Is it possible to purchase your own non-performing note?

Question

Does anyone have any experience with Kondaur Capital Corporation?   They are looking to sell non-performing notes in my area, and a friend has two properties that would fall under this category.  Would she be able to purchase them back somehow legally, and not violate any of this company's rules/regulations?

Scott Carson · Answer

So it all depends on who the lender of the note is.  If its a smaller or regional bank or fund like Kondaur, your friend would want a third party to purchase the note in a different entity.  Now it's not going to wipe out the liens or anything else like as only a foreclosure can (or reaching a settlement with the jr lienholders).  Your friend's loan has been sold a couple of times (probably at a discount) but that doesn't eliminate or reduce their financial responsibilities.

Here is how we have done this on a couple of RARE occasions.  A third party contacts the bank and negotiates a purchase of the note.  Your friend would need to finance the purchase somehow (with cash primarily) or have a friend willing to negotiate a loan modification for them.   You wouldn't want them to do a cash settlement or payoff, otherwise the other liens would fall into first position.

One of my students was contacting banks for assets and called up the lender who held the note on their self-storage property.  The bank literally sent over a list of commercial assets with their pricing and included the students note.  We were able to negotiate the sale of the note to another party who financed the note purchase and who immediately modified the terms of the loan to my student.

It is rare that this happens.  But it can happen.

John Harding · Answer

Not sure how I see how it would be illegal if the holder of the note cooperated?  A short sale would be very difficult since there are many liens on the homes..   looking for options....

The notes have not had payments since 2010, and they've bounced around from one company to another since then.

John Harding · Answer

She can borrow from someone.

Marco Bario · Answer

In other words, @John Harding - your friend is delinquent in payments and the note holder has put those notes up for sale? I presume at a discount to the unpaid balance?

I'm a beginner with non-performing notes, but I haven't come across any regulation yet that would prohibit purchasing your own note. Factor into the costs that she'd want an attorney to review the purchase agreement.

You friend could also contact her lender and negotiate an early discounted payoff. It sounds like she has some cash since she is considering buying the notes.

Hope this helps and best of luck.

- Marco

Is it possible to purchase your own non-performing note?

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