18 May 2008

Vulture Mortgage Investing

This is a rather interesting read on a guy who is buying mortgages at about 20¢ on the dollar and using the difference to make a profit:
The homeowner was $365,000 under water after buying the house with no money down in June 2005, according to a spreadsheet listing about 30 loans for sale by a national mortgage servicer that Gutierrez referred to in his truck. If Gutierrez bought the note for 20 cents on the dollar, or $73,000, he could probably get the owner to leave by giving her $5,000 for moving expenses, then sell the home for about $150,000, well below even the neighborhood's declining market value, he said. That would leave him a profit of about $70,000.
I'm not sure how I feel about the ethics of all this.

It seems that lenders, who should have known better, are the ones who are getting the worst haircut.

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