Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
I have seen this done many times in a commercial setting post GFC.. were banks wanted notes off the books any means possible.
the issue you will have is debt relief as it relates to the IRS>. when the bank takes a big haircut they send out a 1099C and the amount they took that was less than owed ( so they can write it off as loss's) has to be reported as ordinary income for you... so check through all the angles first.
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3 Reply
Patrick Desjardins
Real Estate Investor · Amherst, VA · Member since 2015 · 386 posts · 400 votes
10y
Originally posted by @Carolyn Morales:

Can I buy my own mortgage note from the bank for pennies on the dollar? it can not hurt to ask, right?
Are you in default? Is your mortgage way underwater?
Sounds like a waste of time to me, but who knows. Why would they ever let you buy it for "pennies on the dollar"?
Also, you wouldn't be buying your note, you'd be doing a discounted payoff.
2 Reply
Daniel Chang
Professional · Riverside, CA · Member since 2009 · 254 posts · 273 votes
10y
Can you imagine the precedence if they allow this?
- I'm responsible to pay a mortgage
- A nonperforming note sells at a higher discount than a performing note
Conclusion, I should stop making mortgage payments to make the note nonperforming, then buy it out from the lender for pennies on the dollar.
5 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
Originally posted by @Jay Hinrichs:

I have seen this done many times in a commercial setting post GFC.. were banks wanted notes off the books any means possible.
the issue you will have is debt relief as it relates to the IRS>. when the bank takes a big haircut they send out a 1099C and the amount they took that was less than owed ( so they can write it off as loss's) has to be reported as ordinary income for you... so check through all the angles first.
We are not behind at all, but the property has lost value and that is a bummer to owe more than what it is worth on any property.. I was just wondering if there was some kind of loop hole that if the bank is going to sell off our mortgage note , Why not give us a chance to actually buy the note at the same discount?
I understand banks generally sell to other financial institutions who then can sell notes to investors. We are not a financial institution but We have sold several properties owner financed ourselves.
I'm sorry Jay, What is GFC?
We gave a 7k reduction to our excellent owner financed tenant due to declines in the market and the well collapsing after 4 years and my CPA did not ask for 1099C information on the tenant for that loss hhmmm. Perhaps I should check into why he didn't. Thank You for that information as well.
0 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
Originally posted by @Patrick Desjardins:

Originally posted by @Carolyn Morales:
Can I buy my own mortgage note from the bank for pennies on the dollar? it can not hurt to ask, right?
Are you in default? Is your mortgage way underwater?
Sounds like a waste of time to me, but who knows. Why would they ever let you buy it for "pennies on the dollar"?
Also, you wouldn't be buying your note, you'd be doing a discounted payoff.
No, not in default at all. I am just wondering if anyone has heard of this similar as Jay mentioned in commercial situations. If it makes no difference to the bank in the long run , Why not give the original borrower the chance at the same discount that is given to mass note buyers?
I imagine I would have to really dig into WELLS FARGO to find out.
0 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
Originally posted by @Daniel Chang:

Can you imagine the precedence if they allow this?
- I'm responsible to pay a mortgage
- A nonperforming note sells at a higher discount than a performing note
Conclusion, I should stop making mortgage payments to make the note nonperforming, then buy it out from the lender for pennies on the dollar.
In a way they are allowing this except that the discount is not passed off to the original borrower, consumer.
I understand generally banks sell notes in bulk to other financial institutions. We are not a financial institution per se' but we have owner financed several sold properties. Not that it would have any bearing on WELLS FARGO letting us buy our own mortgage note. Just something to think about and possibly dig into.
Thank You for your reply!
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
its very hard to deal with a bank when your current.
I did see this a ton in the desert though and I am sure it happened in FLA.
folks through an intermediary buying their own home back at foreclosure sale.
you risk being out bid but no one can usually out bid an owner occ.
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
@Carolyn Morales Notes in Default (non performing) may get sold off at a discount, not performing notes. You'd be going down a fruitless rabbit hole.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
and when I say they bought their own home back. this because the bank did a massive drop bid this was common in Vegas as the banks did not want the asset.. but you risked the bank opening the bid at what you owe.. so that does you know good..
but many who bought in 06 ish.. at the peak in vegas and saw their values plumment were able to buy their homes back at huge discounts. But of course you needed cash etc.
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Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
WELLS FARGO said they only sell loans to FANNIE MAE, FREDDIE MAC, FHA & VA. Only then can you do HARP Loan Which may help people who are facing diminishing value of property compared to balance owed.
But it is a smart question on a yet undiscovered topic. If notes get sold at a disccount, performing and nonperforming, Why not open the door to allow original borrower an opportunity to the discount in the form of a pay off or however that can be structured?
0 Reply
Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
@Carolyn Morales Why do you think institutional performing loans get sold at a discount? They sell them to those secondary markets you mentioned above at a Premium, soon after origination. This is not a "yet undiscovered topic", it is a flawed thought process based on misinformed thinking.
2 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
podcast 179 Wayne Brooks..
0 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
Why would I not think the notes are sold at a discount in bulk ,performing and non performing?
0 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
Originally posted by @Wayne Brooks:

@Carolyn Morales Why do you think institutional performing loans get sold at a discount? They sell them to those secondary markets you mentioned above at a Premium, soon after origination. This is not a "yet undiscovered topic", it is a flawed thought process based on misinformed thinking.
Wayne Brooks The undiscovered part is giving that opportunity to original borrower to pay it off at the discounted price. Such as Jay mentioned happens often in commercial situations to get the asset off the books. Why not residential as well? I will dig some more. You do not have to answer or comment if you are going to be rude.
We flip houses for 20-40k profit. Why not research the back office in our portfolio and see what we can come up with in paper work that can also save some $ ?
0 Reply
Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
This just sounds like a short sale where you get to keep the property. I don't see that as likely.
0 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
Originally posted by @Daniel Chang:

Can you imagine the precedence if they allow this?
- I'm responsible to pay a mortgage
- A nonperforming note sells at a higher discount than a performing note
Conclusion, I should stop making mortgage payments to make the note nonperforming, then buy it out from the lender for pennies on the dollar.
Good point!
I wouldn't make mine NP...just thinking if it's offered in bulk for a certain price, why then can't the original borrowed consumer have an opportunity to pay it off or restructure it somewhere else?
0 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
I wish I could get that dumb lower case 'i' of the title of this thread . oops!
0 Reply
Michael S.
Dallas, TX · Member since 2014 · 8 posts · 25 votes
10y
This may be more information than you need but here it goes. It is unlikely Wells Fargo owns your loan. Most loans are owned by some entity other than the loan servicer that you pay each month. It is very unlikely that Wells even has the authority to sell your loan. If Wells did own your loan, or you were able to ask the actual owner of your loan, they wouldn't sell it to you even if you were willing to buy it a price attractive to them (which is a separate issue discuss above; your loan is performing, why wouldn't they just ask for a payment if full?). There are, especially after Dodd Frank and CFPB, rules that regulate the purchase and sale of consumer debt. There is risk to the seller of legal or regulatory action if the buyer, for instance, violates certain consumer protection or mortgage servicing rules or laws. Additionally, there are transaction costs in debt buying and selling make it more cost effective to sell in bulk.
This may shine some light on why you won't likely be able to buy not only your own debt, but similar debt, from big financial institutions.
2 Reply
Frank Gucciardo
Highland, NY · Member since 2013 · 169 posts · 130 votes
10y
It's offered in bulk at a certain price because economies of scale come into play. The bank can package several hundred or thousand loans together and do one negotiation/sale with a single or group of institutional buyers.
Now, if the bank has to negotiate each loan, with individual buyers, they lose the economy of scale and the cost to transact the business becomes prohibitive.
2 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
Thank You Michael S. and Frank Gucciardo
That all does make perfect sense.
Perhaps If a person such as myself keeps asking the right questions to the right people within the institution on a persistent basis, I can get to the bottom of whether it is possible or foolishly impossible.
If I can join an investor group who buys notes, I am potentially buying similar notes as the same one I originated with. Just not in my name. Just wondering how to connect the dots, potentially . tidy up the back office, regain $ with paper work.
0 Reply
Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
@Carolyn Morales Wasn't trying to be rude, just point out the major flaw in your plan: banks do Not sell institutional Performing loans for pennies on the dollar, period. The commercial loans @Jay Hinrichs was referring to were most certainly Non performing loans, which can crush a lender as they kill their capital reserve requirements. Even with NPN's, as mentioned above, they have banking regulation restrictions on who they can sell them to.
1 Reply
Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
ThankYou Wayne Brooks for clarifying!
It can't hurt to keep digging on my end personally, back office regain $ in paper work. I don't know how much more rehab I have left in my knees and my husband in his neck on top of our day job which is also very physical.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Wayne Brooks Exactly what I was talking about.... and post GFC for about 2 years a lot of stuff happened that was unprecendented.. this is not the case in todays market.. the banks have figured out how to handle this.. rules and laws and harp and all the other stuff have come into play.
On top of that as OP said consumer or Owner occ debt is highly regulated.. they can't sell notes to anyone who is not set up as a licensed servicer or has one...
The commercial paper is unregulated as it relates to the new rules and laws apples and oranges and probably not a good example that I mentioned that led the OP to think if it works there its got to work here
@Carolyn Morales also take podcast with a grain of salt... this are blue sky feel good Macro talks do not take them vertabim..
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Carolyn Morales
OP
Investor · Jacksonville, FL · Member since 2015 · 504 posts · 217 votes
10y
AWESOME JAY HINRICHS
Thanks for the info.
Doesn't hurt to clean up back office and regain $ in paper when your body is retiring ahead of you, right?
0 Reply
Charles Worth
Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
10y
@Carolyn Morales
It can never hurt to ask and if its a small bank you may even have luck but its doubtful for a number of reasons including:
1) Banks can't just do what they want, they have processes and a fiduciary duty. Unless you are worth it on their books (i.e. a lot of money) they have no reason to deviate from their process and I can assure you its not typical to sell performing notes at a discount back to the person on the hook for it. I would also say there are possible legal and regulatory issues here which are not worth it for them to even look into unless they are going to make a habit of doing it (a lawyer will charge them a fortune just to look into this).
2) Even if it made sense bank may not want to set a precedent. In short, if they say your note is only worth 90% of value why wouldn't other notes in the same area be worth 90% too? By creating that number it could cause an auditor to make them mark the whole portfolio down costing them a lot of money and causing regulatory capital issues.
3) In most cases your bank doesn't own the note. If not, you are dealing with a servicing company who services the note on behalf of investors who they may not even know. In short, there is no way a servicing company is going to do this unless its part of the larger program like a loan restructuring program they already have in place.
In short, I think its tempting to think about this as just an issue where you want to buy your note but I would say its more an ecoystem and that is why its just more complicated.
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