Second Opportunity of America (SOA)
The NPL market is massive. The most recent HUD auction was $2B notional, and Fannie and Freddie auction over $500mm quarterly. These pools are auctioned off in sizes of $1mm to $100mm. Here, our capital partners range from high net worth individuals to the largest global financial institutions. Capital partners have the luxury of structuring their investment in the form of debt or equity with additional flexibility of prefs, front-end, or back-end loaded. The full NPL workout will average 18 months, with incremental cash flows along the way from short sales, modifications, and cash for keys. Our annualized return numbers in the NPL portfolios has averaged over 20%, and we have not experienced a portfolio loss since inception. The fascinating aspect of distressed investing is the “recovery rate”, or in the case of these mortgages, it is the asset backing the loan – the home. As the borrower is delinquent, the value of the note declines, yet is still supported by the underlying value of the asset, thus the monies at risk actually decline. Lastly, the pool sellers have realized that nonprofits have experienced better neighborhood stabilization rates (less foreclosures), and they have altered auction processes to favor non-profits.
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- Maximum Opportunity:
$100M+ & possible fund structure
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