First off, I want to say that this is my fault for not reading the loan modification close enough.
I started looking into note investing after I heard the podcast with David Van Horn. I loved what I heard and did a lot of research into note investing - read some books, read every article I could find, listened in on Q&A calls, etc.
I signed up for PPR Note Co.'s email to get the featured performing note deals. Within less than 6 months I purchased five notes. I loved the ease and simplicity of purchase as well as the warranty.
As of today, three of the notes are performing, one is delinquent 94 days (which I am in the middle of exercising the warranty which is a buyback option - everything is going smoothly so far), and I received a request for Payoff Demand for the fifth note.
This last note is the reason for this post.
This is what was in the email from PPR that I received Jan. 6, 2018:
I grew up in Granite Bay, CA which is very close to Rocklin. I new the city and the neighborhood. I did a little more digging and found that the house was listed for sale. I was thinking this looks great. Unpaid balance of about $64,000, I’ll offer $48,100, and make some money when the house sells. So I purchased the note.
On March 30, 2018 I received a loan payoff demand from the serving company for a little less that $64,000 (I had received three payments, mostly interest). Fantastic! I signed the payoff demand. On April 3, 2018 I received a revised payoff demand of $45,000. I thought there was a mistake. The very patient and professional loan servicing specialist told me to read the loan modification where it pertains to the “Option to Payoff Loan at a Discount”. Yes, in the loan modification there is a stipulation that if the loan was paid during the first 12 months of the agreement the discounted loan payoff is $45,000. I have never heard of a prepayment discount on a loan. Normally, there is a prepayment penalty of a couple points if the loan is paid off early.
I received a call from the borrower asking for the payoff demand to be signed, and said of course, I’ll send it right over, and explained the situation. “She” apologized and said “that’s not right. I have been asking PPR for a payoff demand since January.” I’m not sure what she meant exactly, but if PPR knew that the loan was going to be paid off soon and they were asking for a suggested bid of $44,550, knowing that the discounted loan payoff would be $45,000, I think that is a little deceptive, and frankly, shady. It was not disclosed that the borrower had requested a payoff demand.
In conclusion, I should have read the loan mod more closely. And instead of making about $15,000, I am going to lose about $3,000. Also, yes, I have checked the other four note loan modifications and they do not have an “option to payoff loan at a discount”.
Hi @Nathan Adair ,
I'm going to look into this with our loss mitigation team, I feel like there's a couple factors at play here. If we know a borrow is going to pay us off, it normally wouldn't be worth going through the process of trying to sell it. Plus, if she made an official request for a payoff with the servicer, they're compliantly obligated to respond to that request. We'll be reaching out to you by tomorrow or Monday at the latest with more info.
Thanks Dave! I’ll be looking forward to hearing from you.
Update: @Dave Van Horn reached out to me again through a private message and his business partner called me today. All is well! They said they'd make me whole if borrower actually pays off the loan. PPR has been a pleasure to work with!
Due to this thread I just signed up for Dave’s site!!
@Nathan Adair - goes to show you his reputation which is highly regarded in the industry. A post that starts out as somewhat negative turns quickly into a great example of customer service.
Just be cognizant that there are many in this industry who would of told you to pound sand so make sure to brush up on your due diligence.
Glad to see you got it resolved.
@Nathan Adair thanks for sharing your experience. I have invested with PPR and was thinking of giving Dave and his team some more capital. You have made me feel like this would be a very good idea.
Thanks for your post. I have bought some notes from PPR and they have paid flawlessly. Good to know how they handle hiccups like this that are bound to happen.
Great thread and why to be on top of it @Dave Van Horn . Bought the audio version of your book though I haven't been able to listen to it yet. Note investing is something I am very much interested in after I get enough capital for a first lean position.
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