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In the game-like world of real estate investing, the other players are getting a lot smarter.

house In the game like world of real estate investing, the other players are getting a lot smarter.

Attention Note Investors:

You’ve seen the headlines about homeowners successfully challenging lenders or servicers attempting to foreclose without proper documentation. The lesson here for note investors is that borrowers and their attorneys are getting better at playing the game of real estate.

But “Foreclosure-Gate” isn’t the real story here…

The real story is that borrowers and even GSEs are starting to think like note investors and real estate entrepreneurs, and this shift will affect how we do business…

How so?

Note investors and other entrepreneurial real estate investors are known for their creative and strategic approaches to wealth-building through real estate and working with the “paper” involved in RE deals. The other parties, typically unsophisticated buyers, sellers, lenders, and servicers, were until recently doing things the same old way they had been for the past 50 years.

But now, not only are consumers waking up to the fact that they have more choices (strategic default, principal write-downs, loan mods, short sales, cash for keys…), but Fannie Mae is even taking a few pages out of the playbooks of creative note and RE investors…

For example, on their new website, Fannie Mae provides information and even an interactive multimedia “role-play” tool to help distressed homeowners navigate all the options with a game-like set of choices and decisions.

The way it works is that site users go through a series of interactive steps to help them clarify their goals and learn about the best options for their particular situation. Then, they can make choices and see what the consequences of their choices might be. Try it: it’s a pretty slick tool.

There is something really interesting about this.

Fannie Mae is now acknowledging that homeowners approach their choices about what to do with their delinquent loan or underwater mortgage the same way they might play any strategy-based “game.”

In other words, the KnowYourOptions website encourages homeowners to evaluate their situation, review their options, and choose the option that seems best for meeting their personal goals, whether that’s staying in their home or exiting with a minimum of fallout.

For example, if a homeowner wants to stay in his home, the new Fannie Mae site shows them the benefits, process, and action steps needed for each of the main ways to do that, such as:

  • Refinance
  • Repayment Plan
  • Forbearance
  • Loan Modification
  • Deed-for-Lease (new Fannie Mae program–see below)

Likewise, the KnowYourOptions site shows homeowners how (and why) to proactively seek out a Short Sale or Deed-in-Lieu deal if they want to leave their homes.

Do you see what’s happening here?

It used to be that note and RE investors were the only ones who saw the world as a game of strategy designed to maximize profits and minimize risk.

Now, not only are homeowners starting to see their own real estate deals (i.e. their own mortgages) this way, but the are becoming pretty sophisticated about what their options are.

Isn’t this why the concept of “strategic default” is both surprising and obvious? It’s surprising to see homeowners making “creative” strategic choices on a mass scale, but it’s also obvious because making rational choices is how consumers operate in other aspects of their lives.

Finally, the fact that Fannie Mae is offering a program like the “Deed for Lease” program is pretty revolutionary. This program allows homeowners to sign over their deed and lease back the home directly from Fannie Mae. Yes, even Fannie Mae is responding creatively to these unprecedented times.

(Read about the Deed for Lease program here.)

Why should you, as a note investor or creative RE investor, care?

Because behind every note deal is a borrower, and if you want to see bleeding edge borrower intervention strategies up close, you should plan on spending some time on the new KnowYourOptions website. And if nothing else, reviewing the options that homeowners have, as laid out on Fannie Mae’s new site, will make you a sharper investor.

Plus, as a real estate investor who has traditionally had an “edge” because we “know the game” better than the rest of the players, in the new world of real estate, the other players are getting a lot smarter and playing game better.

How will you, as a real estate or note investor, respond? Are the borrowers you work with getting more savvy about their options? Are they negotiating harder?

Leave a comment below and tell us what you think!

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  1. 1 Comment(s)

  2. By Marc Faulkner | Reply

    It is great to see that they are finally realizing that there is a need to be proactive and creative in providing information and options to home owners. Let’s hope they can actually figure out how to streamline these processes so that folks can actually follow though with the requirements and get the benefits these programs can offer!

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