Catherine Bell (Titan Impact Group) explains why banks sell distressed debt and who buys it. Banks originate loans but must remove non-performing loans from their books; specialist firms buy these loans at deep discounts, work with borrowers to restructure and make them 'reperforming', and after about 18–36 months package and sell them to institutional investors. The video positions distressed-debt investing as profitable and socially beneficial (helping borrowers, banks, investors, and communities).
Questions this video answers
About 18 to 36 months.
Chapters
Hey everyone, I'm here to answer the question who would want to invest in distressed debt? And to understand that, we have to go back and we have to understand economics a bit and about what's going on with the banking system. And so what happens is banks, banks are in the lending business, but they are not in the real estate investing business. And so what that means is that the more mortgages and loans and everything that they create, that's actually how they make their money. And so what happens is in order for, for banks to be able to lend out more money, they can only lend out a percentage of the actual deposits that they have in the bank. And so how do they, you know, work around that once they've met that threshold? Well, what happens is there's always statistically a certain percent of loans that will actually become distressed debt, meaning that the borrowers stopped paying for some reason. Well, banks aren't actually set up to reach out to these people to figure out what's going on and how to get them repaying again or have to restructure it or whatever. And so one, they've got a problem because now they've got bad debt on their books and so they're actually required to get that off of their books and so that they can continue lending out more money. And so there's companies like ours, we have these fabulous relationships with these banks and we go in and we buy this debt for pennies on the dollar. And so then from there we pull it over because we're real estate investors, we know how to work with the customer to find out what's going on, get them repaying, get it restructured, whatever it is, so that they can stay in their homes and that means everything. So then what happens is we turn around and we take those non that distressed debt, we get it performing again. So it's no longer distressed debt, it's actually called reperforming. And then we, after 18 to 36 months of it, re performing, we package those up and we get them back on Wall street, which hedge funds that manage 401ks, things like that, invest in those and continue making money that way. So the question is again, who would want to invest in distressed debt? Well, companies like ours because we understand that it is a piece of the economy and keeping the economy going and it is very profitable and lucrative. And we love helping everybody. We help our investors, the banks, the borrowers, the communities. And that's who we are. At the end of the day, we are Titan Impact Group and we leave every person property and community better than we found them. Thanks, everyone.
