how to buy and sell notes non performing mortgages discounted mortgages note buying profits.com

1

Notes and Insight to Make you a Better Buyer

Licensing and the Market

22

Objectives for this Session

• Introduction to Licensing: GA and CA examples

• Licensing examples: CA and GA

• The market – a current overview

• Macro picture

• Loan sales

• Licensing – some basic points

33

Licensing

All the answers aren’t in one place …

• Problems with “advice” across states

• Exceptions

• Attorney input/advice vs. actual licensing support

• 1/3 of states

• Regulatory environment changing, emergence of a “clearinghouse” for licensing registration: NMLS

www.stateregulatoryregistry.org (follow links for NMLS)

44

Licensing takeaways

Learn what’s required in your state

• Loans are bought ALL the time by people and companies without licenses …

• But doing so is illegal in states that regulate note buying

• “Will I get caught?” vs. “How much does it cost and what does it take?”

55

States with Readily Available Licensing Info (NMLS)

• Arizona• Arkansas• Connecticut• Delaware• Georgia• Idaho• Indiana DFI• Indiana SOS• Iowa• Kentucky• Louisiana• Maryland• Massachusetts• Michigan

• Mississippi• Nebraska• New Hampshire• New York• North Carolina• North Dakota• Pennsylvania• Puerto Rico• South Dakota• Rhode Island• Tennessee• Vermont• Washington• Wyoming

66

The Market - Rally & Hope

At 1998 levels now

77

Have we hit Bottom Yet?

New York Times, May 4, 2009

Now [Sacramento] seems to be in the earliest stages of a recovery…

Sales in Las Vegas in March, for example, rose 35 percent from last year.

88

US New Home Sales

March 2009 – lowest since 1963

99

Unemployment – Still Growing

No Slowdown in Job Losses

1010

John Mauldin @ Investor Insight 5/11/09

Part of the reason we are so challenged in our outlook is that we are experiencing a deleveraging on a scale in the world that is absolutely breath-taking in its scope.

And to balance that, governments are going to have to issue massive amounts of sovereign debt to deal with their deficits.

But who will buy it, and at what price?

And in which currency?

1111

US Deficit Shortfall Assuming $0 in Jan. 2008

7 straight months deficit growth

Cumulative Deficit Since Jan. 2008

-1,400,000

-1,200,000

-1,000,000

-800,000

-600,000

-400,000

-200,000

0

200,000

Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09

1212

US “Income” (last 28 Aprils – traditionally + months)

First shortfall since 1983

US Deficit/Surplus (-)

-50,000

0

50,000

100,000

150,000

200,000

250,000

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

1313

Home Prices Still Dropping

I expect another 15-30% Drop

1414

FASB 160 and Accounting

The IMF reckons that both European and US banks - but in particular the European ones - are well behind the curve in terms of recognizing their credit crunch related losses. According to the IMF, there is at least another $1,500 billion to come.

So when the US banks reported surprisingly good numbers for Q1 it was certainly not because the economy had suddenly and miraculously revived itself, but because some of the oldest tricks in the book were used to gloss over much bigger problems.

Absolute Return Letter, May 2009 (www.arpllp.com)

1515

Foreclosures – Climbing Still (CA example)

Source: MDA Dataquick, April 22, 2009

Many lenders re-initiated foreclosure proceedings after March 31, 2009 (the

“holiday homeowner break”)

1616

Default Rates by Bank as an FYI

Source: MDA Dataquick, April 22, 2009

Institutions with highest default rates for loans originated in August to November 2006:

• ResMAE Mortgage 69.9% of loans w/NOD’s)• Master Financial 64.6%• Ownit 63.6%• IndyMac default rate of 18.9%• World Savings 8.0% • Countrywide 7.7%• Washington Mutual 6.3%• Wells Fargo 3.4%• Citibank <1% in default• B of A <1% in default

1717

The Market: Loan Sales

Sales and Pricing Trends:

• PPIP – market slowdown since 12/08

• Uncertainty on pricing: WL Ross (10%); Morgan Stanley – DB – CSFB (3-7%)

• Hold mentality amongst larger institutions

• Smaller institutions still hitting quarterly and monthly recovery targets

• Consolidation: larger trading platforms (Milestone, First Financial, DebtX)

• Rise of the small aggregators: BigBidder / Loanmarket

1818

Tips on Sourcing

Regional banks

Loan-level is good

Bankruptcy trustees and liquidators (Resmae /

Ownit / AHM)

Build relationships now – buying opportunities

will increase through the year

Follow-up, follow-up, follow-up

Don’t assume 1 trade = forever deal flow

1919

Next Session: May 27 5pm PT / 8pm ET

Due diligence basics – a step-by-step analysis