Forbearance, Distressed Real Estate and the NAR/DOJ Settlement Agreement

Although not scientific, looking around the landscape it appears some distressed property owners are taking account of their situation and off-loading properties to wholesalers. I’ve noticed a distinct increase in property offerings across several Arizona wholesalers.

While the Governor’s residential eviction moratorium order expired on Oct. 31st and his commercial order expired May 31st, the CDC order is still in effect for residential property owners to Dec. 31st. You can listen to my interview with Judge Wismer on this topic at www.weservgad.org. Click on GAD Podcasts.

Some of that investor class soaking up potential distressed real estate are not purchasing the real estate, but the distressed or non-performing notes. Some purchase individual notes, but the larger investors invest in the note pools, also known as NPLs, offered by Freddie Mac, Fannie Mae, HUD, regional banks and other lenders.

There are several Impact Investor arms to nonprofits operating within the social services realm with an emphasis on preserving homeownership to underserved populations. The model generally looks like this:
The non profit has a mission to preserve homeownership and purchases non-performing loan pools as part of that mission, example – the Freddie Mac/Fannie Mae Impact Investing Program.

The NPL assets are managed by the non-profit and in order to create the funds necessary to manage the program, the non-profit forms a fund management entity and solicits investors. The nonprofit charges less than market rate for their management fee and the projects within the fund are small with no commercially available financing. While the nonprofit uses some traditional tools for ascertaining risk and return, its main measure is social impact. The funds raised by investor fees is designed to cover the costs with little or no profit and any profit is invested back into the nonprofit to perform its mission.

Under the October 9, 2020 IRS ruling, that impact fund model may mean the nonprofit forgoes its tax-exempt status. While the ruling is specific to one nonprofit with this model, you can be sure others are taking a long look at the ruling.

NAR Agreement with DOJ: By now a lot of you have already heard and seen the DOJ/NAR settlement regarding antitrust concerns. The DOJ (Department of Justice) filed both the lawsuit and the settlement simultaneously. NAR agreed to a settlement.

NAR announced the upcoming changes to the Code of Ethics and MLS rules and policies in compliance of this agreement. You can watch the video to see a quick overview.

You can read the NAR summary and read the FAQ at nar.realtor.

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