A Hybrid Loan Conversion is the best of all worlds especially for people who are facing foreclosure or are just struggling every month to make their house payment. This may be due to payment adjustments on their current loan, it may be due to a job loss or some other reason where your economic picture has changed.
The way the Hybrid Loan Convesion works is actually quite simple. When you bought your home, you went to a bank or mortgage broker. They then packaged up your information and got approval from an investor who then agreed to fund your loan. You may not have known that the bank or broker you are working with very likely never fund their own loans. After a period of time, the investor sells the note to another investor. Depending on the status of the note it can be for a profit or for a loss. You as the homeowner however will never know what the new investor paid for your note. The good news is that the terms stay exactly the same for you. Even if the investor buys it for $100,000 more than what you owe. You still pay the original note payment. But if the investor buys the note for $100,000 less, they will never tell you and still charge you based on the original note. That’s the benefit of being able to buy and sell notes. It’s all about the profit.
But if that’s the case, why doesn’t the original investor just give you the discount and re-cast your loan so you can afford your home? Oh yeah, that’s called a Loan Modification. There’s a thousand theories as to why the lenders won’t do this including the fact that some of them make more money when they foreclose but that’s not the scope of this article.
Along comes the Hybrid Loan Conversion (HLC) investor. They do the same thing as the other investors and buy your note from the previous investor but because you’ve been behind on payments and the value of your home is about half of what it was before, they can buy it at a substantial discount. As an example: Your note is for $600,000 but behind on payments and decreased property value, the HLC investor will buy it for say $300,000. The investor will then issue you a Service Value Guarantee (new terms on the note they just bought) at say $350,000. The will re-calculate the payments based on $350,000 not $600,000 now making your home affordable again. You can visit http://www.HybridLoanConversion.com to watch a video that goes into more detail and get more details.
In the end of the day, you the homeowner and the investor win. You get to keep your home and the investor now has a note with a $50,000 profit built into it. In the end the investor will again sell the note ($350,000) to another investor at an additional profit but that’s how the world turns.
Frankly this is one of the best things I’ve seen come on the marketplace since the market started to turn.
