The Rise of Non-Performing Loans in 2020

With the NPL funds that you’re seeing,
do they generally tend to be specific to, let’s say, just
larger commercial property loans or only residential investment
properties that you see a segregated like that? It can be.
I…in the NPLs, there are a variety of asset classes, including
residential, one to four units, commercials. There are also
consumer loans that you can actually purchase. You know they’re
owner occupied. You know the loan has primarily been originated
for the purposes of consumer and consumer purpose and
so in that the fund manager or the the the person who
wants to acquire that NPL you know are going to look at you know
how that loan performs based on the fact that it was a consumer
or business and again, it’s just a wide variety of asset classes
depends on what the fund manager is experienced with. And
how’s the PPM typically structured to be? Do they just
kind of as far as the anticipated return. How does a lender
even say that hey, this is the expected return because you
know it’s it’s it’s a little more complicated. Right. You
got you got to get reperforming and then what happens after? Do you
sell the assets to make this big profit at the end or or do you
hold on to it long term? Sure. So some of these you know
structuring within the PPM or in the offering is that they sometimes
do a hurdle rate so you hit 6. You hit 8. You hit 10. You
hit 12. We’re gonna distribute based upon this hurdle
or we’re going to do a smaller lower. you know a lower
pref but guaranteed an accumulative during the deferment
period and thereafter. I’m having much higher net income later
on in the back is I’ve also seen where where just a fixed coupon
of say a percent, and then the rest gets taken to the manager.
There’s just various mechanics and how they can structure
this to make it work economically. Okay, and with that, if
anyone’s thinking of starting an NPL fund or has any questions, Geraci
LLP is one of the premier law firms in the country for private lending
and reach out to find them on LinkedIn and hopefully they can help
you out. Thank you Rocky. Thanks for joining us. Yes. alright.

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