Valuation of mortgage-secured debts
A number of mortgage loans that are sold by banks is growing. In the year 2013, there were 1447 such mortgages. In 2018, the number reached 4447. Large portfolios of debts, which are secured by a mortgage (use tangible assets, i.e. real properties, as collaterals), are bought from bank by large debt collection agencies that are more experienced in collecting sums owed by debtors. And it is that complex process of debt purchase and recovery, in which Lege Advisors also participates.
‘For debt administrators, we prepare valuations of entire portfolios of collaterals for debt packages. These are mostly NPLs, i.e. overdue and non-performing loans’ says Szymon Mojzesowicz, CEO, Lege Advisors.
In practice, a large market player usually buys from a bank a package of, for example, several hundred debts (loans) secured by real estate (both residential and commercial), and thus becomes a creditor. Then the creditor proceeds to collecting the debts. To be able to make a purchasing decision and find out what the value of collaterals is, the creditor-to-be asks Lege Advisors experts about various parameters. It is often the case that available information, which is a starting point for our analysis, is limited to a list of entry numbers in land and mortgage registers
‘Based on entry numbers in land and mortgage registers, we examine legal statuses of real properties concerned. Then, we supplement our information with geodetic and planning data. Our next steps are a field visit for verification purposes and a merger of the data in one report. Then we proceed to analysing market for sales levels, unit prices, rental rates, offerings, and liquidity levels for a given real property type.’ explains Szymon Mojzesowicz, CEO, Lege Advisors.
On the basis of all those data, a report is prepared and delivered to an ordering party, which report is then used in a portfolio analysis as the basis for estimating a return on investment in acquiring a given debt package.
‘For successful trading in debt packages, current debt levels and collection costs have to be evaluated against the value of collaterals. Therefore, a collateral assessment in the field and a market analysis are essential for making proper investment decisions.’ clarifies Szymon Mojzesowicz. Frequently, appraisals are required for particular real properties, but, where entire portfolios are subject to valuation, it is usually the case for selected properties only.
Source: Lege Advisors