Seconds non-performing, firsts performing

4 Replies

Team,

I usually invest in firsts but lately I have been seeing some non-performing seconds where the firsts and performing and the second has enough equity for a full payoff.  Is there any reason I shouldn't buy these? Thanks.

@Dave Van Horn Dave, copying you here.  Pricing is at 50% of 2nd payoff and they are in CA and other states.  Any thoughts? Thanks.

You should be able to pick up 2nd position NPLs for 10% to 25% of the UPB, depending on the state of the property and equity status. Obviously you need to keep an eye on the first and property tax payments so you don't get wiped at FC. Also check the first position loan to see if it was modified. On one deal I thought I had my 2nd covered by equity then found out the first with Chase was modified with the borrower about 5 years ago and there was a deferred principal balance for more than the balance of the UPB on my second. This did NOT show up anywhere with due diligence and only was discovered when the borrower sent in his mod paperwork from Chase to us. 

You can make good money on reperforming 2nds, but look out for the potholes in the road...

@Gabe K. Msg me privately and I would be happy to share my experience and thoughts regarding these types of notes specifically. Thanks!

Josh


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