In this article we intend to introduce the reader to a real estate tokenization use case, that of the Tokenized Expired Portfolio Loan, which you will be able to find on our Investment Platform once you register, and thus learn about the details of the tokenized opportunity.

What is a Non Performing Loan (NPL)?

In the world of finance, it is common to come across terms and concepts that can be confusing for those who are not familiar with them. One such concept is the Non Performing Loan (NPL).

A Non Performing Loan, or NPL, refers to a loan that has ceased to generate income for the lender because the borrower has defaulted on the agreed payments. In other words, it is a loan in which the borrower is not meeting his or her payment obligations, either due to lack of financial capacity or for other reasons.

Specifically, the Non Performing Portfolio Loans (NPLs) we are interested in for our use case are those secured with a property as collateral or security to back the loan, i.e. failed or defaulted real estate mortgages.

In this type of loan, the mortgaged property is used as security to protect the lender’s interest. If the borrower fails to meet payment obligations as agreed, the lender may initiate foreclosure proceedings to recover the outstanding debt. This involves petitioning the court for a forced sale of the property to obtain the necessary funds.

NPLs represent a problem for financial institutions, as they directly affect their balance sheet and profitability. When a mortgage is considered NPL, the lender must take steps to recover the funds owed, which may involve negotiations, restructuring or even legal action.

How to get a return on a Non Performing Loan (NPL)

Nonperforming loans represent a challenge for financial institutions, but also offer opportunities to implement recovery strategies by debt acquirers or debt buyers.

It is quite common for financial institutions to choose to release their balance sheet and transfer the responsibility of debt recovery to another entity. These specialized companies acquire the Delinquent Portfolio Loans at a discount and take over the management and recovery of the debt with the objective of making a profit.

Let us remember that we are talking about defaulted real estate mortgages, therefore when purchasing the NPL the acquirer is subrogated to the credit right of the financial institution. This allows the new creditor to negotiate out of court with the debtor or to follow the foreclosure procedure, which ends with the sale of the property at public auction.

In short, you can profit from a mortgage NPL by buying the debt at a discount and selling the property at a higher price at public auction.

We could give you examples of buyers of Non Performing Loans such as Intrum, EOS Group or Arrow Global. The point is that they are unknown to the general public, as this market is restricted to investment funds or highly qualified professionals with high purchasing power.

However, in Tokeniza Real Estate we want to democratize the access to the Non Performing Loans business, joining forces with our Investor Community. We have a team of professional experts in the buying and selling of NPLs, together with the best blockchain asset tokenization technology.

Therefore, we are going to offer fractional investment opportunities to all those who want to learn, enjoy and above all generate passive income with the exciting and lucrative business of buying and selling Non Performing Loans.

How we tokenize a Past Due Loan Portfolio

For this use case, Tokeniza Real Estate is going to follow its standardized tokenization protocol, consisting of subscribing a Tokenized Merchant Participating Loan with the investors who purchase the tokens.

The legal contract describes the NPL purchase and sale project in detail, stating the actions we will carry out with the funds raised, all the legal clauses required by our legislation, the characteristics of the token and the financial projection.

With the funds raised from the sale of the tokens, Tokeniza Real Estate’s team of professionals will access listings of mortgage NPLs from the main Spanish financial institutions and national and international funds, to identify real estate assets of interest in Spain. We will negotiate with property owners and financial institutions to subrogate in the best opportunities that will allow us to sell and monetize the property at public auction.

As the process progresses, we will keep the token holders of each NPL informed of the cost of each transaction in the process, the characteristics of the property collateral to the NPL acquired, the status of the foreclosure and even the day of the auction so that they can enjoy it live.

Once the property is sold at auction, we will distribute the net profits to the investors in proportion to their participation in the investment, i.e. the number of tokens they own. It is important to note that in this type of tokenized real estate project, we will not distribute periodic returns, the entire return on investment will be returned to the investor in a lump sum.

If you have arrived here and you are interested in knowing the details of our Tokenized Past Due Portfolio Loans, do not hesitate and enter the Tokeniza Real Estate platform to be part of this change of era.

Let’s democratize access to the real estate market!