It’s no great secret that even as distress continues toaccumulate, foreclosures are slow in coming. The leeway banks havebeen given in modifying loans is one factor, and the lengthy timeframe entailed by the process in judicial-foreclosure states suchas New York, Florida and New Jersey is another. This is giving riseto note sales as distressed asset holders look to cut their lossesby getting rid of those assets as quickly as possible. In the shortterm at least, we can expect to see more such sales, expertssay.

“There are still a lot more modifications and foreclosures goingon than actual note sales,” points out Kingsley Greenland, CEO ofBoston-based DebtX. He adds, however, that note sales are “growingin usage very quickly” and he expects to see more such investmentopportunities coming to market over the next six to 12 months.

Kevin Welsh, a senior vice president with the New Yorkinstitutional group at CB Richard Ellis, would agree. “I like touse the expression ‘debt is the new equity,’” he says, adding thatthe notes are “typically being acquired by relatively sophisticatedinvestors.” Some buyers acquire the notes with the goal ofeventually gaining control of the property (see “Loan to Own?Expect the Unexpected,” beginning on page 14) while others are lessconcerned with real estate than with maximizing yield.