Scratch & Dent Loans

Scratch & Dent Loans are mortgage loans that are not saleable to FNMA, FHLMC, or in the normal whole loan and securitization markets in the ordinary course of business as newly originated, non-defective mortgage loans. This is a classification of mortgage loans that may include:

  • under-performing loans;
  • re-performing loans (meaning, for example, mortgage loans which may have had a single late payment in the past 24 months but may now be current; or mortgage loans which may have had a rolling 30-day late payment but never actually defaulted);
  • loans with errors in relevant documentation (for example, quality control discovered compliance issues after the loan was closed/funded; or appraisal flaws causing LTVs to be outside guidelines; or underwriting errors resulting in loans being outside guidelines; or failures by the originator to adhere to applicable laws and regulations; or other defects in credit documentation); and
  • credit deterioration which can be caused by various factors such as delinquency, default, bankruptcy, foreclosure, charge-offs, loan modifications, restructuring downgrades, credit rating changes, economic downturns, and industry-specific events.

Although Scratch & Dent Loans are typically sold at a discount compared to their new counterparts, let Royal American Financial demonstrate their expertise at locating an investor interested in your Scratch & Dent Loans at a lucrative price.

Contact Royal American Financial today to discuss your options!