Good morning, BP! My question today is regarding due diligence on the borrower of a distressed loan. Loan modification seems to be, according to much of what I've read, a good way to get a positive ROI.
How does someone like myself, who is new to the business, go about performing this part of DD? Where should one start and what vendors would be recommended? I don't have a specific state in mind... Just in general.
Thanks in advance!
If you're buying a 2nd mortgage, often the seller provides you with a credit report so you can start there.
If it's a first mortgage it's pretty rare. Most of the time it shouldn't be a huge problem because as long as they have some income, people generally understand that first priority is their mortgage. See if the mortgage, taxes and insurance are cheaper than renting in that area.
Good places to start looking deeper into the borrower are bankruptcy filings and social media. You can find a lot.
I have a borrower that claims she can't afford a $400 ish payment. I've been monitoring her Facebook account and her and her husband have a fairly successful business and she takes vacations just about every month.
Start with that.
Well start with their name in Google, check FB and Linkedin, check for BK on Pacer.gov. You could order an O&E report for about $100 which would provide an idea of any liens or judgements on the borrowers. Check with property's county to see if taxes are delinquent. If you are bidding on a loan, have the seller send you the servicing notes from the current servicer and look for entries that involved any conversations with the borrower.
This will help you to build a baseline profile of the borrower.
Thank you @Patrick Desjardins and @Bob Malecki for the input. One other question I have is regarding MLOs. Not sure if it depends on the state but would a note investor be able to perform a loan modification without being a MLO?
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