Paperstac’s 2025 End of Year Market Report

Investment to UPB Ratios: The Pricing Foundation

Investment to Unpaid Principal Balance (ITB) ratios show what investors are paying relative to the remaining loan amount, making this a core metric for understanding note pricing dynamics.

Performing First Position Notes Lead the Market

Performing first position notes command the highest ITB ratio at 73.35%, with a range from 6.81% to 119.54%. This premium reflects investor confidence in payment continuity and the security of a first-lien position. The fact that some trades clear above par (over 100% ITB) signals intense competition for high-quality, cash‑flowing assets.

Non-Performing Notes Trade at Steeper Discounts

Non-performing first position notes average 56.71% ITB, roughly a 17‑point discount to their performing counterparts. This spread illustrates the risk premium investors require when acquiring assets with payment issues. The broad range from 21.08% to 121.48% underscores how factors like collateral quality, jurisdiction, and workout potential drive individual pricing.

Second Position Notes Reflect Additional Risk

Second position notes, as expected, trade at lower ITB ratios given their subordinate lien status:

• Performing 2nd position: 47.38% ITB
• Non-performing 2nd position: 61.16% ITB

Interestingly, non-performing second position notes show a higher average ITB than performing seconds, likely reflecting niche strategies where investors pay up for specific workout angles, borrower equity positions, or senior lien dynamics.

Investment to Value: Understanding Equity Protection

Investment to Value (ITV) ratios measure investment size relative to property value and highlight the equity cushion that protects investors on each trade.

Conservative Leverage Across the Board

Performing first position notes average just 37.17% ITV, meaning investors typically maintain nearly two-thirds of the property’s value as equity buffer. This conservative leverage profile provides meaningful downside protection, even in softening markets. Non-performing first position notes trade at an even lower 25.28% ITV, giving investors roughly a 75% equity cushion and multiple viable exit strategies.

Second Position Notes Show Minimal Property Exposure

Second position notes exhibit very low ITV ratios:

• Performing: 10.16% ITV
• Non-performing: 7.74% ITV

These modest exposure levels show that investors are heavily discounting for the senior lien ahead of them and intentionally keeping positions small relative to overall property value.

Average Transaction Prices: Market Entry Points

The average trade sizes reveal accessible entry points across note types, making it easier to match strategies with available capital.

These figures show that mortgage note investing remains accessible to investors at a range of capital levels, from starter notes to institutional-sized deals. The wide pricing bands reflect diversity in property values, loan sizes, and geographic markets represented on the platform.

Market Distribution: What’s Actually Trading

Performing Notes Dominate Volume

An overwhelming 94.16% of assets sold are performing notes, with 5.84% classified as non-performing. This mix shows that many investors on the platform are currently prioritizing predictable cash flow, while Paperstac continues to support a steady flow of non-performing inventory for investors who specialize in workout and distressed strategies.

First Position Notes Are King

First position notes represent 97.82% of transactions, leaving second position notes at only 2.18% of volume. This pronounced preference for senior liens reflects their stronger security, simpler workout paths, and superior liquidity in the secondary market.

Mortgage Notes Outpace Land Contracts

Traditional mortgage notes account for 88.43% of sales, while Contract for Deed (CFD) and land contracts comprise 11.57%. Investors appear to favor mortgages because of their well-established legal frameworks, clearer enforcement paths, and greater familiarity among lenders, servicers, and investors.

Single Assets Preferred Over Pools

Individual notes make up 89.41% of transactions compared with 10.59% for pools. This suggests that many participants prefer to cherry‑pick specific assets rather than buy in bulk, reflecting easier deal-by-deal due diligence and sharper pricing transparency at the single‑asset level.

Transaction Security: Risk Mitigation in Practice

Escrow Utilization Is Standard Practice

Nearly 90% (89.56%) of funded deals use escrow services instead of direct seller payments. This widespread adoption signals a maturing market where professional standards around fund handling, document transfer, and fraud prevention are the norm.

Collateral Audits Are Nearly Universal

An impressive 98.68% of deals employ a collateral auditor — a clear indicator that industry best practices are being embraced across the board. The modest cost of a third‑party audit is widely viewed as justified by the risk reduction it provides.

Looking Forward

The 2025 data points to a maturing marketplace characterized by strong professional standards, conservative leverage, and accessible pricing. The dominance of performing notes signals that most participants on Paperstac continue to emphasize income generation over speculative distressed plays.

For newer investors, these benchmarks suggest you can enter the space with relatively modest capital while leveraging established due diligence workflows and secure transaction processes. For experienced operators, the wide dispersion in ITB and ITV ratios across asset types highlights opportunities across the risk–return spectrum.

Using these 2025 benchmarks as a reference point helps investors evaluate individual deals against current market norms, spot mispriced opportunities, and structure competitive bids in the Paperstac marketplace.