There are many ways investor price NPLs & RPLs. Some have models that are simple and straight forward and other models are very sophisticated that produce probabilities on several outcomes based on a database of assumptions.
As with any other investment, trying to solve for the price/value of non-performing mortgages is solving for an expected value problem. In today’s market, many are surprised to realize how liquid non-performing and re-performing loans are and how tightly they are priced, for example a lot of market participants assigning basically the same value to them.
The value of the NPL or RPL is the net present value of the forecasted cash flow from the NPL/RPL
Joining the podcast today is Mike Kelleher Vice President of MountainView Financial Solutions. Mike assists clients with the valuation, sale and purchase of residential whole loan and mortgage servicing rights portfolios. Mike previously worked on MountainView’s trading desk, where he provided analytic and transaction process expertise that helped loan sale advisory clients to execute trades. Prior to joining MountainView’s trading desk, Mike spent three years working with MountainView’s bond and whole loan valuation team as a Pricing Analyst and three years at Clayton Fixed Income Services as a Credit Risk Analyst.