A large part of the Private Money Trust Deed investment market had been gobbled up by the Institutional Non-QM (Qualified Mortgages) Mortgage Companies backed by Wall Street Investment Companies seeking higher yielding investment strategies in the last few years. Trust Deed Investors were being squeezed out of the market and replaced by large aggregators. This provided fewer opportunities and competition was fierce for these loans.
Wall Street’s growing demand for these Non-QM products had driven these lenders to expand and ultimately soften underwriting guidelines – similar to what happened in the subprime crash of 2005 – 2007. The biggest differences this time are that the lower credit borrowers did not get to the high Loan-To-Value’s of the subprime meltdown years and the Non-QM loans have higher standards for qualification.
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. Most of them are no longer lending at this time.
Lenders are in a wait-and-see mode and will soon be reshaping their business models. In the next 30 – 90 days these lenders will come out with less aggressive more conservative lending guidelines if they survive at all.
Borrowers have been left in the dark or have had transactions that were cancelled by these Non-QM lenders. Many Non-QM lenders will not survive this crisis. Many borrowers and their brokers are looking for other lending sources.
Over the next several months there will be a high volume of good conservative loans requiring private lender funds. Val-Chris Investments, Inc. plans on focusing on lower loan to value loans (60% or less) with yields from 7% – 10% with 1-3 year term primarily. Many of these loans will have prepaid interest of 3 or more months as well. Many will also have borrowers with a strong credit profile. As a leader in private money lending here in California since 1975, we are well positioned to take advantage of this opportunity.
If you have money sitting in the bank – earning very low money market rates, give us a call at 949-252-1907 or email us at info@val-chris.com
We are looking for investors with $100,000 to $20,000,000.
By Chris L. Boulter
President of Val-Chris Investments, Inc