Private Lenders - Good Mortgage Gone Bad – Now What?

There is nothing worse than funding a deal that goes bad! If you are an FI who insures your deals you may have some solace knowing that you have that insurance in place – but there are still tons of lenders who don’t insure their deals simply because they can’t!

You know better than I that those more difficult deals where there are challenges with credit or income type generally don’t qualify for insurance and end up as equity deals that largely depend on the integrity of the asset, location and equity.

You may have done all you could – you may have had a conservative appraisal, lent on a low loan to value only to encounter a surprise later when a mortgage goes into default. This often occurs when there are changes in the marketplace impacting the value of a property – or in the case of second mortgages, the first goes into default and the first mortgage lender begins chewing up equity with whatever expenses they incur.

You likely have your standard procedure for dealing with defaulted mortgages – but this blog will shed insight into some technology that banks use, technology that is now available to even independent private mortgage lenders, that can be useful.

The first thing you want to do when a mortgage goes into default is check into the value and any encumbrances that may have been registered after your mortgage. A simple property search using a tool such as Purview For Lenders can achieve this by validating both value and registered encumbrances.

You can change your criteria to generate different models that show you the low to high end of the spectrum with respect to other properties in the area.

What’s more, you can even leverage an AVM (Automated Valuation Model) to identify trends in particular areas to be able to see where you have assets that may be experiencing a shift – good or bad. This could be a sign to solicit clients to borrow more – or a sign that on renewal, maybe this isn’t a good deal to have in your portfolio.

Shifts in markets and equity positioning are especially challenging for private lenders because when 1 year terms give you a chance to get out, annually, interest only payments mean that you are not seeing principal go down so a shift in values in a particular area can present considerable risk.

Want to be prepared when a good deal goes bad? Deploy the tools and technology available to you!! Purview For Lenders has those tools. Contact us today by calling 1.855.787.8439.