All Forum Posts by: Andy Mirza

Adding to #2, know the difference between a mortgage and a deed of trust and why that matters.

Go through the process of doing doing due diligence on a file before you do your first deal just for the experience. 

@Matt Devincenzo We don't bother with getting additional information from the borrowers because it's irrelevant to our needs. We determine the amount that we can accept for a short payoff and that it's it. It's then up to the borrower to make it work.

My advice is to figure out how much your "small reduction" is and go with that number.

FCI wants to have acceptable language for their loan mod and short sale denials so that they're in compliance with the CFPB. Acceptable language is more what the banks use and everyone in the industry can understand. It's usually not the same as what investors think. They don't want to hear, "we just don't feel like giving this crappy borrower a loan mod."

They want to hear:

"The lender doesn't offer programs involving any principal reduction"

"The lender doesn't offer a program that will extend the term of the loan"

"The lender does not offer a program that will lower the P&I payment"

etc

@Chris Seveney The attorney that handled those two loans didn't either. The loans and the debtors plans languished for a couple of years before we decided to transfer the files to other attorneys who specialized in bankruptcies. The new attorneys suggested APOs and we were immediately empowered to try to get the problems resolved instead of standing by helplessly not knowing what we could do.

I recently had two successes with Adequate Protection Orders for borrowers in Ch 13 BK. The APO is another way to deal with a borrower's delinquency in their BK plan when it negatively affects a creditor. 

If a borrower is in default under their plan (delinquent in post petition payments or failure to pay for un escrowed taxes or insurance), you can file a MFR. However, a lot of courts are lenient and will give the debtor extra chances. You might go through added time and expense to try to get relief, only to get shut down by the judge.

I look at APOs as settlement agreements between creditor and debtor. Instead of taking the chance at a MFR hearing, which could go either way, both sides agree on a remedy to the default.

For the debtor, he or she doesn't run the risk of relief being granted at the hearing and he or she gets another chance to complete the plan.

For the creditor, you avoid the same risk of losing in court. If the debtor completes the APO, generally, they've fixed the problem (caught up in post petition payments or paid delinquent taxes). If the debtor fails, the creditor gets relief without having to go to a hearing.

In two of our cases, the debtors failed to perform on the APOs, which resulted in getting relief without having to go to a hearing.

Just another tool to deal with loans in BK :)

I don't think that this will affect our business but it seems like it will make things more difficult for the servicers. They tend to play it safe and I can see how they might add extra steps to make sure they're in compliance. So, maybe this results in a little more work but I think the servicers were already doing something close to this.

I've been saying that that a lot of forbearances will turn into loan mods for the borrowers that need more time to recover. It's the same playbook from after '08. Combine the arrears, call it "deferred principal", and make it non interest bearing and due at the end of the loan. 

Just the process of applying for a loan mod, even if it doesn't go through, on a mass scale is enough to slow the foreclosure rates. Nobody really wants to see a wave of foreclosures and this is another way of preventing that, in my opinion.

As Peter mentioned, your purchase price becomes your cost basis off of which you will determine your gain or loss on sale. Each holder of that note has to account for gain or loss depending on what they bought the note for and what they sold it for, regardless of what is owed on the note. That's separate.

For most non performing notes, the losses were taken a long time ago by previous note holders.

UPDATE:

In this situation, I think the borrower was hoping for a loan modification but didn't use it as an excuse to drag things out. Once the borrower learned that we weren't able to do a loan mod, she amended her plan to surrender the property. Although the debtor's attorney wasn't very responsive to communications in the DMM portal, the whole experience wasn't that bad. I can see how it would make it easier to get loan mods done as everything is kept in a centralized location and communication is transparent between the depot, creditor, and the mediator.

Great story! Thanks for sharing :)

I agree with the others in that you have to find a hybrid model that uses performing and non performing and tailor it to your needs. 

Hopefully, the COVID craziness will end soon in the states that still have it.