Florida note buyers?

Question

Anyone out there with any experience in buying non-performing notes in Florida? I recently bought a note from a lender on a property in my area, but I am not familiar with all the rules about servicing it. I was told by someone an individual could service up to 10 loans on their own here in Florida without having to use a major servicer like FCI. I like the idea of buying notes at a discount and want to continue to add them to my portfolio, I just want to make sure I am crossing all Ts and dotting all Is.

Because I purchased this one I have been shown 2 more notes, one in Altamonte Springs and another in West Palm Beach, but I want to be sure I am evaluating the full extent of what I can and cannot do before pursuing more, especially one outside of my local area.

Brandon M. · Answer

@Dion DePaoli - Thanks for the clarification. With the previous note I purchased I already had the DIL agreement so I didn't have to really worry about the servicing. Any idea what a typical charge is for FCI or someone else to service the loan if I don't end up getting the DIL ahead of time?

@Mark Gustafson - with this particular lender all of the negotiations were actually done verbally/through email and they drew up the contract and then the assignment docs. You might not even need to have your lender draw up the docs, typically a lender has experience assigning mortgages so they likely have the docs they can use already. You might just want to have your lawyer review the contract they give you and then the assignment docs they send over.

Bill Gulley - With this particular deal I actually spoke to the borrower first and saw the lender was one I had never heard of, located out of state, so I figured I had a decent chance of reaching them and buying the note from them. Typically a lender like that has no interest in foreclosing on the property and owning a property out of state. Luckily for me this was the case here and I got a great deal. And now I have a good relationship with this lender and have been presented 3 more notes just in Florida that I could buy from them at a nice discount to current value/unpaid balance.

Marty Happle · Answer

Use a servicer.  It isn't worth the risk.  There are attorneys out there working with borrowers to find a loop hole in a lender's practices to file suit.   Also it's so cheap and easy, it is a good business decision.   There are some sellers out there now that won't sell you a pool of notes unless it is going right to a servicer.  I believe this trend will carry through to avoid federal scrutiny on all ends.

When you say a good deal, how many cents did you pay for the note?  (if you don't mind)

Mark Gustafson · Answer

Hello @Brandon M.

The most recent one I bought I already had an agreement for deed in lieu, so the assignment of mortgage and DIL docs were both recorded on the same day (in that order of course!). So for that one I really didn't worry about servicing because I knew I wouldn't be the lender for long. I actually talked to the borrower first, and then after that approached the lender about buying the note because I already knew I had DIL agreement in place.

I  am interested in buying notes as a way to build equity while purchasing houses to rehab & resell. Would you be willing to send me copys of the docs you use to buy notes so I can see exactly what is needed ?  Of course I would have my attorney draw up a  "recordable" assignment of mortgage doc

Thanks,

Mark G

Dion DePaoli · Answer

I am not aware of a number exemption from the state.  If you make the investment or loan with your funds you 'can' service those loans. Is it a good idea to service your own loans? - No.  Not at all.As Bill points out, exemption from the Mortgage Servicer License requirement in Florida is not the same as exemption from proper practice or administration of said loans.  Frankly, you are simply not likely to be fully compliant.  It is going to cost you more money to be compliant than if you were to use a licensed Servicer.  In addition, a Servicer, even a limited service one, will keep you 'more safe' (love to hate that phrase) than by yourself to some degree since they are more familiar with do's and don'ts.   Not sure what other FL loan experiences the OP is wondering about.  Ask away and I will be happy to comment as applicable.

Bill Gulley · Answer

@Dion DePaoli

There you go, Dion is in FL.

BTW, that is the way to do it!

That also says you have a good relationship with that bank, most won't let you talk to the borrower in such circumstances. Good luck :)

Brandon M. · Answer

Anyone else with any other experience in buying notes in Florida?

Brandon M. · Answer

The most recent one I bought I already had an agreement for deed in lieu, so the assignment of mortgage and DIL docs were both recorded on the same day (in that order of course!). So for that one I really didn't worry about servicing because I knew I wouldn't be the lender for long. I actually talked to the borrower first, and then after that approached the lender about buying the note because I already knew I had DIL agreement in place.

For the other two notes I have the ability to acquire from the same lender, I have not been able to have the same discussions with the borrowers ahead of time.

Bill Gulley · Answer

There are exceptions to servicing licensing, not really to servicing requirements so much, if you are familiar with servicing and collections, you might retain servicing, if you're not I'd suggest turning it over to a servicer. Institutional loans will be viewed in that light as to compliance more than a seller financed or private money note, the bar is higher as to your dealing at a more sophisticated level.

Some common sense would, could, might apply, for example, you may not be expected to record all collection calls and retain those records (you might, but you may not) but, you would need to implement some record keeping concerning your collection efforts that can be shown as to when and what actions were taken, what was said, what agreements might have been reached and those records retained. Some requirements like record retention are there for institutional examinations that you won't be subject to, some retention requirements relate to borrower inquiries, notices given, liabilities and relate to collection laws.

A note/loan originated in accordance with federal laws, doesn't change its stripes just because the next note holder isn't an institutional or regulated lender, there are expectations and requirements that follow with that note. I sure hope you didn't buy an adjustable rate loan!

I did loan servicing, I know more than the basics and I don't service our notes!

Need to think about doing any modifications as well, modifying an existing note is the extension of credit just as making a new loan, so you have loan origination issues as well, servicers are licensed and aware of loan origination requirements as well. Check state laws pertaining to originations as well.

You're also in the shoes of a lender buying institutional notes, if you have your eye on getting the collateral you need to consider laws of equity, all you're entitled to is the UPB and costs of collection and it depends on the deed given as to your obligation to dispose of property after foreclosure. Get a deed in lieu of foreclosure and you can move into the place if you want to. :)

Wayne Brooks · Answer

In Florida, I don't believe one should try to self service, don't even think it's legal, particularly if you're headed to foreclosure.  If it gets to a trial, you'll have to have a "witness" from the Servicer, testifying about how the records have been kept by industry standard practices, pay,net histories, default letters,, etc, etc.  Of course, be sure to check for scheduled tax deed auctions, etc. if they've been in default for a few years.  If you want a second opinion on the WPB one, feel free to PM me.