Paperstac Non-Performing Underwriting Model

6 Replies

New to notes.  Bought my first Performing note on Paperstac.  I was looking at making an offer on a non-performing note.  I was building an excel underwriting tool myself.  I've taken a commercial real estate course on building commercial real estate underwriting, so this is something I feel I can do.

I was using one of the non-performing notes I was interested in as a case study for building it. I noticed some big problems. When you calculate the payment on what was listed as the original balance, it was MUCH higher as the current payment. The Total Payoff was way higher than the UPB plus the Total fees. A payment based on the Total Payoff, was closer, but still not exactly the same.

My assumption is that when a non-performing is bought a couple of times and the loan is changed and then they become non-performing again, is it common thet the new loan details sometimes isn't don't correctly.  

Loan details from the servicer should never be correct, but the borrowers payment is based on the UPB, Interest rate and remaining term. Typically the UPB, rate and payment are correct and number of periods could be off when trying to calculate which is why I always double check that number. The total payoff is a different animal as that may include late fees, advances from the lender, escrow shortages etc.

You may have found an anomaly. Payments (P&I) should be pretty accurate.  Late fees, arrearages, escrows etc can be a mess. It could also depend on the source of the data for the note you are looking at... a serviced note from a servicing company that Paperstac links to should be accurate, a serviced note should be relatively accurate (it has an opportunity for data entry errors) and a note without professional servicing will have a high probability of being inaccurate. Build your tool to account for the key parameters - when they don’t jive that’s an area for greater due diligence. 

It is very common that the payment amount is way off compared to the original amount.  This is generally because there may have been a loan mod (or 2 or 3) along the way which changed the loan terms and payment.

It's the closest to real if PV in the PMT function was the Total Payoff. When you use the UPB the P&I is way less than the loan. I suspect this exposes some mistakes were made. Either on the reporting side or constructing a workout somewhere. I do like the idea that the model incorporatse the facts as you are told them, but have indicators that can check and show when they aren't aligned to reality.

It is like solving a mystery.  It could be due to delinquency, forbearance, modifications, a mistake in the documents, or a mistake in the servicing records .  Getting copies of the docs and servicing history with notes should solve the mystery.

You should ask the seller to explain, then verify it.  Probably a loan modification.  I was selling a loan on there last year, and the way it's structured I couldn't find a way to enter the information to reflect the actual current P&I payment shown in the payment history.  I created a separate document to explain, it was kind of a confusing situation, I'm sure some buyers thought I was being shady.   Since the borrower was in bankruptcy, the amount of P&I payment they were ordered to make (and were making), was quite a bit higher than defined by the note. 

Paperstac didn't give me any way to enter it to reflect reality.  Also the loan had an adjustable rate, and the next adjustment was coming soon, so I used that instead of the current rate.  The new payments at the new rate were still lower that what they had been paying for the last couple of years in BK.  My point is that there can be legit reasons for what you are seeing.  Ask the seller to explain before assuming bad intentions.