If it isn’t standard protocol it should be. - Posted by Dr. Craig Whisler CA NV
Posted by Dr. Craig Whisler CA NV on October 09, 2003 at 12:31:31:
I guess this post will make those of you who don’t know me think that I escaped from the zoo again, and those who do know me will be sure of it, BUT:
I just gotta defend the lenders in this case. All we ever do is ‘hiss and moan’ that we can’t get good easy financing for older, used, mobile homes. Well If I were a lender I wouldn’t loan any of you a dime on them either. Why do you suppose the most knowlegable note buyers won’t touch our paper with a 10 foot pole. Because we are offering the market CRAPPY paper. It is VERY shakey credit wise. It is even worse equity wise. It’s no wonder that smart trust deed buyers aren’t interested. If they bought the junk you are offering them they would go the way of Greentree and Conseco, belly-side up.
So what’s all of this griping I hear about not wanting to recourse our notes so we can sell them in the secondary market. If your notes are junk then sell then to the junk dealer. If you want to sell them at reasonable discounts then you NEED to happily offer FULL RECOURSE with them. Recourse is just another way of saying that you will guarantee the notes if they go bad, as well you should. Then it would be YOUR personal credit and your assets that would make class B and C into class G notes. G standing for golden and valuable and desireable. Passive investors would rather invest their money safely in CDs at 2% interest per YEAR, than risk it on your junk even if you offer it to yield 20-25%. I’d, prefer those CDs myself rather than buy what you are offering.
There is an old saying that the only reason something doesn’t sell is price.
Well now there is a new saying: the only reason you don’t have 20 buyers screaming for every one of your notes is their almost total lack of security and ZERO recourse.
For years, when I was still selling my mobile home notes, I offered a split rate of return. As an example I might offer a note at 15% with no recourse or at 25% with full recourse. I had WAITING buyers for EVERY note that I ever offered for sale. Most investors wisely chose the recourse notes.
All that glitters is not gold.
Here was my deal: If any of my notes went bad for 90 days I would have 90 days to buy it back for cash OR to replace it with another comparably sized, good note. The amounts didn’t have to be exactly the same but they should be similar or we could make up the difference in cash. I NEVER had to buy back a single note for cash. Yes some went bad, but I replaced them with new notes. I then repaired my bad notes and resold then to different investors. By repair I mean I repoed the mobiles or got the bad guys to refinance them or place additional security with them so I wouldn’t repo them, etc.
There are billions, I said BILLIONS of dollars just sitting in front of their picture windows, waiting for good notes to drive by and discover them. There is more DEMAND than SUPPLY, for GOOD notes. The operative word is GOOD. Why do you suppose trillions of dollars is earning less that 2% in savings accounts? Those investors would KILL to get SECURE NOTES yielding 12 3/4%. You folks have lots of such notes that you could get RICH from by cashing out at FULL FACE VALUE. Your Lonnie deals would start yielding tens of thousands of percent, instead of just a paltry 100%-200% per year you are settling for now. Remember if you can sell your notes for cash at full face value it is the same as making a cash sale in the first place. You could turn your investment capital over 6-12 or more times a year. Heck at that rate you wouldn’t hardly need any capital at all. You could do 6-12 deals per year with just 3k-4k total capital. You probably wouldn’t even be able to find deals for more capital even if you had it. Before you know it you would have so much money that you would be buying back your own notes. :~0. You wouldn’t have any installment sale tax problems either.
Whats the problem? Is that hard to see?
Honorable, ethical sellers of full recourse notes would set the mobile home industry on fire OVERNIGHT.
The CREonline board would light up like a Christmass tree, with retired folks looking for SECURE, recourse notes yieling 12 3/4%. And you’ve got’em by the car load.
Time to unload.
Regards, doc