Webinar Recap: Looking to Note Investing in the Global Health Crisis

The performance of real estate notes was a bellwether for the economy in the last recession, so in this Best Ever Webinar we explored the performance of 1st position and 2nd position notes, how the market has been affected by COVID, and what the data indicates about the real estate market at large.

As a servicer of tens of thousands of first position notes, Jorge Newbery pointed to the $4MM loans currently in forbearance, which are on the precipice of foreclosure after government intervention comes to an end.

The counterargument speared by Kathleen Kramer was that the $4MM homes don’t represent the volume of homes in trouble, but in part those taking advantage of the situation. She also pointed to all-time highs in homeowners equity relative to average debt amounts and record low interest rates that could allow troubled homeowners to be bailed out by refinances.

Jim Maffucio added that we see the unemployment rate dropping and average HHI of homeowners being significantly higher than the last recession where subprime mortgages were provided to low wage earners.

Regardless, all agreed that the amount of unpredictability in the future has returned to normal along with pricing for notes, suggesting that for the time being the market has an optimistic outlook on the future of residential real estate.

What the future holds for commercial notes is a larger question with retail and hotels going to double digit CMBS special servicing rates. Will there be opportunity to buy distressed office notes? Whispers of the opportunity are just beginning and it could be too early to see what the future holds.

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