All Forum Posts by: Andy Mirza

@Gary Dezoysa You're right about the time being that precious. With regular real estate, escrows with retail buyers fall out all the time and is expected. Loan traders don't like it when deals fall through at the very end for an unacceptable reason. It not only wastes their time but it also makes them look bad.

A couple of years ago, I would respond to inquiries about whether I had NPNs for sale. I wanted to help out newer investors. After responding to emails & messages, taking calls, and sending tapes, I had very little to show for all of that effort and sold none of my loans. Out of about 60 people, there was only 1 that even provided bids (no response to my counters) and only a couple that followed up from time to time.

In my book, you have to put in the time to develop the relationship.

I completely agree that you should never contact the borrower of a loan that you do not own. I know that you have good intentions but what if you mess things up with the borrower? You've just caused an unnecessary problem for the seller of that loan. I would be extremely pissed off if a buyer mucked things up with my borrower and didn't end up buying my loan.

@Chad U., I disagree with you on never contacting the borrower. It's supposed to be the servicers job but I've found that they are terrible at doing anything except being the messenger. 

The first time we contacted one of our borrowers, it was after seeing servicing comments go nowhere over the course of a month when a borrower was clearly trying to work something out. We called the borrower directly, who picked up right away, and hammered out a Deed in Lieu deal within a couple of days.

This is a reminder to all note investors to do a thorough title review before finalizing a Deed in Lieu of Foreclosure/Cash for Keys Agreement. A foreclosure will eliminate most liens. In a short sale or Deed in Lieu, however, the liens have to be addressed & dealt with in some way during the transaction.

Do a title search and clear all of the liens by having the borrower clear them before your transaction or get the lien amounts credited to you so you can pay them off post transaction.

We generally pay the full amount of the net cash for keys amount when the borrower vacates the property & leaves it in broom swept condition.

Yesterday, we were surprised when a town refused to provide the transfer stamp, which we needed in order to record the Deed. (The town is in the suburbs of Chicago.) The $3,000 in unrecorded fees were incurred when the borrower's wife took a number of ambulance rides over the years without paying.

Our attorney assured us that this was illegal and that we wouldn't have to pay these. (Towns can get aggressive & lots of people just pay the fees instead of pushing back.)

In this instance, we could have been proactive in calling the town ahead of time. Another alternative would have been to withhold part of the cash for keys until we successfully recorded the Deed in accordance with our agreement.

Just do what you can to avoid surprise liens in your deed in lieu and short sale transactions :)

@Tevin Edwards You should check the usury laws in your state before determining your interest rate. In CA, you can't charge more than 10% without using a broker to arrange the financing.

In my opinion, people should use seller financing in cases where the property is not easily financed to regular buyer or they really want to hold the note for cash flow. If you don't really want to hold the note, you're better off having the buyer find their own financing.

If you want to sell the note on the secondary market, most note buyers will want a discount. (Having a higher interest rate makes it easier since the yield will be higher.)

Hypothecating loans seems to be that unicorn that used to exist in the 80s & 90s but is mostly a myth that gets floated around. The only lending that I know of are for portfolios of loans that are $10 M+. You would need to find a private note investor that would lend money to you for your loan.

That's crazy! I would never think of doing that for a loan that I was trying to sell and it would really lower my trust in a seller that was trying to do that to me. Another reminder to not take good relationships for granted and why it's so important for buyers and sellers to treat each other right to develop a good relationship.

Lots of great answers for you here.

If the loan is already being serviced at a place where you're comfortable having it serviced, I would stick with them. If you have to change servicers, yes, you have to do the work to decide who you're going to use. I wouldn't advise self service, unless that's something you really intend to take the time to learn and there is a purpose to it.

The biggest thing you can do as the buyer of the new loan is to make sure the old servicer and the new servicer are communicating and on schedule. Once the loan sale occurs, make sure that the point of contact at the selling servicer is in contact with the point of contact with the new servicer.

They need to coordinate dates for the hello and goodbye letters. They also need to coordinate the final data transfer, which occurs a day or two before the loan transfer date. 

I would contact them right after the sale, about mid-way through interim servicing, and then a day or two before the transfer just to make sure everything's on track.

Great info from Don on the costs involved in foreclosing! I thought that would be the case. My only concern would be the quality of the paper. The better the quality, the more this note should sell for. Was the paperwork put together by someone who was doing this for the first time or by an institution that does this all the time?

Before I was involved in notes, I put together a portfolio of 19 rental condos with a partner. Almost 5 years ago, we refinanced 14 of them with a blanket loan originated by a hedge fund that specialized in making rental portfolio loans on residential properties. Underwriting took a long time, we had to create a special purpose entity to hold the properties, and there was a ton of paperwork. 

From what I remember, the special deed listed all 14 properties and was recorded against each property. Everything was as iron clad and tight as you could make it for the lender. I know that they packaged this loan along with others into a bond and sold it to Wall St.

Are you buying this at a discount? If so, what it is the yield? Higher risk loans should have higher yields.

I'm assuming that the owner is keeping this as a rental but I'm wondering why he or she doesn't refinance to a cheaper loan?

@Chris Seveney

Another important lesson is doing a thorough job on due diligence, which you did. By doing that, you avoided having to deal with the seller's problem. He's stuck with a note that we won't be able to sell for a reasonable amount until the title issue gets sorted out.

@Stephen Keighery I think that the national debt is the far important thing to look at in the longer term (which is in line with your devaluation comment). The pandemic was a major disruption and it will take a few years to work everything out. But the national debt is like the sword of Damocles hanging over our heads. How long can this situation last? I don't know. But, I think we'll have to deal with it sooner or later and the trigger will catch us by surprise.