Small Credit Union need to liquidate

We sold three homes earlier this year and the buyers financed through a credit union. The credit union needs these buyers to refinance out of their existing loans.

Looking for a private lender to take over these performing notes, all are A paper and 700 plus ficos.

Edited: 06/26/2010 at 09:18AM

Skylar Howard

Real Estate Consultant · Siesta Key, Florida

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Icon_minipost Aug 10 '09, 10:49 AM

And the discount is....

Edited: 06/26/2010 at 09:18AM

Jon Holdman

Real Estate Investor · Denver, Colorado

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Icon_minipost Aug 10 '09, 10:59 AM

How can the lender force them to refi? Were the loans callable?

Sounds like the credit union's problem to me. Like Skyler says, they will need to sell the notes at a sufficient discount to get a buyer.

Edited: 06/26/2010 at 09:18AM

Jon Holdman, Flying Phoenix LLC

Daniel Garcia

Residential Real Estate Broker · Van Nuys, California

44 posts
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Icon_minipost Aug 11 '09, 12:39 AM

I am a Realtor and I thought I had seen it all. I was wrong.

The mortgage broker did something that is new to me: he processed these loans through a credit union and was paid cash by the borrowers outside of escrow. In doing so, he created false documentation to allow the loan to be approved. The credit union approved and funded the loans. In quality control 6 months later, they discovered the unoriginal documents.

The homeowners all have 700 plus ficos, they all put money down, they all paid the person cash and they all have to refi or the Credit Union is threatening a criminal prosecution.

Any ideas on how to help these people?

Edited: 06/26/2010 at 09:18AM

Jon Holdman

Real Estate Investor · Denver, Colorado

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Icon_minipost Aug 11 '09, 02:42 AM

Why don't they just apply for loans through the normal process? This just seems like a normal refinance. Sounds like the CU wants all their money back, where a buyer for these fraudulent loans would want a very large discount. From what I've heard and read, this happened a LOT during the bubble.

Are these loans upside down? I don't get why these borrowers don't just refi?

Edited: 06/26/2010 at 09:18AM

Jon Holdman, Flying Phoenix LLC

Daniel Garcia

Residential Real Estate Broker · Van Nuys, California

44 posts
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Icon_minipost Aug 11 '09, 02:47 AM

Jon,

1 loan is now at 100% LTV because the value has dropped a bit. 1 homeowner is selling his home to get rid of the whloe issue. 1 homeowner is refinancing into an FHA and has recruited others to be co borrowers so they can qualify. 1 loan is actually upside down 5%.

The 2 that need help are the 100% and the upside 5% situation. They can't just refi because nobody will do those loans today and they spent all their money on downpayments when they bought.

I am not sure if they have a solution.

Edited: 06/26/2010 at 09:18AM

Jon Holdman

Real Estate Investor · Denver, Colorado

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Icon_minipost Aug 11 '09, 03:14 AM

Sounds like they need a lawyer to sue the mortgage broker. This sounds like an all-to-familiar situation these days. Buyers were put into houses they couldn't really afford using falsified documents. If they could have afforded them, why falsify the documents. Values fell, leaving them unable to refi. The mortgage broker, meanwhile, pocketed a nice payday. Maybe I'm reading too much into what your writing.

The solution is to move to a place they can afford, sell the property, paying off what they can and either getting the lender to forgive the rest or taking back a note from the lender for the deficiency.

Is there any chance the credit union would sell the notes at a significant discount? I'm thinking something like 50 cents on the dollar.

I'm not very sympathetic to the credit union. They may be crying fraud now, but they weren't paying attention when they made the loan.

Edited: 06/26/2010 at 09:18AM

Jon Holdman, Flying Phoenix LLC

Daniel Garcia

Residential Real Estate Broker · Van Nuys, California

44 posts
187 Influence

Icon_minipost Aug 11 '09, 03:28 AM

I am not crying for the credit union either. They are praising their quality control now, when it was missing in the first place.
The mortgage broker "works" open houses and he has not been found. He gets paid in cash and has apparently left the area. I considered asking the credit union to discount the loans and carry a private loan, but I wanted to explore all the possiblities first. I think I need to find out about a discount at this point.

Edited: 06/26/2010 at 09:19AM

Jon Holdman

Real Estate Investor · Denver, Colorado

11859 posts
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Icon_minipost Aug 11 '09, 03:31 AM

I moved this over to the Note Dealmaking forum.

I'd be curious to see what Marc has to say about these notes. I think you're looking at 20% discounts for well qualified buyers on notes with some equity and seasoning. These aren't nearly as secure, so the discount would need to be much larger.

Edited: 06/26/2010 at 09:19AM

Jon Holdman, Flying Phoenix LLC

Marc Faulkner

Note Investor · Kalamazoo, Michigan

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Icon_minipost Aug 23 '09, 09:31 AM

I would take a look at the spreadsheet but, I suspect that the equity situation is even worse than it has been presented. Most likely the crooked loan officer was working with a crooked appraiser to get the values needed to justify the loans. We look for notes/loans that have at least 10% real equity from the home owners stand point. If they have no equity what do the have to lose by just up and walking away?

Edited: 06/26/2010 at 09:27AM