Getting Away from Bank-Only Lending For Residential Mortgages

OlufisayoJuly 19, 201901,113 views

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How can a person invest in a residential mortgage? In the years gone by the only way that an individual could be invested in a mortgage was when they purchased their own mortgage. They were basically taking a bet on themselves that they would be able to pay down that mortgage and that the property would increase in value over the years.

That is a massive bet, but it often paid off for those who took it. It was a great way to build up wealth, and it has worked over generations for families. However, we still lacked the ability to bet on residential mortgage besides our own for the most part. That was the problem that Mike Nierenberg wanted to solve by “thinking outside the bank”.

The Vast Majority of Mortgages Are Securitized These Days

Did you know that about eighty percent of all residential mortgages are now securitized? What this means is that the mortgages have been bundled in some way with other residential mortgages in existence to create a security that an individual or institutional investor can put their money into. The reason to purchase this security is to take a bet that most of the residential mortgages in that bundle will be paid in full and on time each month. If that happens then investors make some profit on their investment. It is only when people fail to make their mortgage payments that things can go wrong.

NRZ Is Running an Active Portfolio

NRZ is the child of Mike Nierenberg and is an actively managed portfolio of residential mortgages and other securities. IT is actively managed because constant monitoring of these type of investments is critically important. One does not just put their money into mortgages and then back off and hope for the best. Rather, they have to take the extra steps to make sure that the portfolio is well maintained so that it may continue to grow. That is what Mike Nierenberg does for his investors, and they have to admit that it has paid off well for them.

You Can Invest in It Through the Stock Market

Do you believe in the vision of a man like this? He has had such forward looking ideas that many are amazed by what he comes up with each and every day. The good news for the average investor is that they do not require any kind of special access in order to put their money down on this kind of investment. All that they actually need to do is invest in the company through the stock market. It trades under the symbol “NRZ”, and it has maintained a rather tight trading range in the last year. This means that the company is managing its risk pretty well according to investors who have put their money into it. It hasn’t soared too high, but it has sunk real low at any point either.

Getting into Mortgages That Are Non-Bank Originated

The unique thing that NRZ is doing lately is getting invested into mortgages that are not beginning with banks. What this means is that NRZ is exploring what has now become the slight majority of mortgages. Numbers show that about fifty-one percent of mortgages are now originated somewhere other than a bank or credit union. That is a lot of mortgages, and much of that market remains untapped by other investment companies. This could spell big news for NRZ as it continues to explore new opportunities that are not as explored by others. Investors should be excited about this possibility.

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