Walker Investing
Group
nd
2
Lien Mortgage Debt
Walker Investing Group, a division of CVW
Investing Inc., was formed in March of 2007, to
assemble and offer non-correlated investments to
investors. Walker Investing Group specializes in
unique and innovative opportunities for our
clients. Our programs are tailored to offer a
minimum of double digit annual returns and are
not tied to stocks, bonds or mutual funds. Our
investments are not affected by the economy or
world events.
Walker Investing Group is offering individuals the
opportunity to purchase unsecured, non-performing, 2nd
lien mortgage debt pools through traditional secondary
markets. This type of debt is typically available only to
institutional buyers.
This debt is available at historically deep discounts due to
the prior collapse of the real estate markets, which will be
discussed later in greater detail.
When partnered with the right debt restructuring or
collection firm, the purchaser of this debt can expect to
generate high gross returns and significant cash flow for
many years.
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Average 2nd lien note is $60,000 @ face value
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Most of the debt is from California, New York, Florida, Nevada, etc.
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Our clients purchase the notes for .0125 cents on the dollar.
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Minimum purchase of $10,000 = $800,000 in debt
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2nd lien notes only
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Non-performing notes
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Unsecured notes
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Our Initial offer to the debtor is to settle for a minimum of 20% of the value of
the note. Example $60,000 = $12,000
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The $60,000 note cost the investor $750
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Down payment and monthly payment programs are available to the debtor
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The debtor will receive significant credit rehabilitation when they agree to pay
the note, and make their initial payment.
Overview
Between 2003 and 2007, over $1 trillion in U.S. 2nd lien mortgages were
underwritten. These included Purchase Money Loans, Home Equity Lines of
Credit (HELOC), Cash Outs and Home Improvement Loans.
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As is well known, very lax mortgage underwriting standards ($3 trillion in
subprime by 2007), coupled with inflated property values, produced a classic
financial bubble – a colossal bubble that was blown dangerously thin by
derivatives (credit default swaps).
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The first hole in the bubble appeared in February 2007 and quickly set off
a chain reaction of foreclosures.
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Delinquencies in subprime mortgages increased six-fold.
With derivatives (in the $Trillions$ by 2007) acting as an accelerant, the
secondary mortgage market collapsed, and the bubble burst.
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Overview
By the fourth quarter of 2008, the deterioration of the U.S. and world
economy, especially in the consumer real estate sector, placed banks and
other lenders under stresses unknown since “The Great Depression”.
Where there is Panic there is Profit!
Banks began selling off this toxic debt (TARP) at historically low
discounts to clear their books and charge off this debt.
Heritage Pacific (HP Debt Exchange) - a member of FDIC - began
buying this debt in large multi-million dollar blocks in September of
2008.
Heritage Pacific would then break these blocks down to smaller blocks
and sell to joint venture partners.
In January of 2009, the initial investors funded the first purchase of blocks
of 2nd lien debt. Heritage Pacific would then clean out the bankruptcies
and break the debt into smaller blocks; mark the debt up and “flip” it to
joint venture partners.
Joint venture partners are investors with significant funds who wanted to
get into the 2nd lien business, but did not have direct buying access to FDIC
notes.
Between January of 2009 and August of 2009, the initial clients earned a
return on their investment totaling
101%
while “flipping” this debt to the joint venture partners.
State of the Art Debt Service
Heritage Pacific opened a debt servicing division in April of 2009 to
service their joint venture clients.
Relying initially on out-bound calling, they had about 100 representatives
working three shifts.
Trial and error proved that the best formula was to send out demand
letters before making out-bound calls.
These demand letters produced a high amount of in-bound calls, greatly
reducing the number of in-house collectors.
Heritage Pacific then initiated the development of custom software to
manage the debt servicing division. They also designed an extremely
efficient skip tracing system, including the use of in-house employees as
well as third party vendors.
Debtors are always treated with
the utmost respect!
Below is the process, if clients choose to work with Heritage Pacific
After the first payment is received from the debtor, the debtor receives a
“Thank You” call from Heritage Pacific!
The Debt is immediately removed from their credit report, which could
increase the debtors score by as much as 100 points!
By September 2009, the Heritage Pacific collection process had
progressed to the point of being very efficient in collecting 2nd lien debt.
Walker Investing Group began offering $10,000 units of 2nd lien debt
($800,000 of debt at face value), with the option of using Heritage
Pacific to service their debt.
Results to date have confirmed the expectations of far above average
returns and monthly cash flow.
Historical
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September
October
November
December
January
February
6.42%
4.01%
3.41%
1.64%
1.75%
2.69%
Performance
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March
April
May
June
July
August
2.85%
3.13%
2.84%
2.58%
3.24%
3.01%
The figures above represent the monthly ROI for the initial 12 months:
9/01/2009 to 8/31/2010
3.13% Average Monthly Return
37.62% Annual Return
The returns above, DO NOT include the Sale of Judgments or Errors and
Omissions Insurance Claims, and are NET after paying the collection costs.
We anticipate the ROI will increase as Judgments are Secured, and the
Errors and Omissions Insurance Claims are filed and payment is received.
The Judgment Process, and Errors and Omissions Claims
take at least 90 to 180 days.
Each debt collection company pays their clients differently. Investors
must inquire and negotiate payments and the cost of collecting their
debt, with the debt collection firm they choose to work with.
We will offer you the name of three debt collection firms, other than
Heritage Pacific, to help you choose a firm for the collection of your
debt.
If our clients choose to work with Heritage Pacific, they are paid every
month, on the 15th business day, for the prior month’s collections. The
1st check is received in 45 – 60 days, depending on which day of the
month the funds cleared for the initial purchase of debt.
Clients who choose to personally collect their debt will be paid on a case
by case basis, according to their results and the arrangements made with
their debtors.
Below are the collection charges from Heritage Pacific.
We do not have current information pertaining to the charges of other collection firms.
Heritage Pacific charges 30¢ of every dollar collected to fund the servicing
company, which covers their operating cost, and 70¢ of every dollar collected
goes to the investor or owner of the debt.
Once the investor recovers their initial investment, the collections are split
50/50, between Heritage Pacific and the Investor.
The numbers on a prior page are Net after 30% was paid to Heritage Pacific.
If the investor chooses to collect their own debt, or work with another debt
collection firm, the return could be different, depending on their success.
There are Absolutely No Guarantees as to the results, regardless of
collection process, or collection firm chosen by the investor.
It is estimated that over 90% of the notes contain fraud. Fraud can be
overstated income, or misleading statements about homestead or
investment purposes.
Every attempt is made to settle the debt in the first 90 days, for a
minimum of 20% of note.
Lawsuits are filed by the Heritage Pacific’s in-house attorney after 90
days when fraud is found.
Once fraud is proven to be involved, the debt cannot be dismissed through
bankruptcy, and if bankruptcy has been filed, it can be over-turned.
Heritage Pacific is able to garnish wages in 47 states.
Once a Judgment is received, Judgment debt is worth 500 to 700 basis
points (5 to 7 cents on the dollar) immediately on the market.
The debtor is now ready to settle.
◦ Each business involved with the loan process, is required to carry Errors and
Omissions Insurance.
◦ This includes appraisers, banks, mortgage companies, title companies and anyone
else involved with the process.
◦ Because of the “Fraud” connected to virtually every loan, the Errors and Omissions
Insurance is potentially liable for any and all mistakes involved with the loans.
This could be a “Windfall” for investors, and it was not included in our initial
business and investment model! We consider it an extra “Bonus” to an
excellent investment!
◦ The largest error uncovered thus far, pertains to a $250,000 home that was
appraised at $2,200,000. More than one individual or company involved in this
loan, was probably aware of the error. The acceptable margin of error is plus or
minus 10%. Obviously this instance is well out of the acceptable margin of error.
◦ Errors and Omissions Claims are currently being filed, and will continue to
be filed as necessary and appropriate
Our primary concern, for our clients, is
Principal Protection!
There are 4 main factors in protecting the principal with
2nd lien debt.
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COST! … Our clients purchase debt at the low cost of 1¼¢ on the dollar.
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FRAUD! ... This opportunity is “Excellent” as it is, but when fraud is
proven and judgments are awarded, the returns are expected to
increase!
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Errors and Omissions Insurance! … When fraud is proven, Errors and
Omissions Insurance may pay off, and the policies pay up to 100% of the
debt. This could easily triple or quadruple the ROI.
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Second Lien Debt…the law of large numbers!
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Data Entry: Data is entered into the system
Quality Control Level 1:
All data inspected for
accuracy and scrubbed for bankruptcies
Research Analyst:
party vendor
Full skip tracing - including 3rd
Quality Control Level 2: All data inspected again for
accuracy
Pre-Law Suit: Loans go to in-house legal team for
review, based on legal strategy
Quality Control Level 3: All data inspected again for
accuracy
Lawsuits: Loans enter Legal System
Q. What am I buying?
A. 2nd lien charged off notes that have no security interest (unsecured). You receive
the original note and collateral files which are held in trust by the collection
company.
Q. How much does the debt cost?
A. The market values this debt at 125 basis points, or 1¼% of the unpaid balance
(UPB), or .0125¢ on the dollar. A minimum purchase of $10,000 buys $800,000 in
debt. This price is subject to change at any time based on market conditions.
Q. What makes unsecured 2nd lien notes collectable and valuable?
A. Unlike 1st lien notes, which are usually forgiven at the time of foreclosure, 2nd lien
notes become an unsecured note similar to a credit card. The collection company
pursues the 2nd lien borrower for the deficiency. Fraud in obtaining the loan and
Errors and Omissions Insurance are also two issues which must be addressed.
Q.
Which debt collection company should I use?
A.
As the buyer, you may choose any debt collection company to assist you in the
collection process. Walker Investing Group will give you names of at least
three debt collection companies, or you may choose to collect the notes
yourself.
Walker Investing Group recommends Heritage Pacific
Financial because of their expertise in 2nd lien mortgage debt. Walker
Investing Group has absolutely no connection, financial or otherwise, to or
with Heritage Pacific.
Q.
A.
How long will it take to make back my purchase price?
Audited results predict that it will take approximately 36 months, on
average, to recover the initial investment. It could be sooner as Judgments,
and Errors and Omissions Insurance become a factor.
Q.
A.
How long does the collection company collect on these loans?
Industry research shows that the total collectable value of this type of debt is
between 5% and 7% of the UPB. Walker Investing Group expects that
purchasers of this debt will receive monthly distributions at least 5 to 7 years,
and possibly up to 20 years, as Fraud, Judgments, Errors and Omissions
Insurance and monthly payouts become a factor.
Q.
How often can I receive distributions?
A.
It depends on the collection company you choose. Heritage Pacific offers
monthly distributions.
Q.
Can I purchase debt for my IRA, SEP, or other qualified
retirement plan?
A.
Yes. The investment direction must come from an established custodian
for qualified retirement plans. We use SunWest Trust located in
Albuquerque, NM.
Q.
Are there any additional or recurring costs associated with the
ownership of the debt?
A.
No (unless it’s in an IRA – annual custodial fee)
Q.
Can I reinvest my distributions?
A.
Yes.