, the second would just get its $200,000 back because that is what it is owed, but, unfortunately, in this case, since it was not the foreclosing party, it has to come up with cash just as any other bidder. Only the foreclosing party is allowed to credit bid.

For this reason, it is important for the second to have a strategy in place. The second wants to be the foreclosing party in most instances, driving the bus, so to speak. Borrowers usually go into default for two main reasons. First, they stop making payments to the lender. Second, the lender’s loan is due, and the borrower has not refinanced or sold the property. In the case where payments have not been paid, junior lien holders have the right to “cure” the first. One can usually do that simply by making the payments to the first. Since foreclosure in California normally takes three months and 21 days, one strategy is for the second to cure the first and start its own foreclosure.

However, this may be cost prohibitive, especially if the first is large and the arrearages on the first are a few months. When the first files for foreclosure, junior lien holders are to be notified. This gives them notice, so they can have the opportunity to cure the first. The second then files its own foreclosure [either because the borrower has probably also not made payments to the second mortgage or because most loan documents state that if a borrower is in default on any mortgage associated with the property, its loan is also in default whether or not the borrower has kept the second current with payments].

One strategy for the second lien holder is to cure the first as soon as possible to allow the second to be the foreclosing party. That way, the second would be allowed to credit bid its loan, but would not eliminate the first; it would have to take the property subject to the first and have to deal with them post foreclosure. However, what happens in the case where the second pays just enough to get the first to stop its foreclosure for the time being, the second starts its own foreclosure, and then does not any more payments to the first and allow the first to start its own foreclosure?

Let’s look at an example and see how this might play out; in our previous example, the property was worth $1,400,000, the first was $800,000, and the second was $200,000. Let’s presume that the borrower stopped making payments on both the first and second mortgages. Both loans have a maturity date five years in the future. If the first files foreclosure, the second could cure the first by making only one mortgage payment to them. Now it is true that most lenders will not immediately file a notice of default after 30 days, but the point here is for the second to make the first mortgage cancel or delay [even temporarily] its foreclosure, so the second mortgage can start its own foreclosure for two main reasons; it puts the second in a situation where in the first does not foreclose out the second, and it allows the second to credit bid its loan at the time of the trustee sale.

Now it is true that, if the second does not make any more payments to the first [other than the one to get the first to stop its foreclosure], the first may start a foreclosure again, but, the first’s foreclosure will be after the second mortgage has completed its foreclosure, buying time for the second to deal with the first [or sell or refinance the property] if the second is ultimately the high bidder at auction. If another bidder outbids the second, the first would get paid, the second would get paid, and the owner [borrower who defaulted] would pocket the difference.

If there is enough equity in the property, either the property will receive a high enough bid to pay off all of the liens, or the second [the foreclosing party in our example] should be able to flip the property fairly quickly or decide to keep the property, as they would be the new owner. If they choose not sell the property, they should very quickly discuss with the first some sort of agreement to either refinance [a new loan to the second who is now the owner] or make payments for a period that will allow time for a new lender. The above information is for discussion purposes only and, as always, one is advised to discuss real estate related issues with a qualified real estate attorney prior to any legal action.


Edward Brown

Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company. Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.

BUILDING WEALTH IN REAL ESTATE: HOW LONG DOES IT TAKE?

By Glenn Mananeng

This is a question on the mind of investors. There is no definite answer for this. This topic is always up to debate no matter how you look at it, as wealth is measured differently by every individual. Here are a few factors you need to know when building wealth – allow us here at Unique Wealth Education to teach you some important pointers to consider:

#1 Wholesaling

This is the easiest point of entry for the majority of the investors, as it requires the least amount of capital. You find a seller who wants to put their property for sale and find a buyer for that property on “as is” condition without the fixing part to try and get the market value higher. After the property has been sold, you’ll get a cut on the sale. Basically you are the intermediary that builds a buyers list to locate undervalued properties using a multi-pronged approach. This relies heavily on how good and how broad your real estate network is.

#2 Fix and flip

You don’t have to be an avid real estate investor to know what fix and flip is. Anyone who has cable and passed by HGTV has a basic idea of what it is. You buy a house below the average market value, renovate it, sell them for a profit! This is one of the most widely used real estate investment strategies used around the county.

Keys to fix and flip investing success:

· Preparing yourself by understanding how to locate undermarket valued properties in the right locations
· Understand values (make sure you are comparing apples to apples and going with the highest comp when doing our due diligence as a conservative approach)
· Aligning yourself with multiple capable and competitively priced renovation contractors to not only give you a bid prior to purchasing the home, but also to deliver as agreed on
· Understanding how far to go with finishes and layout changes to keep within the budget and comps in the area
· Stay away from potential losers such as foundation issues and bad layouts
· Having a sales strategy in place prior to the purchase that accounts for commissions, closing costs, holding costs, etc…
Contrary to “reality” real estate shows, getting rich doesn’t happen overnight. The longer it takes to flip the property, the more expenses you would incur for maintaining it while waiting for a buyer. Working with getting coached by or partnering with a seasoned investor is a huge advantage, as you learn best practices and pitfalls to avoid, which only years of experience can provide.

#3 Rentals

Mortgage Paydown

Let’s use a rental property as an example. In a normal scenario, you have a tenant who is essentially paying the rent in exchange for living privileges. If you bought the rental property with a mortgage, your loan will eventually cancel itself out over time. Why? The rent you receive from your tenant is basically used to pay the loan, which is increasing your equity in the property. The money left over is your cash flow divided by the amount you put down to come up with your CAP rate. This is a GREAT way to build long term wealth.

Cash Flow

We can all agree that this is very important. For those who are new in the game, cash flow is basically the income you get from your investment property (usually rental properties). This is a major factor in generating a high return for your investments and savings. Once you increase cash flow by accumulating properties, this allows you to plan your income and determine the course of future investments.

Taxes

If taken into account optimistically, you’ll see a lot of tax benefits when it comes to real estate investments. Consult your CPA to see how you can depreciate properties that you are holding onto for rental income and also discuss with them acceleration methods used to front load depreciation to give you more capital to buy more and keep building your portfolio.

The answer to how long it’s going to take, as you might’ve guessed already, is up to you. Your real estate skillset, determination, experience, and risk management are major players in this ballgame. it’s all about how smart you invest in the industry. If you make due diligence and play your cards right, you’ll one day realize that you’ve gained a considerable amount of wealth already. Unique Wealth Education can help you in your real estate career in helping you avoid common mistakes & pitfalls, is something that we take to heart very seriously. Contact us at(734) 224-5454 or email us at [email protected]to learn more.

Where The Mortgage Notes Are Now

By Fuquan Bilal

Where are the mortgage notes for investors now?

The last few years saw some compression of yields and increased challenges in finding profitable notes and attractive returns for investors. There are deals out there, and there could be many more coming up, if you know where to look.

Biggest Multifamily Servicers

Multifamily loan originations have been setting new records over the past few years. For those seeking to tap into bulk pools of notes, these are the largest commercial loan services in the multifamily space now.

  1. Wells Fargo $682B
  2. PNC $655B
  3. Keybank $273B
  4. Berkadia $268B
  5. CBRE $208B

New York

Every real estate market in America is unique. Each is at its own phase in the larger cycle and has its own dynamics. New York unfortunately, appears to have fallen over a cliff into a new mess.

In the long run people from all over the world will always want to live in NY. Yet, whether it is crazy new mansion taxes, transfer taxes, sky high and rising property taxes, and taking away tax breaks, or overbuilding and lack of fit for the market, certain segments of the Empire State’s real estate market seem to be in free fall mode.

Retail vacancies are turning once popular shopping strips into apocalyptic looking ghost towns. 25% or more of new condos built since 2013 still aren’t sold. Median residential sales prices have fallen 17% year over year.

Some very big dealmakers have recently lost properties worth tens of millions of dollars to foreclosure. There may be more individuals who decide it is easier to walk away than to stomach owing far more on their homes than they are worth. So, from commercial mortgage notes to residential ones, there is plenty of opportunity to grab assets and debt at a discount.

Hot Flipping Cities

Watch the cities which have been among the hottest for flipping houses over the past few years. In some cases property prices tripled since 2008, with modest homes going from $50k to being flipped for $150k. There may be some substantial roll back in those prices coming. Those stuck with inventory may present prime opportunities for acquiring the property or debt at a discount.

Many new investors have tried to jump on the house flipping bandwagon inspired by ‘reality’ TV shows. Most new investors struggle with the big learning curve, and make way less than expected. They don’t have the expertise, teams, and systems to do it efficiently and are getting stuck. There will be plenty of private money loans up for sale that are backed by these properties.

The economy we live in is changing rapidly too. We are going through one of the most massive shifts in history. 80% of jobs are changing. Many property owners and buyers have over leveraged themselves in the past few years, and have been relying on outdated industries and jobs to pay the bills. Those who don’t adapt fast enough will lose their homes, unless they are fortunate enough for a new note holder to come along and provide a reasonable and attractive workout.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund


Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.

Can You Micro Flip Mortgage Notes?

By Fuquan Bilal

There’s a lot of talk about micro-flipping real estate out there. But can you micro-flip mortgage notes?

The Micro-Flipping Craze

If you’ve Googled anything to do with real estate lately, you’ve probably been inundated with ads for micro-flipping. Almost every podcast, email and social post out there is talking about the same micro-flipping stories.

It’s a great twist of phrase on a very old strategy. Some people have been doing extremely well at it for years. So, what is it? What are the pros and cons? Can you apply it to notes instead? If so, why should you?

What Is Micro-Flipping?

Micro-flipping is the new term for wholesaling real estate. Wholesaling means buying or contracting to buy a property, and then assigning your contract or flipping it as-is, without doing any rehab work. If you have a good buyers list and connections, or can do this effectively online, you can be in, out and paid fast. It’s a high volume sport.

This has been made a lot easier thanks to all the access to data and software and online platforms we have today.

This form of real estate investing is made to sound super easy. That may be luring in a lot of people who think it is a lot easier than it really is. Not everyone is going to get the results they were sold on. Some will find it the easiest and fastest money they’ve ever made.

The real con of this strategy is that everyone is being sold on trying it. At least tens of thousands of people are sold on using the same software, data and marketing to do this. So, what you get is a lot of people bidding on the same deals, trying to sell them to the same buyers, and engaging in long broker chains. You don’t make money when you are running with the herd.

How To Flip Mortgage Notes

So, what if you could apply the same benefits of micro-flipping houses to the less crowded mortgage note space?

There are at least four ways to try this:

  1. Acquire individual mortgage notes and flip them as-is for a reasonable markup
  2. Buy pools of mortgage notes at deeper discounts than others can, and sell the individuals notes for more
  3. Acquire non-performing loan notes, work them out, resell them as more valuable reperforming notes
  4. Use non-performing notes as an avenue to acquire the collateral property and wholesale that to all of these new micro-flippers

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund


Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.

Mortgage Free Real Estate

Matthew Pillmore

Disclaimer: I am not a lawyer or an accountant. Nothing here should be construed as professional advice. I suggest that you always retain the services of a competent professional to provide advice on your transactions.

If you have a loan on your primary residence and/or rentals, you may have considered whether it would be worthwhile to pay it off ahead of schedule. And if so, you’re not alone.

The debate over whether to prepay your mortgage is perpetual in the personal finance world.

Pay Off Your Mortgage or Invest? The Math Says…

On one side, some experts argue you should NOT prepay your mortgage if you are locked in at a low interest rate. Their reasoning: You would be better off INVESTING your money where a reasonably diversified stock portfolio can expect to earn at a higher rate of return on average over the long run.

Add in the home mortgage interest deduction you can take on your federal taxes and, they say, you would be silly to prepay your mortgage and miss out on those perks.

To this group, the question is just about math. After all, why would you prepay a loan at 3% or 4% and lose out on part of a valuable tax deduction when you could invest that money instead and earn considerably more?

But There’s a VERY Important Side to Prepaying Your Mortgage, Too

Still, there are plenty of experts who forge ahead with their mortgage prepayment plans. My parents (including a CPA father) fell squarely in that category. Instead of taking the standard 30 years to pay off their mortgage, they paid it off in well under 10 years.

Ask him if he cares about the tax deduction they missed out on, and he’ll probably look at you like a crazy person. Why? Because the decision to prepay was never JUST about the math to them; it was about their financial freedom. And math aside, they have never regretted their decision to pay off their home and become entirely debt-free.

Most people agree with that sentiment, eventually. Most, just don’t like debt. It’s as simple as that.

But others prefer a deeper analysis.

Analyzing the Pros and Cons

For starters, let’s take a look at what the home mortgage interest deduction really means.

The easiest way to figure out your home mortgage interest deduction is to look at your effective tax rate. Say your overall tax rate is 22%, for example. On average, the home mortgage interest deduction reduces your taxes by $22 for every $100 you pay in mortgage interest.

That’s a nice perk, but there’s a caveat. Your home mortgage interest deduction is only valid for the amount you deduct over and above the standard deduction, which is available to taxpayers who don’t itemize their returns. The standard deduction for married spouses filing jointly was $12,400 in 2014.

So what does that mean? Simply put, if you don’t itemize your taxes, your home mortgage interest deduction is worth nothing. And even if you do, it’s only worth what it helps you save over the standard deduction that anyone can take. In many cases, this drastically reduces the value of the home mortgage interest deduction to the point where it’s barely worth considering.

But what about those lost investing returns? When you ask people whether or not they prepay their mortgage and why, you’ll find plenty of skeptics who balk at the idea of carrying long-term debt in favor of investing their extra dollars in the stock market. And when it comes to who is “wrong” or “right,” there are several ways to look at it.

The interest you save by prepaying your mortgage is a “sure thing.” Many people are happy prepaying and banking the extra money they save on interest, even if it’s less than they may have earned by investing their extra dollars instead.

A Balanced Approach

As someone who loves leverage but despises (ALL) debt, I see both sides of the issue. And that’s why I personally take (and teach) others to consider a balanced approach.

My only debt includes what is used to advance the assets and income growth of my plan, but is paid back strategically to $0 as quickly and safely as possible. I don’t see the reason to choose between investing extra money OR prepaying my mortgages, so I rely on Debt Weapons™ to do both faster.

What About Debt Weapons™??

Debt Weapons™ are tools that allow any consumer to achieve 1 or more of 7 highly financially beneficial purposes.

1) Maximize Cash Flow
2) Compress Amortization Schedules
3) Replace Inadequate Bank Accounts
4) Invest More Quickly & Safely
5) Minimize Total Interest Costs
6) Enhance & Protect FICO® Credit Scores
7) Quickly Increase Financial Safety and Emergency Reserves

To be clear, VIP Financial Education does not provide or offer Debt Weapons™.

We do the research for our Coaching Members in order to help them decide where to go to get the right Debt Weapons™, at the right time, to accelerate their unique goals.

Just like exercise equipment can injure you when used incorrectly, Debt Weapons™ can also be quite harmful if you access the wrong one or use the right one the wrong way.

Applying for any Debt Weapon™ without knowing the proper questions to ask, can lead to several negative consequences. For example, credit scores can rapidly decline, you could access the wrong Debt Weapon™ for your intended purpose leading to unforeseeable costs and terms, possibly delaying your goals even further.

That seems like a good compromise to me. Still, there is nothing wrong with taking sides on this issue.

When you hate debt, you want to put it behind you once and for all, and that’s understandable. But it’s also understandable for someone to make their decision based solely on the numbers. After all, it’s hard to argue with math. At the end of the day, we all have to do what is best for our families – and what helps us sleep best at night.

So, should you pay off your mortgage quickly? It is, and always has been, up to you, yet by joining us at the upcoming event with Realty 411 you will learn how YOU too can rely on Debt Weapons™ to take a more advanced approach and achieve BOTH simultaneously, far more quickly.   

 

Matthew Pillmore
President
VIP Financial Education

7 Personal Finance Questions to Ask Yourself Before Getting a Mortgage

By Dr. Teresa R. Martin, Esq.

Are you ready for a mortgage? It’s a big step that requires careful planning. A mortgage will affect your financial future for years to come.

Before you sign that mortgage, consider these finance questions:

  1. What is your credit score? Credit scores affect mortgage rates.
  • Before buying a house, check your credit score. Should you raise your score to get a better interest rate? In general, high scores with no late payments during the last three years are enough to get good rates.
  1. Are you capable of handling maintenance costs? It’s important to consider the cost of maintenance before buying a house.
  • The mortgage is only one part of the total cost of owning a house. Maintenance is another important piece. Will you be able to pay for a new roof or air conditioning system when the current ones wear out?
  • Does your monthly budget include enough savings for maintenance?
  • It’s also important to consider DIY projects and hiring others to complete tasks. House maintenance can involve expensive and ongoing projects. Are you ready to pay for these costs?
  1. How secure is your job? Before signing a loan, evaluate your job security. Will the work last? How will you handle changes?

  • Evaluating your job future is part of planning for a home purchase.
  • Consider emergency funds and savings in your plan. If your job situation changes, will you be able to continue making monthly mortgage payments?
  1. Do you have the necessary financial paperwork? Mortgage applications require a great amount of paperwork. Lenders can ask for old tax statements, check stubs, savings account statements, and other information.
  • If you have a high credit score, you may get a no documentation loan.
  • It’s rare to get a no documentation loan, so it’s better to be prepared by checking your files and collecting the financial papers you may need.
  1. Did you calculate the hidden expenses of owning a home? Home ownership comes with multiple expenses that go beyond appraisal fees, property taxes, mortgage closing costs, and insurance.

  • One of the hidden expenses of moving to a home is more bills. If you’re used to renting, then home ownership can change your monthly bills by adding new ones. You’ll add trash collection, water, recycling and sewage in most locations to the expense list.
  • Home insurance is higher than renter’s insurance. In addition, older homes cost more.
  • Homeowners’ association fees are becoming more common in neighborhoods. You may be aware of condominium association fees, but are you ready to pay homeowners’ fees?
  1. Do you have an emergency fund? Emergencies can vary from broken dryers to flooded patios, so you need to be ready for anything. Is your emergency fund big enough to handle common, unplanned expenses?
  • Emergency funds are a better option than credit cards or loans. Putting enough money aside can help you avoid new debt.

  1. Are you applying for other credit? Mortgage lenders can see applications for other types of loans on your credit report.
  • Applying for other types of credit while trying to get a mortgage can hurt your loan. Mortgage companies view these applications as risks, so it’s better to wait before trying to get another credit card.
  • Applications for new credit lower your credit score and affect interest rates.

A mortgage is a responsibility that affects multiple areas of your financial life. Before you buy a house, consider how your current financial situation will be affected and plan for emergencies.


Dr. Teresa R. Martin, Esq.

Dr. Teresa R. Martin, Esq. is the founder of Real Estate Investors Association of NYC (REIA NYC). REIA NYC (www.reianyc.org) is a premier real estate investment association serving the New York City marketplace. Its primary focus and mission is “helping our members build, preserve, and harvest multi-generational wealth” in the areas of real estate investments, business ownership and personal development.

 

A New Era Of Zero Interest Rates?

By Fuquan Bilal

We could soon be in a new era of zero interest rates. What will it mean for investors, the markets and you?

Could We Have Negative Interest Rates?

The president has been pushing for lower interest rates. We could even potentially see zero rates and even negative interest rates. The fed already recently cut key rates, and more reductions could come in 2020. This may sound crazy at first, but it has been done around the globe at various times and has worked.

While everyone enjoyed pointing fingers at different parties in the wake of 2008, one of the biggest factors that actually caused the crash was rising interest rates. If they get it right this time, lowering rates could help the economy remain afloat and avoid falling into the abyss again.

The Impact

The most widespread outcome of this is it costing people to have money in the bank. It probably already does when you add up all the fees and charges. Yet, when banks start charging every interest for having money on deposit, there is going to be a massive need to find somewhere else to park money and invest it. Real estate is of course a nice solid alternative. Cutting out the banks as the middleman and directly investing in mortgage notes and funds can also be a smart way to turn those losses into net gains.

Negative interest rates also mean it will cost banks and lenders to make loans. The negative interest is applied to paying down your outstanding balance each month. There are other ways lenders can make up for this money, but clearly they will be pickier about who they loan to.

Perhaps most significantly for investors, a new period of mortgage originations with near zero or negative rates means soaring appeal and demand for older higher rate notes, including nonperforming and re-perfoming loan notes. 8% and even 4% notes will become far more valuable.

Those who acquire those assets early stand to win big as this unfolds.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

 


Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.