Professional lien calculation for foreclosure Who does this?

Question

I am the owner of a 2nd lien on  beach property in Laguna California.  The first is current and the FMV is much more than total owed.  Ill get paid someday when it sells. It has taken 8 years to remove a fraudulently recorded deed of reconveyance and some serious legal work.  There are penalties and interest with several laws governing this.  I have done many spread sheets but have no confidence in the legality of how I did the math.  I did it according to the terms on the Note.  The numbers are huge,  8 years of penalties.   What else can I include in the debt.  I had to fly out for court 6 times,  hired 4 lawyers etc.    I have called many CPA's even forensic mortgage CPA's   but I dont think they are the guys to do this math that should hold up to legal scrutiny.   What about loss income from not having this money? I could have done some great deals.  I haven't foreclosed because it is on the market for $7.5mm and it will sell saving me from having to pay the $5,000 to the foreclosure company.  Are there any strategies to foreclosing sooner.

Andy Mirza · Answer

@Jon Andersen Coming up with a payoff is a job for the note servicer. If you're self servicing the note, I suppose that would mean that you have to do the calculations yourself. At the end of the day, it would be up to the borrower to take action if he or she didn't like your payoff number. It sounds like the borrower is the litigious type so it might be an issue. I'd have your current attorney double check your numbers for you. He or she will also be able to advise you on what expenses are recoverable and what aren't. You won't be able to claim the lost income from missed opportunity costs.

Best strategy is to let the borrower sell the property. If you foreclose, you'll spend 6-12 months on a borrower like this before he files BK to stop the sale. I would go this route only if you think he's not genuinely trying to sell the property.

Ron S. · Answer

I like Andy's strategy. If the numbers are there and you aren't desperate for the money now, wait like you stated and get paid in full. You'll still have to validate your numbers. I also agree, lost income isn't an option as a recoverable expense. Only servicing related expenses (Demand requests, inspection fees, late fees, legal fees, etc..).

This isn't a court case yet, and if you choose the court route, you're subject to a judicial foreclosure, which has its own set of nightmares and redemption periods (even in California). You could use the power of sale clause in your note (If you have one) and foreclose without a court case (as 99% of California foreclosures are done). If you choose to foreclose judicially or non judicially, you may still be subject to single action (Anti Deficiency) so whatever you do, you'll most likely only get one shot (One action).

I'm not sure there is any "legality of math" doctrine out there. I am sure that if it doesn't make sense to a reasonable person, you'll more than likely be challenged and if its not clear, the confusion will more than likely err to the benefit of the borrower. If you calculated the math per the terms of the note, that sounds like something you can defend and explain.

All that said, $5,000 is cheap money on a $7.5MM property. If its in California, i seriously doubt you will get a foreclosure done for that amount. Still, i'd pay whatever the cost is, if foreclosure becomes an option. Doing your own foreclosure if you don't have an entity servicing your loan, opens a can of worms you don't want. California has a right of private action against the lender for an improper foreclosure and the penalties aren't chump change.