Bulk REO, NPN & CMO...
What it is and how to buy it.
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Let's not EVEN get into why institutions have ceased ALL release of bulk REO portfolios - just know because of TARP, the motivation of institutions to liquidate, has vanished. Which is why you can't and won't, find assets.


Secret Investment Tip:

There is ONLY ONE way to access the coveted distressed portfolios you desperately seek; and they are NOT on this or ANY other site on the internet.

There exists a secret method that only very few are aware of and fewer know how to access it.

We have a separate page dedicated to educating potential QUALIFIED investors.If AFTER reading this material you feel you are qualified and ready to move forward quickly, please feel free to contact us.

The page is

 >>> HERE <<<


Secret Investment Fact.:

Unless you can prove me wrong and provide irrefutable proof, I am the only person I know who has discovered the ONLY guaranteed method of acquiring bulk bank assets.

As a principal or DIRECT authorized principal representative, I will share this information with you. If you are an interediary, don't bother to ask.

Principals, you've got to have and prove you've got deep pockets to play in this game.

I'm going to take a leap of faith and assume if you're here, you already know what the alphabet soup phrase above is... BUT, if you don't or are foggy about the industry meaning for the abbreviations, I'll take a minute to give you some BG (BackGround) info on them. Please bear in mind, I put this site together to educate. The instruments discussed should only be considered by those who have consulted with their financial advisor and fully understand these topics.

Right here, right now, let's dispell the internet myth that "...large REO tapes of up to $1b are readily available." "So...show me what you've got in a tape." Ask yourself this: If you were the owner of a valuable asset, would you throw it out on the internet to see if anyone would buy it? I didn't think so.

And neither will any bank or servicer.

(And BTW, stay away, waaay away from ANYONE "advertising" or claiming they "have the product" you need or are "direct with the compiler", etc., etc., etc., on ANY forum. They don't; and they aren't.)

There exists a process or "protocol" which must be adhered to. If you don't yet know the rules or think your're someone special to which such rules don't apply, have fun wasting your time. Unless you're "hooked up" to the source as direct as possible, you're going to be involved in the most hellalcious exercise in futility of your life known as..."the daisy chain".

There are a number of ways or methods in which to use these instruments to make money. Lots of money. Each instrument is a complex but easy to comprehend maze of intricacies. As you read through this information, you will have questions. Questions that we invite.


Before you begin reading, please refer to the disclaimer below.

REO: "Real Estate Owned". The liquidation of "Bulk" REO assets is typically handled by an "Asset Manager". Most times internally to the institution or servicer.

They will typically deliver a pool ($10 Million to $100+ Million) of properties at 55% to 80% (depending on area, even steeper discounts) of the true value including fees. While the pricing has been about that percentage, getting to the list of properties is another story. The reason the pools are elusive, is simply because they are purchased by well positioned investors before anyone "sees" the list.

Buyers must be ready to pull the trigger at a moment's notice on REO packages, which means we need to have our buyer's educated and well prepared. The REO process is extremely competitive so "newbie" buyers/investors to the game will have great difficulties in securing packages if they don't know "how" the deals work and are structured which is where we come in.

The buyer/signatory MUST be identified upfront on the initial note order form or letter of intent. The seller's must know "who" they are potentially doing business with from the start because of the U.S. Patriot Act so if we can not get past this key buyer ID disclosure issue with involved broker's/consultant's, etc., we can not move forward.

Buyer ID is crucial and the first step as the seller will check their "watch" lists for certain organizations, names and parties that they are prohibited from doing business with under law. Secondary to that critical item is the new "internal" watch lists the banks have in place due to the unbelievable level of fraud occurring in the arena so the involved parties requesting product for purchase MUST be disclosed.
Realistic buyers are a must. We need to ensure we are working with buyers who clearly understand the current market and price points.

Much of the frustration occurs when large buyers with deep pockets puff out their chest and demand to get to the front of the line to dictate what the seller will give them and at what price point. They want high-end everything for little or nothing. Yes, we are in a correcting real estate market but buyer's must be realistic. This type of attitude and behavior will not fly with the banks and selling sources. These types of buyers/investors will never secure product and will likely get themselves blacklisted. This is one of the "hot" topics with bankers and private sellers right now. They are sick and tired of arrogant buyers, uneducated brokers and consultants.

Financial performance - last but not least is necessary. The buyer's MUST have their finances in order and be able to prove it. Cash is king and cash buyer's trump buyer's that use credit. Hard money loans from shakey lending sources for newbie buyer's will not impress the sellers and will likely lessen the buyer's chance of securing a REO or note pool.

We all must remember at the end of the day the Seller decides "who" they will do business with period. They are trading trust deeds for cash and they choose who they will conduct business with. Unfortunately, the buyer's and involved parties are not in the driver's seat on this one as there are more buyer's than seller's right now. So let's all be clear on that...the seller's are in control.

NPN: "Non Performing Notes". Very simply, these are individual or "pools" of residential or commercial mortgages. Once the borrower fails to meet the promise to pay on the note, the note becomes "non-performing". These instruments can be accessed via similar channels as REO portfolios.


CMO's: What Are Collateralized Mortgage Obligations? Collateralized mortgage obligations, or CMOs, are mortgage-backed instruments that make the term of your investment more reliable.

Mortgage-backed securities, or pass-throughs, as they are sometimes called, provide an investment that has the security of bonds but with a higher yield.

Unlike bonds, however, you never know when the home mortgages that back pass-throughs might be prepaid, introducing a note of uncertainty to your investment. The "mortgage" in collateralized mortgage obligations refers to the home mortgages on which these securities are based. Like other mortgage-backed securities Ginnie Maes, Freddie Macs, and the like CMOs are based on the performance of home mortgage loans that are sold by their lenders to an intermediary company.

This company packages the loans as certificates that investors can buy. The interest and principal payments on the mortgages go from the homebuyer through the intermediary and then to the investor. That is why they are called pass-through securities.

With other kinds of pass-throughs, the performance of your investment depends on how and when the homebuyer pays the mortgage. CMOs are fundamentally different, in that they are based not on one mortgage but on a pool of loans that are categorized based on the payment period of the mortgages in the pool. In this way, CMOs seek to limit the uncertainty that can be caused when mortgages are prepaid a problem for pass-through investors when declining interest rates lead many people to refinance their home loans.

They also spread the risk of default among a number of investors. The mortgage pools that underlie CMOs are divided into categories called tranches based on the repayment schedules of the mortgages. Bonds are then issued on each of the tranches, each with a differing maturity date and interest rate. CMO bonds are issued with maturities of two, five, 10 and 20 years.

Coupon payments from the mortgage pool are paid to the bondholders for each tranche while principal payments are applied first to the bonds with the shortest maturity (the first tranche). CMO bonds are highly rated; because they are often based on government-backed mortgages and other top-grade loans, there is little default risk involved.

CMO bonds are issued by the Federal Home Loan Mortgage Corporation (FHLMC), the federally sponsored corporation that also issues Freddie Mac pass-throughs. CMOs are also issued by other government-sponsored agencies as well as private issuers. Some investors hold CMO bonds to maturity; they can also be sold and bought on the secondary market, where their prices fluctuate with changes in interest rates.

Now let's look at two special classes of CMOs: companion bonds and PACs.

Companion Bonds and PACs Collateralized mortgage obligations may issue special classes of bonds that can either increase or decrease the risks involved in CMO bonds, allowing investors to opt for increased security or the potential of higher returns.

Companion bonds are a special class of CMO bond that is paid off first when the underlying mortgages in a CMO pool are prepaid. Prepayments tend to occur when interest rates fall, so the payment rate on the companion bonds vary with interest rates. As a result, companion bonds absorb much of the prepayment risk in the CMO and display greater volatility on the secondary market. The potential of higher yields is the investor's reward for taking on these risks.

On the other hand, planned amortization class bonds work to reduce risks for investors. Some of the income from the mortgage pools that underlie PACs is diverted into a sinking fund, a special account used to help pay off the PACs. The availability of this sinking fund makes it more likely that the bonds will perform as expected, except in cases of extreme prepayment situations. In return for lower prepayment risk, PACs tend to pay lower interest rates than other classes of CMO bonds.

Strategic Considerations: The main advantage that collateralized mortgage obligations offer over other kinds of mortgage-backed pass-through securities is protection from the prepayment uncertainties caused by changing interest rates.

With Ginnie Mae and Freddie Mac bonds, a drop in interest rates could cause the mortgage you bought to be paid off early, shortening the term of your investment and diminishing your overall yield.

CMOs offer a degree of protection that makes the income they produce more reliable than returns from other pass-throughs. This protection is not iron-clad, however. Even a relatively low-risk PAC bond might suffer in the event that plunging interest rates cause a rush of mortgage prepayments. Because of their relative safety from mortgage prepayment, CMOs tend to offer lower yields than other pass-through securities. However, they still tend to perform better than other kinds of fixed-income securities such as U.S. Treasury bonds. And default risk is low: CMO bonds typically receive AAA ratings, largely because they are based mostly on government-backed mortgages.

You can refer to a helpful CMO glossary


Now for the "Catch 22"..."The" Protocol.

That's just it...there isn't just ONE protocol.

Each seller has their own.

Then the paperwork starts flying all over the place - everybody wants "to be protected".

My advice? Forewarn your clients ahead of time that each seller has their own legal department which means their own set of protocol. Which means thier own "Buyer Profile" form and their own "LOI". In addition, your buyer will need to "proof up".

Typically  called a "POF" or proof of funds. A simple statement from the buyers financial institution indicating they do in fact have the required liquid funds to close the transaction. No account numbers necessary. If your deal gets this far, it will then be buyer and seller on the phone hammering out thier deal. So, just relax.

And speaking of the seller...if you're trying to get next to them...It's like this... you have an exotic Italian car. The best mechanic in town is the only person you let service your car. In fact, every exotic car owner in town wants him to service their car.

This many clients keep him extremely busy. So  busy in fact, they don't speak directly with him. They make an appointment with his assistant. The work gets done. Everybody's happy.

That's the game.


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