All Forum Posts by: Dave Van Horn

@Tim FitzGerald

I would suggest checking out my BiggerPockets Blog to get acquainted with the note business a bit, and to check out the many questions people have asked me in the past on the articles and BP forum. 

We're going to be going through some introductory topics on the call and I'm sure answering many questions for those who are new to the business tomorrow night. Hope to hear from you then! 

Best,

Dave

@Christopher Montgomery Starting out, my partners and I went through a similar situation when looking to buy. Bring your questions to the call and we'll do our best to answer them!

Best,

Dave

Have a question about notes? Want to learn more about the industry? Are you working on a specific note deal and need answers?

I will be holding an OPEN Q&A call this Monday, 7/20, at 8:00 pm Eastern Standard Time, with PPR's Director of Borrower Management, Bob Paulus, and you're invited to participate! Since 2007, Bob has managed thousands of notes and has seen it all. I'll be picking his brain as well as fielding questions from the audience. So whether you're a new or seasoned note investor, bring your deal and note business questions or simply tune in to hear what's sure to be a great call with others in the industry.

Call-In Information:
Conference Dial-In Number: 605-475-3235

Participant Access Code: 424572#

As there is a limited capacity for attendees, please call in at least five minutes early to ensure call access.

Hope to hear from all you BP members!

-Dave Van Horn

President, PPR Note Company

Hi @Elaine Griffin,

Although I understand your confusion, there are a lot of positives to your current situation, as the property is still occupied, their current on the first lien, and you're close to an exit. If you have any questions or if you would like the contact information for my NJ attorney, please feel free to private message me.

All the best,

Dave Van Horn

Hi Charles,

I can relate as I own a recovery house for the last 6 yrs. not very far from you in a nearby township. First you can gain a lot of insight from the Oxfordhouse.com website under the legal section. We ended up hiring an attorney from Saul Ewing in Chesterbrook who had actually won a previous, similar suit in our twp. It cost me a little $$ but the twp. got the message. These folks are a protected class and the unrelated people thing doesn't apply. Anyway, wish you the best.

Dave

Hi Brian,

Although we're friends and I know you and your story, your articles are still very inspiring for me and everyone else, so I hope you keep writing for BP. 

Talk soon,

Dave VH

Hi All,

@Steve Babiak, thanks for the mention, and I agree that if there are a lot of high cost junior liens, a deed in lieu wouldn't be the way to go.

@Thomas Watson   I do suggest pulling title before agreeing to a Deed In Lieu to get clear on amounts of any junior liens. Speaking with your attorney is a good call.

Also, once he deeds it to you, you can't foreclose, as you would have the deed to the property in lieu of your lien being satisfied. Your first mortgage would no longer exist.

I hope this info helps!

Best,

Dave

Hi All,

Thanks for the mention @Steve Babiak 

We have a different model and so we have a different experience than what Dion describes. We work in both spaces (first and seconds), but most of the money we make is on no equity seconds. Our most common exit strategies, with seconds, are not through the property, but through working with the borrower.

When we do foreclose from second position, we don’t typically pay off the first mortgage in full (very rare), but we have occasionally taken the property back subject to the first or reinstated.

Originally posted by @Robyn J.:

They way that we get reinstatement amounts if we need one is through the foreclosing attorney for the senior lien, which is public record (when they file lis pendens, you can see who filed it). If you send the law firm a copy of the note and the assignment of mortgage as proof of ownership, they will typically be glad to give you reinstatement amounts. If you’re looking to negotiate, you would have to go back to the bank directly, but this is a way to get the reinstatement amounts. Sometimes your foreclosure attorney can contact the bank’s legal department on your behalf if you’re still having trouble.

I hope this helps!

Best,

Dave

Hi All,
I apologize that it took me awhile to chime in on here, as we’ve had several events over the last two weeks. @Steve Babiak  – Thanks for the mention.

@Jamie Greenberg  - Regarding our warranty on performing notes, you’re right that we would re-touch the loan in an effort to get it re-performing in the event of borrower default. If we are unable to get it re-performing in approx. 4-6 months (depending on the state), we buy the loan back for the initial investment principal minus any payments received during your time of ownership.

In most states, you have reinstatement rights as a junior lien holder, where you can bring the senior lien current in order to protect your interest. Then, you can foreclose from second position (if necessary) and take ownership of the property subject to the first without paying the full balance owed. There are additional options at that point, such as rehabbing and flipping out the property to pay the first and keep the profits, renting out the property (especially if the first’s payment is less than rent), and so on.

What you described is the worst case scenario that could happen, although it rarely does with the type of asset you’re describing, especially if you’re due diligence is accurate. Keep in mind that equity isn’t the only driver, and all seconds are not created equal. Lower-end categories of seconds statistically have a higher incidence of being wiped.

The senior lien status, to us, is more important than equity. For example, a homeowner who is delinquent on their second mortgage is typically in better financial shape than a homeowner who is delinquent on their first mortgage. Also, if the senior lien is current, this typically means that…1. They have a source of income, and 2. They want to stay in their house (or else they probably wouldn’t be paying on it).

With junior liens, you can’t discount emotional equity.

While the most common exit with first liens is through the property (i.e. foreclosure), the more common exits for second liens are through involvement with the borrower (i.e. payment plans, discounted payoff, short sale, deed in lieu, cash for keys, etc.).

Regarding deficiency judgments, although it may be a profitable business model for some (for example, collections attorneys), for most of us, it’s just not profitable to be chasing deficiency judgments.

I hope some of this info helps!

Best Regards,

Dave

Hi All,

First of all, props to @Dion DePaoli  for starting for starting this thread. These are valuable discussion points for those considering getting into the notes business.

I apologize that it took so long for me to chime in on here, as there were several conferences in the last two weeks.

I did tread lightly at first, as well. It took my partners and awhile to get started with non-performing notes, and this was partly due to the fact that we didn’t have many resources at our disposal for learning the business. Today, there’s much more information available on notes, whether it’s online or at various conferences throughout the U.S.

In the beginning, I only did private loans to rehabbers. When my partners and I ventured into distressed debt, we started out with a few notes purchased with our own capital, and we only bought notes backed with equity. After we had begun utilizing investor capital to purchase assets, the market crashed, and we had to learn how to make money working distressed assets without equity.

From our experience, I became a strong believer that notes is a ‘learn by doing business.’ At some point, you can’t really learn it all until you jump in.

I also suggest for many newer note buyers that they pursue education, network with others in the business, and find a mentor.

Learning the process, reading books, discussing deals with people more experienced, getting your feet wet with equity-backed deals, etc.—these are all great things to do when you’re getting started.

That being said, certain categories of assets are more passive, involve less of a time commitment, and are easier to manage. Then, there are categories that are more active, require more time, and are more advanced.

If you’re not familiar with collections, then distressed debt will most likely present a learning curve, as it can be more statistical, especially with junior liens. Although, secured notes and mortgages are still collateral backed investments, assuming that there’s enough equity to protect your lien position.

I hope this info helps!

Best,

Dave