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Law360 (October 7, 2020, 4:57 PM EDT) -- Real estate investor Lakeport Capital has joined a $175 million joint venture that will buy distressed residential mortgages, according to a statement Wednesday by Finitive, the financial technology platform that facilitated the deal.
Lakeport Capital joined forces with a division of "one of the top 50 global banks" to purchase nonperforming residential mortgage portfolios, the announcement said. The name of the bank was not disclosed.
The partnership will see Lakeport identify and complete the underwriting for the loan portfolios, and the banking unit will supply the funds to purchase them, the announcement said. The joint venture may also buy up additional assets using debt.
Upon acquiring the loans, Lakeport will "work with homeowners to help them become current with payments, refinance and stay in their homes," the statement said.
Lakeport focuses on buying defaulted mortgages in jurisdictions such as New York, New Jersey, Connecticut and Florida — states with high delinquency rates during the COVID-19 crisis, the announcement said. The mortgage portfolios are generally secured by single-family homes, condominiums or smaller multifamily buildings, the statement said.
"With mortgage delinquencies on the rise, now is an opportune time to purchase distressed mortgage portfolios," Lakeport co-founder Yonel Devico said in Wednesday's statement. "Many banks and other lenders are looking to remove [nonperforming loans] from their balance sheets, particularly post COVID-19, to reduce overall reputational risk and address long-term profitability."
Finitive, which connects institutional investors with private credit deals, highlighted Lakeport's experience in the distressed debt space.
"Lakeport Capital brings extensive [nonperforming loan] sourcing capabilities, foreclosure and work-out expertise to a marketplace with limited competition," Finitive founder and CEO Jon Barlow said in the statement.
The partnership also comes at a key moment for the distressed mortgage industry, Barlow told Law360.
"As the pandemic continues to affect the ability of homeowners to pay their mortgages, many loans have fallen into default," Barlow said. "As a result, the inventory of nonperforming mortgage loans has surged to levels not seen in many years."
The COVID-19 pandemic has contributed to considerable disruption to real estate markets, as job losses and the economic downturn have hit homeowners and businesses grapple with leases for locations shuttered by lockdown orders. The U.S. Centers for Disease Control and Prevention announced a nationwide eviction moratorium for certain renters that will last through the end of the year, and many states have implemented their own eviction stays as well.
Lakeport Capital did not immediately respond to a request for comment on Wednesday.
--Additional reporting by Emma Whitford and Dave Simpson. Editing by Janice Carter Brown.
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