Case in point is the re-emergence of "contracts for deed" whereby a home is sold by a private entity to a buyer that doesn't take out a "real" mortgage but instead contracts to buy the property--eventually. Generally, the "buyer" makes a small downpayment and the seller retains legal title. Under most cases, the deed cannot be executed for at least the first year. The play is this: someone looking to buy a home or investment property doesn't have to hassle with the home buying process, credit checks, and all the new rules and regulations driving the mortgage process.


In particular, what's driving the increased use of private deeds is the foreclosure crisis, he said. "With a contract for deed you don't need to foreclose," he said. "It's an eviction. The use of these is being driven by the long foreclosure timelines we're seeing."

... no mortgage, per se, is filed in a county court house. "What you do with these is file a memorandum on the land contract," he said.

For the lender the beauty of these deals is simple: some of the paper on such contracts yields up to 11%. "Those are the numbers we see in Michigan," said Lax--but he also notes that factored into the yield are a whole host of fees that might include appraisals, title insurance and other items.

It also appears that the private deed market is being driven by investors whose goal is to buy homes on the cheap and rent them out... It's no secret that traditional mortgage lenders (mortgage bankers, commercial banks and thrifts) have tightened up their investor loan standards, so much so that many would-be landlords don't even consider going to a bank anymore.

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