The market for distressed assets is attracting new private capital via note sales, ostensibly repackaged seriously delinquent mortgages. CoreLogic staffer Faith Schwartz explains how this innovative solution is bringing together public and private interests to fix America's "zombie" loan issue.
While the number of foreclosures is improving, there are still many properties 20%-30% underwater. Fannie Mae and Freddie Mac are taking a portion of these loans from services and packaging them into note sales which are being bought by hedge funds and non-profits.:
Private buyers have more options, and incentives, to work with borrowers. Because they are acquiring these assets at sizable discounts, allowing for flexibility, they can afford to write down lost principal and modify payments to keep borrowers in the property, and hopefully bring these assets back to re-performing status. And investors have an obligation to track borrowers and disposition after the sales, to keep the program on track to measure good outcomes.