NPN -Owned trying to work with homeowner. Suggestions?

Question

I personally own a NPN and it was a throw in deal when buying a few others.  Looking for advice from others on how to work with the homeowner to get a DIL or SS w/o going Foreclosure.

I can get the owner on the phone but I do not believe they can understand what I am trying to work on due to their age.  Has anyone had any luck on working with a workable conversation or with Door knock?  They do not live in the property that NPN is attached to, as the city has condemned it.  At worse I just forget I own it, as it was very cheap.

Rick H. · Answer

Hey Kristine - I don't know if your notes have all been in CA, where the non-judicial foreclosure process is relatively short.

In comparison, the OP appears to be in an eastern state where judicial foreclosures are much longer.  I speak only as an observer as I've never owned paper other than CA until my recent NPN JV partner created our hedge fund.

My point is that a DIL may still be a viable option if foreclosure is started but is a lengthy process.

I say, if possible, door knock the owner's residence and get a dialog going. Having a dual-track educational process whereby the owner knows that they're in foreclosure and also receive more personalized correspondence from the note owner could be helpful.

However, I must also disclose that I've had some of my own borrowers receive my letters as sales material, when loans were serviced by a third party company other than my own.  Frustrating.

Account Closed · Answer

All my attempts at work outs and DILs on NPNs ended in foreclosure anyway. They were all absentee landlords who abandoned the properties long ago, which meant they were tax defaulted as well.  One thought "the state" owned it.  One thought the original seller/carryback lender had taken it back.  I see this kind of thing all the time.  Many people don't really understand foreclosure and have all kinds of misinformed ideas about how it works.  If their property debt was eliminated in BK, they will contact their attorney who will tell them to not sign anything. So that's who I'm dealing with when trying to negotiate deed in lieu. Not worth it anymore. I just go straight to foreclosure action.  They can respond if they care to.

You could put it all in writing and offer to accept a DIL and see if you get a response.  Has there been any foreclosure action yet, before you bought the note?

Also, are you sure the DIL is a good idea?  Putting aside past due property taxes and possible forthcoming special assessments for the code violations, are you sure there are no other liens against the borrowers?

Dion DePaoli · Answer

@David Putz   If the property has been condemned you need to find out if there is also a Taking through Eminent Domain.  If there is a Taking, the interested parties can file claim to the case of Taking and receive compensation for their interests.  
	 
	 Not all condemnations result in Taking.  If no Taking is to occur, the building will be demolished and a Demolition Lien will be accessed by the local municipality and placed against title.  
	 
	 If you take title with this lien present or imminent, you may end up assuming this liability.  The Demolition Lien will be superior to your Mortgage.  
	 
	 It is possible to stay the demolition plan depending on how far it has progressed but this is only done with permission to cure the property so a time limit will apply.  
	 
	 In some states and cities, the Mortgagee can be responsible for the Demotion Lien as well as the Property Owner (Borrower).  Sometimes referred to as Creditor Liability Law.  Where a property is abandoned by the owner, the Mortgagee is deemed liable by the municipality for the cities costs to deal with the nuisance property.  
	 
	 You have a potential issue on your hands that you need to really dig into the asset may have had a cheap purchase price but the congruent liability that it came with may not be so cheap. 
	
	I am guessing you didn't see that coming, not an issue to be forgotten about.

Steve Babiak · Answer

Summoning @Dave Van Horn the resident NPN expert.

Dion DePaoli · Answer

Rick H. what is a "dual tracking educational process"?

Aggressively pursuing a DIL with elderly folks who are having a hard time understanding what the intent or outcome may be is not a sound practice.  It can be seen as causing duress to the borrower by the redundant attempts to obtain a DIL or as an unconscionable advantage to the mortgagee.

Clearly you made some attempt at conveying the idea likely by speaking to them.  They didn't understand and it seems frankly didn't agree to do it.  A DIL is a voluntary surrender of the property by the borrower to the mortgagee for the satisfaction of the debt.  The borrower should not be insolvent.  Extraordinary financial concerns should not be used as a encouragement to a DIL.  It doesn't really sound like some of these concepts can safely pass the sniff test.  All real situation issues here in the servicing of this loan.
	
	If the property is located in New Jersey they have an expedited abandoned property foreclosure proceeding that can drastically reduce the time to finish the foreclosure.  That based on the information herein seems to be the safest and quickest path to disposition for this asset that ought to be explored.  It is not understood if the property's other liens and tax liabilities even make pursuing a FCL, even if quick, a sense able action.  As I mentioned before, a concern to the future liability from the demolition and creditor liability also has to be dealt with.  
	
	Why would a builder want, even if cheap, to take on a potentially clouded title?  Not to mention one with a demolition clock ticking.  If you merge through lieu deed, you will loose all your foreclosure rights and junior lien holders will become senior to your ownership.
	
	It just seems the idea here is to hurry up and take title via DIL to get out from the speeding train wreck that this could become.  That could give rise to even further liability and with collateral only valued at best repaired at $25k it also seems like the seller of this asset who graciously threw this into your acquisition didn't really do you any favors.

Dave Van Horn · Answer

Hi David,

There are definitely things you can do to build trust with the borrower to show that you own the loan. For example, you can send him/her a copy of the recorded assignment and original note, with a request that they contact their attorney or the county clerk to verify that you now own the loan, as you would like to have a dialogue with them in order to help them find a solution. I also liked the idea of the 3-way call with the servicer. (BTW, our model always includes starting legal.)

We do have a process that includes a phone campaign, mail campaign, door knock service, before we initiate legal action (which is by day 16 of ownership) in order to encourage dialogue. Once we have the opportunity to speak with the homeowner about potential solutions, we also trust and verify things by going over their financials, etc., with them and try to find the root of their problem, and then we try to create a work out plan that’s a win/win for both the homeowner and PPR. That being said already in this thread, there are some cases, where this isn’t possible and we must continue on in the legal process.

I am in agreement with Dion and Katie that you need to get clear on what liens and encumbrances exist on the property before you can decide what's next. You may need to pull title first ( at least an E&O report), because if you do decide to pursue a DIL, you will inherit any liens that are against the property, and per Dion it's not a bad idea to check with licenses and inspections dept of the city to see anything outstanding including demolition situations like he mentioned. Once you're clear on the loan, the title, the borrower, and the property, it becomes easier to make the next informed business decision.

I hope some of this helps,

Best,

Dave

Dion DePaoli · Answer

@David Putz 
	
	It is pretty common for the borrower to not trust in the servicing transfer.  In the past we have taken both letters (Hello & Goodbye) to speak with the borrower and have even done a three way call into the servicer to verify identities.   Certainly their previous servicer should also be telling them the loan was transferred so usually pulling that one out showing it says good bye and references your servicer they can connect the dots or simply have them call and verify the information.    
	
	As K. Marie mentioned, in these types of situations which are fairly common, the alternative to getting them to believe is simply file foreclosure.  
	
	Good luck.

David Putz · Answer

@Dion DePaoli I never have spoken to them about DIL.  I have called and attempted to explain that I am their new lender and they stated they already spoke to someone.  I then explained that along with the letter that I have sent (RESPA) that their mortgage has been sold and I am now the person to speak to about their mortgage.   Their response is "I have spoken to my mortgage company".   So it is clear mis-understanding and would like to clear it up, possibly through door-knock.
	
	This property is not in NJ it is in Ohio... It is nearly impossible to find a home selling  for 23-25k in NJ.  And Yes we are already utilizing the abondon property law, that went into effect last May, on a property in Manchester.

David Putz · Answer

This is not a lamdlord situation just elderly people who could not make payment anymore for  an unknown reason.

We have not started the foreclosure yet and unsure it is worth it.  the property is retail worth 23-25k fully up and running and around 650-700 rental. We bought it for very cheap under 3k.

I would like to just find a way educate and help them get  out of the situation.  I would flip it cheap to a local contractor.

Eric M. · Answer

Wasn't Dion saying that taking the deed would leave you responsible for paying the city for demo or other charges?  What is the land worth?

NPN -Owned trying to work with homeowner. Suggestions?

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