Can Banks Buy Their Bad Debt At A Discount?
Hello BPers,
I am somewhat new to foreclosure investing...I've bought at county-tax foreclosure auctions, but haven't purchased anything from a bank yet.
I've started attending weekly mortgage foreclosure auctions at the courthouse in Detroit where banks auction off their bad mortgages to investors....usually for a $1 over the starting bid amount (the bad mortgage debt). Recently, a house I had been following week-to-week after it continued to be adjourned came up for auction for about half of what the advertised debt was in the 'foreclosure information' provided by auction.com., and from what I could tell the bank bid on their own debt. To my question...if banks can buy their own non-performing loans at a huge discount, does the typical 6-month redemption period still apply? In other words, could I try to buy the deed from the homeowner for a few thousand dollars, and then go to the bank and pay off the now discounted debt amount to obtain the house free-and-clear?
I have seen other investors do this to each other....where someone buys the bad debt at the auction, and then someone else swoops in a few days later and gets the homeowner to quitclaim the deed to them for small sum of money (given that they cannot afford to buy back the property and are willing to take what they can get since their losing the house anyway.)...kind of like cash-for-keys, or said differently cash-for-deed. Then the 'shark-investor' either charges a fee to original debt-purchaser for the deed or pays off the original investor's purchase amount of the bad mortgage.
Best,
Marc