Introduction: Overlays/Guidelines Produce Scratch & Dent Loans:
Overlays/Guidelines Produce Scratch & Dent Loans: There are so many ways a good loan with a good borrower who pays regularly can still end up as a Scratch and Dent loan due to the amount of overlays and guidelines that must be satisfied. A loan can become an unsaleable loan by missing an investor overlay or agency guideline. With most mortgage providers having numerous investors and different targeted agency loans, adhering to all overlays and guidelines can become difficult. This challenge has become even more daunting with constant updates and modifications from investors and the agencies due to the COVID pandemic. The end result has yielded more loans that do not meet investor overlays and agency guidelines. Ultimately, mortgage lenders are seeking liquidation on the secondary market from this negative impact on the mortgage industry.
How RHC Can Help:
RHC is here to help and assist with Missed Overlays/Guidelines Produce Scratch & Dent Loans. RHC has targeted several S&D buyers who specialize in purchasing loans that fall short of satisfying all investor overlays and/or agency guidelines. These buyers have great relationships with all agencies whether it is Fannie Mae, Freddie Mac or Ginnie Mae. RHC has vetted their ability and execution on purchasing investor fallout loans. RHC has also learned what variants each buyer has on receiving exceptions for violated agency guidelines. These buyers have the ability to buy these loans with quality bids that can reach par level pricing. These relationships can serve our clients by mitigating their losses.
In order to receive par or near par pricing. Mortgage providers must act quickly as these loans must not become too aged. A rule of thumb on seasoning is for a loan to be liquidated within the first 6 months from funding. Therefore, our clients must be aware of the pending deadline. And reach out to RHC as soon as they find out about a problem loan that cannot be sold to their regular investors.
Summary:
Hopefully this information will increase awareness. And mortgage companies will have a sense of urgency in starting the liquidation process on the secondary market sooner. With all that said, Right House Capital is here for any of your liquidation needs when it comes to loans that violate investor overlays or agency guidelines. For more information or if you have any problem loans in your pipeline, contact Andrew Zale at 502-365-5632.
