The stalled market for distressed mortgage assets seems to have finally gotten untracked and a viable secondary market for these assets is heating up.
And it is private investors and hard-money lenders, apparently, who are now offering enough to get reluctant lenders who have been sitting on these assets for years to sell.
Shadow inventory remains substantial, meaning there will be a decent NPL market right through 2016. However, with home prices rapidly appreciating and home equity following that back up into the sunlight the NPL market is one that won’t last forever.
Many people wonder why the distressed mortgage market didn’t take off much earlier. There was and is no shortage of bad collateral! But many lenders did not want to sell at firesale prices (which is what investors were offering) and so the gap between ask and bid remained wide.
Those lenders who received government assistance thought they had every reason to hold that money aside as capital against bad assets until such time as the market improved. All well and good, but that meant that money was not available for lending. And we remained mired in a tepid recovery.
A big difference between this time and the last time there was a glut of distressed assets to sell—after the thrift crisis—is that back then there was a government agency designed just for the job. Far be it from us to say that the government can do anything at maximum efficiency but they did a creditable job in creating a market. This era’s disposition energy is much less organized.
In fact, this would be a good time for the private market to take up the challenge of doing a better, more efficient job at disposing of problem assets than the government did last time. According to prevailing piety, the private market shouldn’t even have to break a sweat in getting these assets into circulation, freeing up new lending money to help the economy prosper.
Now is the time to ramp up your knowledge of this exciting but volatile market. And the best place to do that will be at SourceMedia’s 4th annual Buying and Selling Distressed Mortgage Portfolios Forum, to be held June 20-21 in New York.
The first three shows in this series have been high-energy dramas and we expect the next one to be just the same. For more information, go online at
