Note Success Story via Loan Modification

[Gabe K.]

Hi Fellow BPers,

This is a success story about helping homeowners and profiting from a non-performing note backed by a 1st mortgage in Washington, DC. Here is the story:

The homeowners had a difficult 2011 when they both lost their jobs and their property's value plummeted by 65%. They defaulted on their mortgage and their lender wouldn't work with them. When we purchased their loan just over a year ago, they were fully employed and we gladly worked with them to modify their loan so they could keep their home. We started with a 12-month forbearance period and then reduced their principal balance by over $100,000 and lowered their monthly payment to only $679 for 15 years. Here are the numbers:

• Original loan balance: over $200,000
• Property value: $55,000
• Note purchase price: $34,000
• Total payments received during 12-month forbearance period: $20,000
• 12-month forbearance yield: 59%

Modified loan:

• 15-year fixed rate mortgage
• 9.50% interest rate
• $65,000 principal balance
• $679 monthly payment
• Yield-to-maturity: 23%

How does everyone like this investment we worked on? Thanks for viewing our post.

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