Welcome to the wild world of private citizens buying bad mortgages

Many who are self-taught by YouTube tutorials are tapping into the $135B market

TRD NATIONAL /
Nov.November 21, 2018 09:45 AM

(Credit: iStock)

Homeowners who had long stopped paying their mortgages are meeting a new type of debt collector: complete strangers who buy their mortgages, sometimes for as little as $1, and collect the remaining debt.

There is about $135 billion in unpaid mortgages on 800,000 nonperforming loans for single-family homes across the country, the majority of which originated in the lead up to the 2008 financial crisis, according to the Wall Street Journal.

This vast amount of unclaimed principal has prompted individuals, some of whom are self-taught by YouTube tutorials, to buy up mortgages and flip them into reperforming loans, or collect the remaining debt.

“Everybody and their brother is getting into the business,” Greg Paulus, a consultant for Chicago-based lender Urban Partnership Bank, told the Journal.

It’s risky — and hard — business. They’ll have to track down the borrowers, get them to pay and, in some cases, threaten foreclosure. If the borrower plays ball, they collect the debt or resell the mortgage. One Oregon-based mortgage buyer made $70,000 on a loan he purchased for a dollar. Another time, he lost $46,000 on a mortgage.

“You can do incredible returns in this business,” he told the Journal, “and you can lose your shirt, pants and everything else if you do it wrong.”

Wall Street is also getting in on the trend, with Goldman Sachs and Cerberus Capital both reportedly taking over delinquent loans. Citing market research by Fitch Ratings Inc., the outlet reported that investors resold over $15 billion of reperforming loans in residential mortgage-backed securities last year, three times that of 2016. [WSJ] — David Jeans 


Related Articles

arrow_forward_ios
Porch CEO Matt Ehrlichman (iStock; Porch)

Porch CEO: SPAC deal gives us $200M and a clean slate

Porch CEO: SPAC deal gives us $200M and a clean slate
Toni Morrison and her former Tribeca home (Getty, BHS)

Toni Morrison’s Tribeca loft hits the market

Toni Morrison’s Tribeca loft hits the market
198 Washington Park in Fort Greene (Photos via Compass)

Fort Greene townhouse, 30 feet wide, led Brooklyn luxury sales last week

Fort Greene townhouse, 30 feet wide, led Brooklyn luxury sales last week
(iStock)

Black homeowners pay $13K more for home loans: study

Black homeowners pay $13K more for home loans: study
24 Leonard Street Unit 2 and 443 Greenwich Street Unit 2G (Douglas Elliman, Compass, Google Maps)

‘Incredibly quick’: $19M Manhattan condo deal done in a weekend

‘Incredibly quick’: $19M Manhattan condo deal done in a weekend
The National Association of Home Builders Housing Market Index reached a record high for the second consecutive month in October 2020. (iStock)

Building up: Homebuilder confidence hits new highs

Building up: Homebuilder confidence hits new highs
Guo Wengui and the Sherry-Netherland penthouse at 781 Fifth Avenue (Photos via Wikipedia Commons; Getty Images and Douglas Elliman)

Ensconced in the penthouse and entangled in lawsuits

Ensconced in the penthouse and entangled in lawsuits
Kaufmann Desert House (Courtesy Coastal Luxury Living)

Neutra-designed “crown jewel” of Palm Springs lists for $25M

Neutra-designed “crown jewel” of Palm Springs lists for $25M
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...