Saturday, May 31, 2014

Peer to Peer Lending Groups Seem Unaware about First Lien HELOC and First Lien Replacement HELOC Investment Opportunities.

Just when it looked like social media peer to peer lending would fill in the gigantic void left by the government, the banks, and Dodd/Frank when it came to homeowners with first lien HELOCs that are about to reset, Peer to Peer lending appears to have lost its way.

The goal of peer to peer lending apparently is to write lending "algorithms" that will automate loaning to simply cut out the bank, but not necessarily make that much of a difference otherwise. I can't find anyone in peer to peer lending that has discerned the distinct investment advantage between lending to homeowners who paid off their homes and then got or want a first lien HELOC, versus homeowners who cashed out with a second lien HELOC without ever having paid off their home.

For an investor, it is a no brainer to invest in a first lien HELOC opportunity versus a second lien HELOC that most likely was a cash out that put the owner further behind ever paying off the home. 

There are millions of first lien HELOC's that will soon reset (reset means that after ten years of interest only payments, the HELOC's require a 15 year payback period in which the interest and principle are paid together). First Lien HELOC's about to reset that require a replacement first lien HELOC are SUPERIOR investment opportunities to second lien HELOC's and sadly it appears as if the peer to peer investment movement is oblivious to this fact.

Of course, what makes the first lien HELOC even more attractive is when the loan to value is at 50% or lower. It will be interesting to see if peer to peer lending can break away from their banking puppet strings and look beyond media misrepresentation of the first lien HELOC market.

Upon further review, I realize the error of my ways. There are NO private investors that would consider matching the prime rate even if the investment was 100% guaranteed. Peer to Peer is just grandoise talk for eliminating the bank so the private investor can make even more money!

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