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Views of Sales Activity Mixed
National Mortgage News – March 1, 2011 
Views on how active distressed portfolio sales are or will be this year have been mixed although there seems to be some consensus that starting late last year there has been at least a relative increase.

"It seems that the distressed asset thing picked up somewhat in the fourth quarter. It wasn't barn burning but it did pick up," Guy Taylor, chief executive of Equi-Trax LLC, Santa Barbara, Calif., told this publication.

"I anticipate there's going to be...and this is purely speculative on my part and anecdotal with really nothing to base it on other than the fact that I think there's going to be a lot more emphasis on the GSEs as well as lenders to start to clean up their balance sheets.

"The question is how much are they going to want to clean up their balance sheets? How much are they going to be willing to push into foreclosure? I still think there's going to be some limitations and constraints around pushing properties into foreclosure by most of the major players, whether it be GSEs or financial institutions and I think that's going to be a managed process," said Taylor, whose company provides-among other things-portfolio analytics.

When asked about some of the mixed reports on how active the market is or could be, Frank Pallotta, executive vice president at Loan Value Group, Rumson, N.J., said a pickup in the market could occur, but he does not believe it will happen.

"There's going to be people out there saying, 'We've got a gazillion dollars and we're ready to buy.' Well, unfortunately a trade involves a buyer and a seller.

"I think if the banks figure out that there are pools of loans they are going to sell, it's probably not going to be the pools of loans the buyers want, which means the buyers are going to lower their price points, which means sellers may not sell and that's what's going on here. If you want to buy a Cadillac and somebody shows you a Chevy you're not going to get a trade done, not to take anything away from Chevys," but it's a matter of mismatched expectations, he said.

"It's been a quiet market for awhile," acknowledged Frank Marshall, president of Default Resource, Frederick, Md.

"When we first got into the business that was actually a very large portion of our business, it quieted down but we think that that's going to pick back up," he said, but also added, "I think supply and demand does not allow for a big chunk to go through very quickly because retail financing is tough.

"If you're buying these things, you're only buying as many as you can sell unless you could buy to hold, which is not quite common. So if you're buying to sell and you don't have end-financing that's going to slow down the pace of transactions."

But "it appears some players in the crowd are starting to make transactions and buy things as evidenced by let's say a couple of the FDIC portfolios. Fannie's...putting out some stuff. There's stuff you didn't see [several] months ago," said Glen Calderon, president of Default Resource, in an interview.

"Everything runs in cycles," Marshall said. "Back in the '90s it was portfolio-based, fairly large portfolios moving. What we saw early in this cycle is...small units of REOs that were selling and not necessarily larger portfolios and now you may begin to see that again where [larger] books of...loans could begin to trade again."