Hello experienced investors...I have been reading threads and have a 101 knowledge of notebuying from other short teachings but still need a great teacher. I want to buy non-performing notes from smaller banks on SFR, 1st lien positions and either renegotiate the note for the homeowner, or obtain a DIL to sell to an end buyer.
My 1st question is: In negotiating from the bank, what is the best offer structure so that you get them interested and find success? What if I want to buy the note at 50% FMV of the home? Is there a certain quantity of notes to buy to be able to offer this figure or is that an unreasonable percentage to even go for?
Also, is it ever successful if you have a homeowner with an underwater home/lis pendens who would want you to buy the note from the bank and it just being one note, they agree to sell to you at a discount? thank you for all insight.
Welcome to BP, Theresa.
I really don't like sounding negative most of the time.....but, getting into non-performing notes is absolutely not a place to begin, regardless of what some guru might suggest. It's like saying you want to go from a Red Cross first aid class to brain surgery.
A bank does not just negotiate note sales with people off the street! The banks I know would laugh at someone approaching them with beginner questions or guru speak right out the door. Especially someone who is a link in a chain, they won't waste thier time.
I have posted here about buying a note as a cure to default, with the borrower requesting the note being sold, that also takes cash in hand, that can happen. It's probably the best way for someone off the street to buy a bank note directly from that bank. IMO
I suggest you begin working with brokers and deal in non-conforming notes that are performing.
That's pretty much reality IMO. It's a great business, it's not a place to start. :)
I appreciate this...the curing of the default, do you mean the homeowner is behind on payments or has received a LP and then they request the Note be purchased in order to stop the default and renegotiate the terms/back payments with the new note owner? And now when you get the note for a discount, you collect the payments, or any other recourse to handle it?
I just see there are a significant # of people in this position and would like to be in this business. If there is a course I need to get, please advise.
Approaching anyone who has received a notice of foreclosure is now covered by law as a foreclosure counselor or agent, you can't just approach these people as a business without compliance issues.
The reason the authorities cracked down is because people were being scammed and "assisted" by people with limited knowledge some probably based on guru stuff and they caused more problems then they ever solved.
While your heart is obviously in the right place, you need to recognize that you may not be qualified, again, more conventional education.
In some cases, non=profit organizations assist folks in default, you might try to volunteer for the experience, then obtain the license requirements and move forward.
My suggestions about buying the note may be prudent when you already know the borrower or where they contact you to buy, then you might offer the note purchase arrangement. :)
I agree completely with Bill. Stay away from nonperforming notes and only buy local performing notes secured by property you know and understand.
Hi Theresa Davidson ,
I saw your post here on the forums and as someone who runs a fund that buys/sells residential 1sts and 2nds I think I can shed some light on your questions. But before I start I would like to mention, like Bill said, the idea of buying an individual non-performing note directly from the bank is an unlikely scenario, unless you have a lot of capital to buy in bulk. Now the reason it's unlikely is because it's hard to buy just 1 note from the Trade Desk of a bank whose job is to specifically sell pools of notes. And to your point of working through a distressed borrower to obtain their note, again it’s an unlikely scenario. Even if you found a borrower willing to do that with you, it's incredibly difficult to buy a loan from the bank through Loss Mitigation – which is the department you would end up at working through a delinquent borrower. Their department isn’t designed to sell notes; you would have much better luck doing a short sale in that scenario. Banks generally prefer to sell notes to other banks and servicing companies who specialize in delinquent debt. The good news is you CAN buy directly from one of these servicers like Granite Mortgage Solutions, Gemini Group, Kondaur Capital, etc. These are just a few examples but they all sell exactly what I think you’re looking for on a loan level basis.
In regards to your question concerning FMV percentages and purchase prices, I have to say first and foremost there's an exception to every rule and this is a business of exceptions but normally how it works is a trade desk pushes out a tape of assets and you would bid on the quality of the tape. In CURRENT MARKET CONDITIONS when banks deal with servicing companies or large quantity buyers most 1sts are trading anywhere from 45 to 65 cents, but typically that means quality 1sts for about $150K and above (depending on equity), which is what the big servicers like to buy. Most assets today are trading at a percentage of BPO (Broker Price Opinion) as opposed to UPB (Unpaid Principal Balance) because of the loss of equity in the marketplace. Assets under $150K banks tend to discount more, and if you go for assets below $75K they start to discount even further due to the diminishing quality of the collateral. There are a lot of factors going into this type of bidding BUT when you buy from a servicer like I mentioned above you don't always have to bid on large tapes and you can buy individual quality loans in your local geographic area.
With all of that in mind I personally DO think it’s possible to start out buying non-performing notes. I started out originating private 1st mortgages and of course they're all performing, but even those can go non-performing because let's face it bad things happen to good people. And whether we want to believe it or not, something bad could happen on any kind of note you own (in our business we call them the Big 4: death, divorce, job-loss, and illness). That made me decide that I wanted to learn how to work non-performing notes to insure no matter what happened to the notes I owned, I'd be able to handle it even if I was wiped on a lien.
I learned much of what I know from a Manhattan hedge fund manager who taught me the collections/workout side of asset management, as well as folks like Dean Engle (who unfortunately doesn’t teach today). I've also taken a few seller financing and private money courses as well over the years, but most of what I learned was from experience because it's absolutely a learn by doing business. At some point, we all have to take the plunge, whether it's buying your first property or even if you want to be a brain surgeon you first have to operate on a cadaver or something! LOL
If you want more info on getting started in the note business, feel free to message me. Hope my comment helped.
Thanks for all the replies and I will probably take you up on your 'more information' Dave. I understand I did inquire about an advanced subject. I am just in the process of lining up an investor for backing and wondered what it would take to begin a business like this. Have a nice evening.
Originally posted by Theresa Davidson :
I am just in the process of lining up an investor for backing and wondered what it would take to begin a business like this.
This puts an entirley different spin on things. You'll need to look into being a mortgage broker using other investors funds. I was speakin of you working with your own money.
Dave made a good post on the institutional side, while individual note buyers may buy from a servicer or brokerage most will be looking at small brokerages doing the same thing.
If you have something like the Bank of Ozark, a 40M dollar bank, they don't have a trading desk or mediation department.
The reason small banks don't sell to folks off the street is due to the liability. If I didn't like a guy and banks did that, I could go buy his mortgage, tell him to send me the payments, throw his payment in the trash and call his loan due, possibly foreclose on his home. That's why banks and institutions deal with licensened, bonded and insured entities and not individuals.
Seemed you were interested in helping individuals, so in that you'll need to have them request that a note be sold to you. If a notice of demand has been made accelerating the note to maturity, calling it due, such a note sale is basically the same to the bank as a payoff. If they don't accept the full amount as a note sale/assignment and take that borrower to foreclosure instead, that bank may need to explain why they refused and took a borrower down that road, regulators would want to know why as well as any judge. So, you can pull a note if you know the sore spot to push on a bank in such situations. So it becomes an assignment in lieu of foreclosure saving the borrower's credit, at least to the extent of foreclosure and leaving them in the home. And the bank may settle for less as an eaiser way out, so you can negotiate.
Doing this, you can modify the note and/or work out options ahead of buying the note, at least getting agreements to do so knowing the strategy to use.
This is doing notes one at a time.....
I agree with Dave, investing in non-performing asset is not that big of a deal. It is, what it is....a non-performing loan.
That said, setting up your plunge into the business, understand what your target asset is. A NON cash flowing asset. NPL's trade at the discounts they trade at due to the lack of cash flow and the additional capital costs to enforce the remedies provided in the note and security instrument.
The key to whole loan investing is learning and understanding all of the aspects of the asset. It is not as simple as real property investing. Foreclosure is different from state to state and borrower interaction is regulated.
The asking price and the bid price for whole loans tend to have a bit of a gap. The bid price is based on the capital expenses in the asset and the time it will take to enforce the provided remedies. As such, assets in shorter foreclosure states tend to trade for a lesser discount than those with longer timelines.
The concept of a bulk trade tends to be misguided on the street. Bulk in whole loan trades is not equal to stepper discounts. It is not CostCo or Sam's Club. The bulk, simply refers to a pool of assets, which loans can trade in pools of two or more or they can trade as one off. Each and every loan on the seller's book has a price which creates a sale. By purchasing more than one asset in a pool, the allocation of the purchase price is optioned to the Seller which tends to help get more trades done. When you bid one loan, it is really a hit or miss. Seller wants 65%, you offer 60%, no trade. In a pool, the Seller ask does not have to match your loan level price to his loan level cost. So if the pool has two assets and you offer 60% for asset 1 and 65% asset 2; that sale would work if the Seller wants 65% for asset 1 and 60% for asset 2. Or the Seller fundamentally wants 62.5% for both assets which is what you offered but allocated in a different manner.
In addition, bulk trades are also a function of the Capital Markets, the investors are large in dollars therefore the trades are large in dollars. In fact, a one off street level investor can likely find a better deal than a bulk buyer. The street level guy has more time to hunt for the right asset and at the right number. So it not uncommon to talk to a street level person who found a great deal at 55% when the bulk guy would have paid 60%.
A common barrier to new whole loan investors is deriving a bid which creates a trade. A non-performing loan bid is competing with the actual costs and time to disposition the asset. There is no duty by any bank to fire sale the asset. There are regulatory influences but they are not so far out side of the assets disposition options that they force fire sales. Even further, if your bid for an asset is 65%, but the Seller can simply disposition the asset themselves and realize 85% recovery, why take a 20% hit selling to you?
There is a skill and art to coming up with a bid, delivering a bid and getting a deal put together. Whole loan deals are not easy and they are more complicated than real property transactions.
The disposition strategy that you speak of, buy loan at a non-performing discount, contact borrower and offer to modify the note to reinstate the loan. Seems so simple, right? I often say, there are zero "new" note strategies in the market, they might be new to you but not the industry. Be aware that 50% of modifications re-default. You then have to start the foreclosure process all over again if you reinstated the loan. In a state like New York, that is a 2 to 3 year process. You will need/want to have a skill in re-underwriting the borrower's ability to pay.
A misconception in the OP post, the borrower requests that the note investor get a shot at buying the loan. The borrower has no influence or control over who buys the note or for how much. In fact, a potential flaw in your workflow is having the homeowner involved in the beginning of the deal. It is not safe to assume that all defaults can be remedied, that all borrowers can pay their bills or that once reinstated it will be all flowers and rainbows. I have seen some borrowers expect some form of forgiveness or similar event from the new buyer once they were aware the loan was purchased, let alone at a discount, let alone actual seeing or knowing the purchase price. As Dave mentioned, the NPN will trade off a real property value base line if the loan is upside down. Say, 65%, so then you get a borrower who thinks or wants a loan reduced to the same 65% level you paid. You say "No", they say go pound sand and now you back to foreclosing. Since they helped you, so they think, buy the note, they too should be able to enjoy your discount. You are make believe partners in some sense in their mind.
In addition to misunderstanding the borrower's role and involvement in a loan sale or the determination of a loan sale, the loan sale does not stop, halt or cure any enforcement of the remedies in the security instrument and note. These are two mutually exclusive events. A borrower can request anything they want, but there is no duty by the mortgagee to fulfill the request or even pay attention to it. The only obligations that a mortgagee must live up to are spelled out in regulation and the security instrument and note itself. The contract was made to pay back the mortgagee, those parameters are already setup. Borrower borrowed money and has to pay it back. A mortgagee has no duty to forgive principal, reduce rates or waive fees, etc.
In the venture you plan with investors, be aware NPN's are insolvent assets. You may purchase for 65% but will still have 10% in capital expense to enforce the security instrument and note. So raising capital for NPN's involves the actual purchase price and cost of due diligence but can also include raising money to cover the cost of legal document prep, foreclosure and bankruptcy defense. This does not include any repair costs for the real property or property preservation costs such as force placed insurance and tax advances.
Investing in whole loans is a business and industry with a lot to learn. That learning curve is conquered over time and experience. It is good to start the journey but realize that journey really starts with figuring what you do not even know yet. Certainly attainable but I would recommend to take it slow at start. Trying to break into the industry, especially with investor capital, too fast and with a diminished skill set can be very costly.
There's a lot of talk here about discount from UPB. Picking up on the OP's original question regarding % of FMV (of the collateral property), what are you guys that are active in this market seeing in terms of discount from FMV? Are hedge funds driving the little guy out of the market?
From what little I've seen, it's very competitive and the discounts from FMV are very small, in the case of 2nds, these astronomical discounts from UPB leave NPN note buyer at nearly 100% of FMV.
As Dion said, be very costly and send you to jail using other's money.
Guys (Dave and Dion) your institutional trading is correct and all well and good, but didn't seem at all that the OP was headed this way but taken in this direction. Just one other thing along the bulk purchases, you can break them down as Dion mentioned but you also work off of several loans or blocks from the weighted average to maturity, weighted average yield, weighted average collateral (LTV/CLTVs) as well in a portfolio. I never disposed of a portfolio of NPNs, they were taken out one at a time as they came, or acquired specifically knowing the details of the borrower, where they came to me.
The best way to start is doing one purchase of one note, from an individual or broker, not going to institutional traders that are going to toss out the chafe to you in Florida. If you're getting other investors involved I suggest you see an attorney, a finance type, not a RE type. You should stay local as well.
I agree with Dion that most workouts on the institutional front fail, there is an old saying that "you can't make a bad loan good".
Doing local notes is another world, you can't save just anyone who has a stale note or someone in default. The trick is underwriting not only to present issues but also into the future, or have other alternatives to take the note out, or the borrower out, and/or dispose of the property.
I believe the intent of the OP was to help borrowers. You have to be local to succeed at that. Lots of hand holding, coaching or adjust their financial lives and counseling are usually needed if they are staying in the property. So, you're not just a note buyer, you have several hats to wear and it may take time. Then, can it be profitable? For me it was, pick up the note at a deep discount, have mod fees, allow time to pass and I'd refi at the par balance. Or, take a deed in lieu, rent/lease and sell. But not every deal can be worth getting involved, unless you are doing charity work. I wouldn't even entertain the thought of trying this 500 miles away!
As Dion and Dave mentioned, I believe, dealing in notes is more involved than RE, you really need the RE knowledge as a starting point and then move into finance (you could do it the other way too) but it takes perceptive skills to do either institutional or individual transactions. It's hard to learn on your own without a sound foundation in both areas, NPNs is not a place for beginners to start.
My assumption is that %'s here Are dealing with FMV/BPO figures, as the UPB on underwater notes is an irrelevant number. Right guys?
Clarification; UPB is irrelevant, unless you think you can collect something from borrower, above and beyond the asset itself. But I wouldn't consider that.
Wayne Brooks : "My assumption is that %'s here Are dealing with FMV/BPO figures, as the UPB on underwater notes is an irrelevant number. Right guys?"
I don't think @Dion DePaoli was talking about % of FMV. @Dave Van Horn seemed to talk about FMV but in the context of first's and bulk buys, even then his post wasn't clear as to % of FMV or % of UBP. I don't think a one off buyer can get anywhere close to 50% FMV on a first, and certainly not on 2nds. But that's what I'm trying to figure out.
75% LTV purchased at 60% of UBP = 45% LTV of FMV/Sale price! So, yes, absolutely you can.
Yes, the UPB is irrelevant if you're taking the collateral, (unless you seek a deficiency) but relevant to the borrower and relevant if it's refi'ed.
I see NPN's trade for around 55% to 65% of FMV. That is provided there is negative equity. If there is equity UPB is used as the baseline as that is what you stand to recover. In states with longer and short foreclosure timelines or with assets that have higher capitalization demand for legal or physical defects, that number will go up and down.
The price is relative to the asset and state the asset is in. 50% in Detroit is not so great on lower level assets and 50% in Texas is too low as foreclosure is a little faster there.
There is a communication issue that arises from NPN discussions, the percent baseline is usually a function of the FMV, but technically that is moving target. That is because FMV is subjective to the party looking at it. In the nature of the parties, Seller's think the property is worth more and Buyers think it is worth less.
Since loans have a varying amount of equity and negative equity it is hard to make a broad statement of NPN's trade X%. The same is true for % of UPB. A negative equity loan with an LTV of 200% will have a lower UPB % than a loan with an LTV of 120%.
Second liens just like first on the concept of principal recovery. Due to the nature of second liens, the recover-ability is much less so the discounts are larger. Dave buys more 2nd liens than we do, but last couple trades we did on NPN 2nds we were around 2.5% to 5% of UPB. They trade more like consumer credit debt than 1st liens as if the 2nd is wiped out in foreclosure, you are left with unsecured debt to collect on.
Those numbers are "Guru" talking points because folks think, "How could I loose" on a second purchased at 2.5% and the answer is, you collect zero, which certainly happens often.
Are prices driven up from Institutional Investors? Yes. On any given day, there is more money chasing an investment into this asset class than there are assets available.
That said, as Bill points out, no the little guy will never be pushed out of the market because at the end of the day, the little guy should be niche and local providing for faster disposition times and more effective asset and cost management. As such, when we look at a downstream trade to a street level guy, he/she would pay more than we did for the asset otherwise, I can do what he is going to do and do not need the street level guy.
Can somebody please explain how these two deals make any sense?
(1) This recent trade included 11 non-performing 2nd mortgages purchased for $61,500 in multiple states. This pool had a 107% overall loan to value (LTV).
(2) A NY note investor purchased this non-performing second lien for $4,900 with a payoff of $46,000, ten months after we bought it in a pool for $3,450.
The Fair Market Value (FMV) of the property was $175,000 and the senior lien was current with an unpaid principal balance (UPB) of $268,000 and monthly payment of $1110 (PITI).
Deal (1) looks to be at 107% LTV and deal (2) looks to be way over 100% LTV. Both deals were taken from the front page of Dave Van Horn's website. These notes are a little higher LTV than I've seen elsewhere but everything in this arena seems to be in the neighborhood of 100% LTV. Honestly, this seems like a total non-starter to me.
Deal (1) - Collected $27k from 2 of the 11 assets (18% of the pool) on a total investment of $61.5k. So the investor has made 44% of their money back and still has 9 other assets to collect from. On average the investor needs to collect $5,590 from each asset to break even. An offer to the borrower to pay $X for satisfy the 2nd can entice the borrower to make the payment by which the lien can be satisfied. So far, the recovery has averaged $13.75k over double what he needs to break even. Will he collect on the other 9? Not sure. Will he make money or loose money? Not sure.
(2) Dave purchased and sold the asset for a $1,450 (42%) gross gain on sale. The buyer paid 10.65% of UPB. The first lien exceeds the value of the home and the CLTV is 180%. The first lien is current, so it would appear the borrower desires to stick around in the home. So the second line investor would need to strike a deal with the borrower to payoff the loan. The investor will need to collect at least $4,900 to break even from the amount the borrower owes, which is $46k. If you got a call from a mortgagee who you owed $46k and they offered to go away if you paid them $10k, would you pay them? (sure)
It seems your concern is about the investment equity level into the real property. And that is why seconds trade for such large discounts. Clearly in deal 1 there is not much equity insulating the investor from default. When stacked on top of the priority of the first lien, you are in the red. You could certainly end up with zero recovery on that investment.
Can you make money with those types of deal? Yes.
Is that sort of deal for everyone? No.
Coming from a HML background where LTV is king, it's hard for me to wrap my arms around this strategy. I doubt it's for me, but i'm sure there are successful investors that it does work for.
Thanks Dion for the detailed explanation.
Originally posted by @Dion DePaoli :
... Be aware that 50% of modifications re-default. ...
Dion DePaoli - I believe your percentage is accurate "industry wide". But I believe that @Dave Van Horn 's rate is different; I recall being the guy in the REIA meeting that prodded him to give his recidivism figure, so maybe he'll publish it here for us too.
Any recidivism rate, the rate of failure after any workout modification will about half, that is almost a rule of thumb. Viewing the failure on an institutional basis, industry wide is not the same for a specialist brokerage operation or individual buyer because they are not the same game at all.
My success or persistency was above 90% every year or looking on the negative side less than 10%. Dion mentioned up there that he could do anything a "street guy" could do, I doubt that really.
One big reason is that institutions or larger national buyers are not dealing face to face, that makes a difference in hearing someone on the phone and seeing them in a discussion, you can "read" the borrower. There is also more conversation, more interviewing and more interasction face to face than could possibly be done by a workout type sitting in an office 800 miles away who has a dozen more to talk to before luinch.
Next, I doubt Dion or Dave is really up on the local market, they must rely on appraisals and BPOs. If you're a local small guy, you drive by, usually walk through and inspect and you know the market very well, so you have a better idea of what you can get on any sale.
Where banks or lenders are throwing out the trash, you can certainly get deep discounts, it's directly related to the preceived risk, part of which is being out of town and relying on others. So, the local broker who nails the collateral closer to what it can be will usually have a higher price, that is from private note holders who don't command the attention at the institutional level. OTH, if the broker is awar of what the market is doing on similar notes, there is no need to pay a higher price. So, the purchase price can be very close to the same, but there are less notes available too.
The next issue is that the institutional types don't have as many tools in the bag as a local broker may. Sure, anyone can modify the note, reset payments and terms to better meet needs, what they might not do is know local investors who will buy the collateral and lease back, or allow a sale with cash to the seller or bring in an equity partner for a borrower taking an interest in the property, say 50% of equity (if there is any) and setting sales later on. Another issue is making repairs and improvements. I took one that had a guy who was trying to convert an old gas station to live in, he failed, he stayed there but did a subordination allowing a new home to be built ($350K range) and the original giuy moved out, leveled the old garage and replanted, selling the new home with a 40K profit arising out of a $5K note purchase within 9 months. And no, I didn't build the house, just sold the land. So, no, institutional types don't have all the tools a local broker may have.
Flexibility of an indivisual dealer to do a deal is not up to the board of directors, it doesn't need corporate approval, it isn't under time constraints of the assembly line process, marketing constraints or investor demands. The more flexible you are the more wins you'll have.
It's much like anything else, you can run an assembly line bulk purchase and salvage business or you can cherry pick more profitable deals and spend more time turning them for a profit.
So, while Dave and Dion probably do very well, at the scale of business profits a small brokerage can be more profitable for the note buyer dealing in thier own interests than slicing and dicing with a pool of investors....can be.
For those considering the business, if you are not familiar with the business it might be better getting with a slicer and dicer, taking a return and not getting too deeply into it so deeply. You also won't learn much other than what the brokerages will point out, which is fine too. A big plus is that you have an opportunity to be more diversified in a pool of notes rather than holding one or two, especially if you don't know what to do with failures.
But, if you learn the business as an individual note dealer/broker/buyer the returns are under your control, you design the deal that is most profitable.
I'd also caution getting with brokers in any pool or sharing investors as there are some tricky collateral issues, someone has to be last on the recoveries. Many arrangements become illegal under SEC requirements as well, that is something you need to understand going in. If you're cherry picking local notes for yourself or your partnership, there are far less issues.
The reason my foreclosures were low were directly related to working out win-wins. My secondary business had a very low FC rate as well, due to good underwriting.
WOW--the amount of info on BP is awesome. Thanks to the posters for the information. I have not considered buying NP notes. I have been originating 1st lien notes inside my 401K. One poster mentions "the big 4"...and I am currently in that situation. The borrower passed away last year. I am hoping to purchase the property at a discount and still waiting to hear from my attorney.
Thanks ladies and gentlement! I copied and pasted all this info for quick reference.
@Steve Babiak good point, 50% sounds high to me but it's a hard statistic for me to gather because we're a velocity based note fund so the majority of our assets are resold. Steve, I agree with Bill that on an industry wide number like that doesn't apply to a specialty broker like us. I do know what it is in one year for our company and it's just under 15% of our fund's assets re-default (and 90% of those re-perform after we retouch them), but the caveat is: What is the quality of your workout with the borrower? So if you drill down on the homeowner financials pretty deep as opposed to the bank who may not have because sometimes they rather accept almost anything from a borrower to sell it as a re-performer (which sells at a higher price point and looks much better on their books).
As far as the rest of this thread, Wow. If I were the OP I would jump ship by now! I hope we don't lose Theresa here, I agree with Dion and Bill on a lot of what was said but I want to clarify some of the differences I've noticed in my company's data when it comes to working 1st versus 2nds.
My assumption is that %'s here Are dealing with FMV/BPO figures, as the UPB on underwater notes is an irrelevant number. Right guys?-
Because equity has fallen out of the Real Estate market, the purchase of delinquent 1sts based on UPB is currently irrelevant because if FMV is less than UPB then it's based on a percentage of FMV. I agree that most of the 1st non-performing notes we see are trading between 45 and 65 cents but there are exceptions to every rule. The lower the FMV and/or UPB, the lower the percentage the 1sts trade at due to a decline in the quality of the collateral behind the first mortgage.
As for non-performing 2nds in this current market, they're more of a statistical COLLECTIONS play because less than 10% of pools of 2nds have ANY equity at all. When buying delinquent 2nds in this market, senior lien status is the new equity and the most relevant data point, along with occupancy.
@David C. - Dion is right about Deal number 1, on a pool like this you still have 9 more assets to work, 2 or 3 out of those will get you your money back and the rest is profit. Typically this is a pool where the assets are current on the 1st mortgage and still owner occupied. There are at least dozen ways to make money on this deal and although it varies from note to note. Foreclosure is just one of many options when working a 2nd. Besides Foreclosure there are about half a dozen ways you can make money, obviously discounted payoff, discounted arrears and payment plan, deed in lieu, seller assistance/short sale, or sell the note
So the second line investor would need to strike a deal with the borrower to payoff the loan.
In referencing Deal number 2, Dion is right except for one thing. There is more than just the option than striking a deal with the loan. A short sale could work there, taking over the property subject-to the 1st and rent it out for a postive cashflow (the PITI was $1110 and market rent was $1300). We could also take $500 or $1000 arrears and accept payments and we could modify the loan. All of these are viable options in deal number 2.
I'm looking forward to more of these note threads, keep the comments coming!
Haha Dave you rock :) I have not jumped ship and I am pleased with all the available teachers BP has - I do however look towards the more positive people here: willing to guide me with the steps to take versus admonishing my query. I said I was New and inquiring to the Experienced Investors for what this site was set up for.
I am a realtor and I run into all these short sale people but we know all shorts end up losing their house; I understand a mod could redefault but if I could give someone a chance to keep it and I make money plus have the future opportunity to be first in line should the house redefault, I want to know how to do this. I will keep studying...
@Bill Gulley You mentioned in several posts relating to investing in notes that license/s may be required for certain actions. Can you please name the license/s required? E.g. Real estate sales license, securities license, collections license, etc.?
Thanks in advance.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing