Deep Mortgage Knowledge               

Whole Loan Capital, LLC

Buying Whole Loans

Mortgage loans can provide safe and predictable returns for investors. Even if the stock market fluctuates or if interest rates change, returns can be locked to provide very safe monthly income.   


Portfolios of loans should never be reviewed based on their averages as a bar-belled pool of very good credits mixed with very bad credits will look "average" but will dramatically under-perform.


For each individual loan a critical risk evaluation is the current note balance compared to the current value of the property.  This ratio (Loan-to-Value Ratio, or "LTV") gives a quick assessment of a note's risk as the lower the LTV, the less likely a borrower is to walk away from the property or discontinue making payments.  High LTV loans default and generate losses at a much higher rate.

A second risk consideration is the current financial profile of the borrower.  The more income a borrower has relative to the monthly payment, the better.  A quick way to evaluate that risk is to look at all the borrower's monthly obligations, including the mortgage payment, as a percentage of gross monthly income.  That comparison is commonly referred to as a Debt-to-Income Ratio, or "DTI".  Current regulations require that in order for a loan to be considered a "Qualified Mortgage", the DTI can't exceed 43%.  

There are many more important risk assessments needed before you purchase loans, such as:

  • The condition of the properties,
  • The trend of property values in the area,
  • Occupancy of the properties,
  • The purpose of the loans,
  • The age of the loans,
  • The guidelines used to originate the loans,
  • Counter-party risk.

Operationally, the following are also important items:
  • Collateral and assignments, 
  • Cash flow pricing to reach target return,
  • Mortgage loan servicing.

Having an experienced professional can greatly assist in making the right decisions. 

Disclaimer - This overview is for informational purposes and is not an offer to sell or a solicitation of an offer to buy any securities.

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Contact Information:

dakre @ wholeloans.com