The non-performing note (NPN) is the nucleus of real estate investing, and Become the Bank™ is the Road to Wealth. The note business in real estate starts with a mortgage, or a promise to pay.
In the course of investing, one of the disciplines that I enact is understanding trends and researching to discover what the market is doing as well as how I as an investor can be ahead of the curve versus behind it. Understand that one source does not tell the whole story. In researching non-performing notes, I make it a point to update myself every three months. According to the Mortgage Bankers Association, over the next 12-16 months, the number of defaults will increase from 4.35 percent to between 6.5 and 7.25 percent.
By loan type, the total delinquency rate for conventional loans increased 27 basis points to 3.46 percent compared to the last quarter of 2018. The FHA delinquency rate increased 28 basis points to 8.93 percent, and the VA delinquency rate increased by 66 basis points to 4.37 percent.
On a year-over-year basis, the seasonally adjusted overall delinquency rate decreased for all loans outstanding. The delinquency rate decreased by 32 basis points for conventional loans, decreased nine basis points for FHA loans and increased five basis points for VA loans.
The reasons for defaults are varied. The overriding reason for mortgage defaults is cyclical; we are now coming to the end of a cycle that started in 2014. If you go back 100 years plus, we were at 40-year cycles, then 25-year, 15-year, and now getting to the end of a 7-year cycle by 2021. This is why I believe that for real estate investors, “timing” is everything, and the time to start with non-performing notes (NPNs) is now. Educate yourself in non-performing notes, and then execute in acquiring NPNs, manage your future in reoccurring income through performance of NPNs and larger profits through wholesaling and rehabbing with the Model of 10™.
The non-performing note is the nucleus for all real estate investing in distressed product and essentially is the beginning process to all distressed properties. As the investor, you become self-sufficient in creating other real estate models, all the while building long-term wealth.