A quarter of newly originated residential mortgages are expected to be denied, creating a more than $300 billion market for mortgage and trust deed lenders despite slow real estate and lending recovery, says Alim Kassam, CEO of Rama Capital Partners LLC, and Managing Member of The Rama Fund.
“[Fannie Mae expects] a little over $1 trillion of residential mortgages to be originated nationwide. Furthermore, Ben Bernanke came out and said that one out of four mortgage applicants today will be denied,” Kassam said. “We are trying to fill that void in the market and trying to help those people who otherwise wouldn’t be able to get financing.”
Kassam says The Rama Fund, which he manages, pools borrowers and lends to them without investing in real estate directly, and pays an average of about 0.81% a month net returns to investors. Kassam says the Fund manages against the risk of nonpayment by rejecting about 95% of loan applications.
“We’ve been paying our investors 10.2% a year on average, net of all fees. When you stack that up against other asset classes, I think that’s a very good absolute return,” Kassam said. “We’re lending on average around 42 cents on the dollar, based on what a property is worth today.”
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