Our thoughts and prayers are with you and your family as we all navigate this unprecedented time together. Our hearts go out to the people who have been affected by this health crisis and we appreciate everyone who is on the front line working to contain COVID-19.
Now more than ever, we want to communicate with you and stress that Mortgage Vintage and CrowdTrustDeed are closely monitoring market changes and constantly adjusting our guidelines to stay in touch with our stringent underwriting that provides significant equity protection across economic upheavals. As you may have heard, many institutional capital sources offering Non-QM Loans have dried up. The COVID-19 virus financial crisis and the downturn of the stock market has created liquidity issues for the Non-QM lenders causing them, as well as Wall Street, to rethink their strategy moving forward. As a result, many of these lenders will go out of business and the survivors will ultimately tighten their underwriting guidelines.
While some Lenders may want to understandably exercise a “wait and see” approach, many Private Money Lenders can take advantage of these impaired capital markets and can act opportunistically on high-quality Trust Deed scenarios. Over the next several months there will be a high volume of good conservative loans requiring private lender funds. Mortgage Vintage plans on focusing on lower loan to value loans (60%-65% or less) with yields from 8% – 11% with 1-3-year terms primarily. Many of these loans will have prepaid interest of 3 months or more and will have borrowers with strong credit and cash flow positions. In addition to these underwriting adjustments, we wanted to let you know the main impacts this crisis is having on our stakeholders:
- New Real Estate Investors/Borrowers: There is very little price movement and price discovery within the overall California housing market. Do not expect a deal.
- Real Estate Sellers: Until the shelter in place order is lifted expect meager buyer activity showings and offers.
- Mortgage Brokers: Brokers are having to establish new relationships as many lenders have closed their doors.
- Lenders: Lenders have price discovery and liquidity concerns. For new Trust Deed Opportunities, we are working hard to lower LTV’s and increase scrutiny on the borrower’s ability to pay. We also are working to protect the cash flow and yield demands of our lenders by validating Covid 19 Forbearance distress and structuring the relief in a way to ultimately collect the deferred interest.
- Existing Current Borrowers: In the Short Term, we all may need to exercise patience and empathy. We will know within the first two weeks of May to what effect the Coronavirus epidemic has had on our borrowers’ ability to make their payments. To date we have had 17% of our Loan Portfolio request Forbearances. We are certain that this trend will accelerate in the coming weeks. It is our intention to work with borrowers to determine Covid 19 related distress and provide relief. Typically, a Forbearance may provide 2-3 month Loan payment deferment where the deferred interest is placed as a loan charge and collected at loan payoff.
- Delinquent Borrowers: Moratoriums on Evictions, Trustee Sales and Notice of Sales are being introduced at city, state and federal levels, which means timelines to collect payments and foreclose on defaulted properties may be extended. We expect that delinquencies and defaults may increase and timelines to foreclose on properties to be extended, which will likely impact returns.
Mortgage Vintage is pushing forward and evaluating loan scenarios that have emerged as a result of this new market. We believe you will see potentially strong risk-adjusted opportunities emerge and we want you to be able to take advantage of the market dislocation. CrowdTrustDeed will continue to present you with new opportunities and will provide you with 24/7 online real time information and knowledge necessary to make informed decisions. No one can estimate when this crisis will be over or the human and financial toll it will take. In the meantime, should you have any immediate financing needs, questions, or concerns please do not hesitate to reach out to us. Please take care of yourselves, your families, and loved ones and thank you for your continued support.