Posted by John Behle on October 21, 1998 at 23:18:09:
The averages have changed a lot in the last few years. There is less of an average note now than ever before, but if I had to put numbers to it:
Amount 15-30k Rate 7-10% Term usually 360/60 - 30 year amortization with a 5 year balloon. Average discount 20-35%. Default rate = 2-5% Foreclosure rate = .01% Average position = 2nd.
Now, with that said, there really isn’t much of an average and my speciality is in the odd and ugly notes. I get higher yields, higher discounts and much greater profits. The competition is much less.
The default rate is about average for the loan market or even below, because we pursue good collections. When someone goes into default, I work things out with them. There are dozens of options to solve the problem profitably without foreclosure. That’s a whole book in itself (“Getting Paid”), but the basic principle is the only way you get a foreclosure is through someone who is mentally challenged. I’m not saying that rudely, it’s just that the only cases I can think of were with pathological liars - and I’m not being mean with that term, that is the clinical diagnosis. One of my investors is a Psychiatrist.
Foreclosure is very remote and 99.99% of the time didn’t need to happen. Creativity can solve the problems very easily.