A new potential sweet spot of opportunity for those buying notes from banks has been surfacing thanks to the giant multi-billion dollar mortgage settlement.
There has been much criticism over the $25 billion mortgage settlement in recent months, but some of the latest moves by lenders have actually come as a huge and pleasant surprise to borrowers and those busy buying notes from banks.
Pressured to get credit for fulfilling their obligations under the settlement some of the nation’s biggest banks have been slashing balances on second mortgages. In fact, one Florida homeowner recently received a notice that Bank of America was completely forgiving the outstanding balance of his $570,000 home equity line of credit.
While this may not really be much of a giveaway for the bank under current circumstances, and perhaps the best way to fulfill their dollar obligations while losing the least, it is great for homeowners and first-mortgage holders and a trend we will probably see more often.
Of course, this doesn’t relieve homeowners of their first mortgage responsibilities, many of whom are rolling late on their mortgage payments. However, for those buying non-performing notes from banks it means larger equity cushions and a lot more potential for equity and security in the near future.
Obviously moves like this will add far more motivation to borrowers to step up and keep their home loans current as well as enabling others to sell, providing instant windfalls for mortgage holders.
There’s no reason to believe that homes across the U.S. won’t surpass their previous peak selling prices and values within the next 10 to 15 years and many a lot sooner.
This means that even in the worst-case scenario, those buying notes from banks that had to foreclose, there would be plenty of profit, even if the home or mortgage note was sold quickly at a sizable discount. Even if these second mortgages and home equity loans weren’t completely eliminated by lenders first mortgage holders get the face value of their note paid first, leaving plenty to win for those scooping up bargains on non-performing loans now.