Huntington Beach, CA · Member since 2014 · 137 posts · 33 votes
Hi Fellow Note Investors,
I own a NPN where the market value of the house is actually large enough to cover the UPB + all the accrued payments and fees (3 years). However, I want to be the nice guy and modify the loan and keep the homeowners in the house since they want to stay there.
What is the minimum number of months of accrued payments you would accept in the loan mod? I could technically foreclose and get a big payday so there is a balance here I need to strike.
Lender · Redmond, WA · Member since 2014 · 553 posts · 490 votes
12y
Hi Gabe - When you do a mod, it is important that the end result is a solid performing note where the borrower can afford the payment over the long term. Rather than focus on what is owed right now, I would suggest that the first step is to determine the maximum monthly payment that the borrower could afford based on their income and expenses. Once you have that, you can play with rate, term, and principal balance to come up with the modified loan. At that point you can decide whether a mod that works for the borrower is acceptable to you or not.
property manager · Las Vegas, NV · Member since 2012 · 502 posts · 171 votes
12y
Get an updated income and expense then run credit. Best shot is to check their DCR and suggest an affordable reinstatement and monthly payment. $5000 has the magic number for our reinstatements. Most folks can put that together. I suggest speaking to a cpa before doing a mod. Best to forbear for as long as possible. No reason to cause a borrower tax issues that are avoidable.
Lender · Redmond, WA · Member since 2014 · 553 posts · 490 votes
12y
Hi Gabe - When you do a mod, it is important that the end result is a solid performing note where the borrower can afford the payment over the long term. Rather than focus on what is owed right now, I would suggest that the first step is to determine the maximum monthly payment that the borrower could afford based on their income and expenses. Once you have that, you can play with rate, term, and principal balance to come up with the modified loan. At that point you can decide whether a mod that works for the borrower is acceptable to you or not.
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
12y
It's tough to drive too far into this without more details which you do not have to share if you do not wish but relevance here matters. Three years of non-payment on a home with equity and the borrow not executing a sale to get out has the makings of concerns.
The general concern here is trying to modify for the romance of modifying, the idea you tried to do the right thing. Not saying that is the case but it has an undertone the way it reads like that. To me, that is why the rest of the story here is crucial. Who is trying to make this work you, the borrower or is it mutual?
I tend to be cautious around the idea of modifications. Borrowers can quickly expect and even demand forgiveness or relief while not really in hardship or being in position hidden from the Mortgagee to recover from said hardship. Somewhere in all of that, what you "want" to do is irrelevant to what the borrower "can" do. So, your proposition it seems is recover all, that is where I would start. To the point of the OP, that is the point you are driving at, the balance between all and less than all. Less than all is hard to see without more details. Why is this sitting so well and not disposition yet?
Three years is enough to foreclose in most states and we can likely assume equity did not grow over night. So if OP is the new Mortgagee, why did someone not simply FC already - is there a barrier to this being completed that you know of?
The second idea as stated above is forebear before you modify. There are borrowers who will take advantage of a modification, knowing it means vacating default or breach events. I have seen some work magically through forbearance and then fall of the planet post modification. So, I am a bit sensitive to just handing them out. There are limitations of the maximum term of forbearance. Borrowers can use extensive terms against you, it can be seen as predatory. In general, if you can't resolve within 3 to 6 months of forbearance you should not be spending time on it.