The recent credit crisis and series of bank failures has created a once in a lifetime opportunity for investors who know how to buy credit card debt and bad loans. The Government has been buying up banks with hundreds of billions of dollars of troubled assets. The assets of these banks will be sold to investors and other banks at a great discount. There are billions of dollars in bad loans that can be purchased from the FDIC and banks. Why not get your share of the profits to be made from the massive government bailout of the financial markets?
There are a lot of things to learn before you jump in and start buying distressed loans at a discount. Bankers receive a lot of calls from new and inexperienced investors every day trying to get great deals on distressed loans. You need to build a relationship with the right banker.
If you don’t already have money, you will need to raise money. It is important to have your cash ready to get the banks to give you the best price.
You should plan out a system for every part of the process. Compare the loan pools against each other and choose the best package for your risk level. Your efforts in analyzing and scoring the loans should allow you to estimate a recovery cost for your collection efforts. Some loans may not be collectable so you will need to estimate a loss percentage into your financial plan.
The FDIC also has a lot of information and frequently asked questions about buying loans, purchaser eligibility, and certification. Every interested investor should consider if loans are a suitable investment based on their own circumstances. Purchasers will need financial resources sufficient enough to bear the economic risk involved in a loan purchase. There is a lot to learn about buying bad loans. No loan package is the same and each must be given careful review and consideration. If it looks too good to be true, it probably is.
You will need to interview several collection companies and find one that has a good track record of collecting so you won’t have to make collection calls yourself. If you do not have any collection experience it is better to leave it to the professionals and factor that cost in before you purchase a loan.
There is a window of opportunity that will last several years and then, most likely, it will be over. In his book, Bailout Riches, Bill Bartmann, who created America’s largest debt buying and collection company in the 1990s and became a self-made billionaire, says “I’ve seen this movie before and I know how it ends: I make a Billion Dollars”.
Many more banks will be failing before the end of the year and record high foreclosures are expected to continue in the future. Several major banks have stopped foreclosure actions because a few employees cut corners and tried to rush the process. This delay along with the government response will disrupt normal market conditions and cause even more distress. This should make banks and the government more anxious to get the bad credit card debt off of the books of the failed banks so they can lend more freely again.
There are a lot of people and businesses that have been affected by the credit crisis. The real estate, construction, and mortgage industries are still in a state of confusion awaiting a recovery. This is the perfect time for people to learn how to buy credit card debt and make their fortunes.