Deed-in-Lieu Timing - how to avoid liability in reaching out

[Daniel E.]

Question for the experienced npl / npn / nonperforming buyers.

We purchased a note that is 5+ year delinquent with significant delinquent property taxes. The county requires 25% down to start a tax payment. Due to this, and the significant arrears, we anticipate this asset becoming REO. Currently owner-occupied.

We have significant acquisition experience, however, as we go out on our own we no longer have any back-office/asset management. We are now using FCI.

Apparently it takes 30-60 days for FCI to even make initial contact. We are considering reaching out before they fully board the loan, solely to offer a deed-in-lieu through a 'cash for keys' offer.

Contact we roughly be: 

Hello, through the purchase of your loan we are your new lender. Due to your significantly delinquent property taxes and mortgage arrears, we wanted to reach out to let you know that you qualify for our incentive program. Before our servicing company takes over, we would like to offer you a cash settlement to work directly with our attorneys in transferring title and vacating the property. Based on our analysis, you qualify for $xx.

- No mention of foreclosure

- No mention of default

- Any mention of anything outside of the 'cash for keys' will be told "we do not have the authority to discuss any other programs"

What are some thoughts on this? Will this be largely non-compliant and open us up to liability?

Thank you.

[Chris Seveney]

Daniel E.
I would be very careful - you say they qualify for a program but then say your offering them a cash settlement. That can be misleading.

This is often debated on what is considered debt collecting and what is not. Some servicers will reach out in first 30 days and others do not.

Reasons why is There is no specific law in place that exactly says that a lender must wait 30 days after the hello letter, however, the nature and language of the Hello Letter, and the FDCPA, make it prudent to simply wait the 30 days. For instance, if you look at the language of the Hello Letter, it states that unless the Debtor disputes the debt within 30 days, the creditor will assume that the debt is valid. If the debtor does dispute the debt, you cannot engage in any debt collection acts until you provide them with evidence of the debt. Absent of pressing circumstances, it makes sense to simply wait for that period to pass, and then proceed with collection efforts.