How Risk, Defaults, and Foreclosures Work
Peter asks Eric to explain how risk works in simple terms. When borrowers pay monthly interest, those payments go to investors. Most loans last about one year. The key question is what happens when a borrower does not pay on time.
Eric uses a real example. A foreign national bought a 14 million dollar Manhattan townhouse in cash and then sought a 6 million dollar refinance. This is a low loan-to-value deal and a very strong borrower. Normally, borrowers like this pay every month. If they do not pay off the loan at maturity, that is called a maturity default. When this happens, Goodman Capital steps in immediately. Their team spent more than twenty-five years working only in distressed debt. They handled foreclosures and complex legal processes long before launching their current funds.
Because everything is done in-house, their team can act fast. They send notices, accelerate the loan, and file foreclosure paperwork without waiting for outside law firms. Even in New York, which uses a judicial foreclosure system, they usually recover principal within twelve to eighteen months. Eric’s main point is simple. Their experience in distressed debt protects investors today. Over thirty-eight years, they have never lost investor principal.
