To solve this challenge, AHP has been bidding to acquire pools of REO's and subperforming mortgages at large discounts. By gaining control of the REO's and mortgages, AHP can then approach each family and offer them an AHP Lease/Option if they want to stay, or an incentive payment if they want to move.
If the family does not want to stay or the home is vacant, the home is marketed through local real estate agents to sell promptly at discounted prices to cash buyers. Because the pool properties are purchased at substantial markdowns, they can be resold at wholesale prices and still generate a good return.
This approach creates a built-in pool of potential AHP clients. Effort now squandered in dealing with uncooperative servicers and lenders can be better spent providing families with long-term solutions to stay in homes in which AHP has taken over the lender position. Ideally, acquisitions of REO's and delinquent note pools will become the primary driver of families to AHP.
AHP completed their first note pool purchase in February and dispositions have proven successful. Now, AHP has entered into a rolling contract with a large bank to acquire their REO's, the majority of which are still occupied. The REO's are expected to continue to be acquired on an ongoing basis.
In a quest to keep AHP a Main Street solution without the poison which comes from Wall Street money, AHP is utilizing private investors to fund the REO and Note purchases. Investors receive assignments of the Notes and Defaulted Mortgages, or Participation Agreements and Security Agreements on the REO's. Due to the anticipated short 14 - 90 day life of most of these investments, the annualized returns are projected to be significant. Investment sizes range from $9,000 on up, well within the reach of many investors. AHP puts 10% down each acquisition and, due to the time value of money, AHP and investors both have the incentive to turn over investment funds as fast as possible. Also, bridge investors receive the first right to acquire the homes of those families who choose to stay with an AHP Lease and Option.
American Homeowner Preservation is excited about this next step in their evolution.