Buyers of distressed residential mortgages who want financing should tell their prospective backers all about their mistakes, financiers in this niche say.

"We're going to run into bumps, so I want to know, how do you handle that?" Catherine Onnifrey, a director of residential property finance at Doral Bank, told attendees at SourceMedia's Distressed Residential Mortgage Summit Thursday. "What the last credit crisis showed us is people react very differently" to stress, she says.

Onnifrey wants to be sure the players her $7.8 billion-asset bank finances won't freeze in a difficult situation but instead will take constructive action. This is crucial because they are working with problematic assets that are likely to present them with challenges

"This is tough stuff that you guys do," she said. Her bank is a unit of Doral Financial (DRL) in San Juan, Puerto Rico.

Onnifrey's fellow panelist Ira Platt, the president of 221 Capital LLC, said he has a similar attitude and often asks mortgage market participants, "What keeps you up at night?"

If he doesn't like the answers, their chance of getting financing is slim even if the returns from their investments have been extremely strong.

"I'm not doing a transaction unless I like the counterparty, no matter how good the returns look," Platt said.

Counterparties need to show they can "operationally get through pools" and have reliable expertise on board to do that, from title experts to vendors, he says.

It's not about the asset, "it's how you manage it" to resolution, Onnifrey agrees.

Follow the Distressed Residential Mortgage Summit on Twitter: #buysellmortg14

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