We’ve all seen the headlines recently that banking institutions are over-leveraged on real estate notes. This means high-level executive management on bank revenue allocated to real estate-backed securities. In some cases, banks invested more than 80% of their liquidity in these notes. Therefore, the current market base for acquiring current and non-performing mortgages is expanding at an alarming rate.
The financial institutions and mortgage banks that originate these notes have begun to realize that selling both the earning and non-earning assets is preferable to holding them. Furthermore, due to recent market conditions, some of these financial institutions have been forced to liquidate their entire portfolios. This has created a huge disconnect between the market value of a real estate note and the amount a bank is willing to sell the note for. This creates a great opportunity for investors to come in with cash liquidity and purchase these notes at a deep discount.
Loan companies have exhausted their lines of credit due to the “subprime crisis.” Major sectors of the mortgage industry, especially subprime and loan lenders, have realized the need for these loans at greatly reduced rates.
Banks make money when customers deposit money at their bank. The bank will then invest a significant amount of that money in real estate notes secured by a deed of trust, also known as; mortgages Now the private sector has the opportunity to make the same investment that banks have done for years. Investors simply need to determine the current market value of the subject property through the broker’s price opinion, then bid on the note secured by the deed of trust.
For more information, go online and search for “investing in trust deeds” or “investing in real estate notes.”