Why Do Mortgage Companies Do Better Modifying the Loans in Their Own Portfolios?

There are two offices in Washington that work together to put out a comprehensive report on mortgages in the United States. These are the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

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Their report is the Mortgage Metrics Report ソフト闇金 . In this report they track closely the number of loans where people are facing foreclosure and who are offered loan modifications and how successful these modifications are.

They look at the mortgages of nine national mortgage companies and three large thrifts. These twelve are responsible for 64% of the mortgages in the United States.

Their report is a quarterly report. Because the volume of loans is so great their report normally is finalized and released three months after the end of a quarter. Their most recent report was released in September of 2009 and covered the second quarter of 2009 which ended June 30, 2009.

There are numerous charts in this report. One interesting chart in the report for the second quarter of 2009 focuses on the percentage of people who default again on their loans after a loan modification was made. These are people who had their loans modified and were facing foreclosure again because they did not continue to make their modified payments.

The chart monitors 5 investors – Fannie Mae, Freddie Mac, Government Loans, Private loans and Portfolio loans. The nine national mortgage companies and three large thrifts service loans for Fannie Mae, Freddie Mac, the government (FHA and VA) and Private investors. Portfolio loans are those that the mortgage companies and thrifts have put up the money for from their own funds. They keep these in their own portfolio rather than selling them to one of the other four investors.

Contract and Purchase Order Funding allows companies to bid on large projects for governmental agencies, hospitals, universities, prison systems and municipalities or also to sell to larger corporations even if the business does not have the credit or bank approval or the wherewithal to service or fulfill a large contract order. Similar to Factoring which works hand in hand with Purchase Order Funding it is not a loan but a simultaneous transaction that involves advancing funds based on the credit of the governmental agency or larger company and the size of the contract. The funds that are advanced are for the cost in completing the order of products or performing services. So the profit that will be gained is not advanced but the costs as in raw and finished material, transportation, production, labor, expertise and any other costs involved in completing the contract. Once the contract is completed or once an invoice is ready to be sent to the client a factoring company which is sometimes owned by the same company buys the invoice at a discount and the funds that would normally be advanced to the company are usually used to settle the amount advanced for the material and other services that were needed to complete the order. Contract and Purchase Order Funding usually requires large transaction amounts as opposed to factoring that can be utilized for invoices as small as one hundred dollars. With the use of Contract and Purchase Order Funding companies that were locked out of the process of bidding on large contract s may become players in multi-million dollar deals.

Commercial Real Estate Sale Leasebacks are similar to Equipment Sale Leasebacks featured in this article. Instead of utilizing owned equipment to secure cash when bank borrowing is not wanted or not available the commercial real estate is used to access funds now. This can vary from office buildings, medical buildings, retail franchises, industrial buildings and manufacturing to large utility plants. This frees up cash “locked” away in real estate. Many entities find that at the present time the business they are in whether it is retail, manufacturing or another field that the holding of commercial real estate is not in their best financial interest for now. They prefer to put to use funds for their industry. So a retailer selling retails goods decides to focus on the retail operations and to lease the space because that real estate when factored into a myriad of calculations does not fit their financial goals during the present time. Yes the ownership of commercial real estate is an asset and can be used as a security for a loan but may also be viewed as a fixed non-performing entity that does not meet the needs of the business, organization, group or individual that owns the building. Commercial Real Estate Sale Leasebacks are another form of getting access to funds and has increased over the years.

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