Dictionary definition of “scratch and dent loan”

scratch and dent loan

n. a loan or mortgage that has become a risky debt investment, especially one secured with minimal documentation or made by a borrower who has missed payments. Subjects: English, Money & Finance, Jargon

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Citations: 1998 Insurance Regulator (Nov. 23) “Hanover Weathers REIT Storm” vol. 21, no. 45, p. 1: Hanover’s primary niche is buying “scratch and dent” mortgage portfolios that for one reason or another do not qualify for Fannie Mae or Freddie Mac. 2000 Commercial Mortgage Alert (Aug. 7) “Firm Plans to Buy Loan “Kickouts”” vol. 7, no. 31,: A company that invests in high-yield real estate debt is looking to buy loans that have been “kicked out” of commercial MBS deals. Midwest Equities of St. Louis has initially allotted $50 million for the purchase of “scratch and dent” loans. 2005 Frank J. Fabozzi Handbook of Mortgage-Backed Securities (Dec. 21) p. 94: The “other” category includes…scratch and dent loans and resecuritizations. 2007 Julie Creswell, Vikas Bajaj New York Times (Aug. 1) “Jittery Stock Market Drops as Mortgage Fallout Spreads”: Founded in 1996, New York-based C-Bass specializes in investing in distressed home mortgage loans. Also known as “scratch and dent” mortgages, these are loans that were either not documented properly or on which borrowers missed a payment but are now current.

Posted 23 Aug 07 | Permalink | Tell a Friend