Good evening everyone!
So, I am looking at my second note purchase, and I have a question for those with more experience!
So the note I am looking at has the UPB of say: $21,000. Further down the tape, it shows "Estimated Payoff" of say:$30,000. Now, other notes on the tape have their estimated payoff close to the UPB.
Am I correct in assuming that the difference in the estimated payoff and UPB are any accumulated arrears, fees etc? If that is correct, the next question: how do we figure when that arrear/fee balance will be paid off.
This is a performing note. So, when you plug in the P&I payments with the UPB balance, interest etc.... we get the NPER of say 100 payments left. However, if you plug in the estimated payoff amount, then its more like say 150 NPER left. So, do we assume that the note will continue to have the same interest and payment and just keep on until the estimated payment amount is paid in full. Or, is it more like a balloon where once the original maturity date hits, or the NPER with the UPB only, will everything else come due?
IF it is a performing note then there should not be any arrears and they pay off should be the same amount as the unpaid principle balance.
Ok so a reperforming note? Or what about a note in active BK with payments being made?
That's considered a "distressed" note:)
Ok... so how about the original question in those cases?
Hi David, yes the estimated payoff is the upb plus all arrears fees Etc. This would be your total recoverable amount should you foreclose or should the borrower refinance or pay off the loan, assuming there is enough equity in the property to cover the total amount.
I use the P&I payments on the upb to calculate my annualized return on a reperforming note, but I use the estimated payoff to calculate my overall net profit should the loan payoff early or go to foreclosure.
So, use the UPB to make sure it will work with the numbers, but the estimated payoff difference is an added bonus!
If the note runs to maturity, it would be paying down the UPB only according to the schedule. Will the arrear fees etc.... then be paid off on the back end as a one time payment, or continue with normal payments until that is paid off? Or will we only recover those fees in case of a refinance, payoff, or foreclosure?
Updated about 3 years ago
The the arrearages could be considered a deferred principal balance. They would be due at time of payoff, or if the loan runs through its entire term then that remaining sum would still be due at the end of the term.
Just a note...
You can only collect interest on the principal unpaid balance, not any of the interest or late fees that are in the arrearages. On most of the Mods, you pay off the principle with interest as in the original agreement then pay the arrearages off dollar for dollar whether it is mentioned or not. So your 9k overage is NO interest but dollar for dollar.
Awesome! Thank you both!