Smithfield & Wainwright has specialized focus in the real estate evaluation, multi-tiered foreclosure process and repackaging and liquidation of bad debt for banks and financial institutions using the Mo-Mod™ platform. It provides a full array of proprietary services for pre and post valuation for banks and financial institutions handling illiquid assets. The proprietary platform does provide liquidation methods that are revolutionary for industry standards.
The following steps must be followed to truly understand the mortgage crisis and to preclude any further deterioration in real estate market values. All taxpayers and homeowners are affected when an asset of a bank or financial institution goes into foreclosure. The systematic and streamlined approach of the Mo Mod™ allows the protection of your most valuable asset, homeownership.
Smithfield & Wainwright’s approach is as follows:
Any property eligible for Mo Mod™ must immediately be appraised by a qualified and licensed real estate appraiser. All Smithfield & Wainwright’s employees adhere to the education standards set forth by the Appraisal Institute, along with USPAP (Uniform Standards of Professional Appraisal Practice) which establishes educational and experience qualification criteria for the licensing, certification and recertification of appraisers within the United States.
The appraiser must perform a 1004 REO appraisal to determine the true underlying asset value. The appraisal must include both a comparable sales approach along with a cost approach to determine the valuation range for the illiquid asset along with knowing current market conditions.
Once the asset value has been determined, the financial institution can apply the 38% DTI (Debt to Income) ratio to the borrower’s current gross income to determine the maximum payment the borrower can afford. The financial institution can use the following tools to calculate a monthly payment that fits within the 38% DTI noted above: apply the lowest fixed interest rate, along with applying a new loan amortization period not to exceed 40 years.
The investment community along with the financial institution can use the NPV (Net Present Value) of future cash flows to determine the market value of this mortgage in the secondary markets. The basis of the net present value calculation will be determined by the projected future appreciation or depreciation of the underlying asset valuation over the next 7 – 10 years.
Key protections necessary to protect the financial institutions and current/potential future investors must include verification of income from the borrower via check stubs, tax returns and bank statements.
Estimate the cost of foreclosure on this property, the loss on the investment using the foreclosure process and the future affect to similar properties if that course is taken to determine savings to the financial institution and current/investors. Mandating the cost of the loan modification must be less than the estimated foreclosure loss.
Modification of any loan using all above mentioned aspects which would recognize the requirement of sound real estate valuation to quantify and exercise proper risk management for all aspects of the Mo Mod™ process. The investment community now has the correct analysis to review and audit the steps used during the loan modification process. Therefore providing the investment community the necessary risk management and stabilization controls to properly invest in portfolios regarding the real estate market utilizing the Mo Mod™.