All Forum Posts by: Dion DePaoli

Welcome to BP Percy.

I have looked at the document (not plural) that was sent to you. The single document you have been sent is what the title says it is, well supposed to be. The document is a pre-application document used to illustrate estimated loan costs. You received this document prior to actually formally applying for a loan (or at-least that is the way it should go) by signing a Uniform Residential Loan Application (Form 1003), Good Faith Estimate (GFE) and other disclosures.

If you received a formal application, form 1003, with this document then this is the wrong document to disclose potential fees. That would be the Good Faith Estimate. The two forms are similiar looking but not the same.

As far as the numbers go, this is a pretty sloppy and sort of high fee arrangement. Comments per line item:

Section 800 - Underwriting Fee - this is pretty high at $900, I am inclined to say this is put in as a place holder but the there are two fees inside of it, a processing fee (for the broker) and an underwriting fee (for the lender). None the less, you can find lenders that do not charge either or have much lower fees than this.

Section 802 - Origination Credit @ 1.875% - You need to ask what this is for. The manner in which this is structured the broker is giving you back $5,419.13, that is why the number is negative. (This would offset the above underwriting fee) I am inclined to think this is the broker is using the line to attempt to disclose his Yield Spread Premium (YSP) but that is not the right line for it. It is not customary for a borrower to get credit from a lender, especially thousands of dollars in credit since the money received in credit would be better spent reducing the interest rate. The interest rate you have looks like market or close to it, so I think this is a miss located broker fee that is on there in the wrong place and doing the wrong arithmetic for you estimated out of pocket costs.

If the fee is paid to the broker by the lender for selling an interest rate, which is how brokers get paid, it has to be disclosed to the borrower. However it is disclosed as non effecting number to the borrower. It does not make your cost to close go up or down since it is payment between the broker and the lender. If this a sloppy attempt to disguise a broker fee or origination fee, which should be above in the 800 section, never talk to this guy again.

Section 804 - Appraisal Fee - this is twice the cost of an appraisal. This is a concerning entry for me, if one of my brokers ever did this, they would be fired in an instant. Appraisal Fees have to be paid to the appraiser, usually outside of closing and they cost $350 not $700. A $700 appraisal would be if the property was very large, like a mansion or was a bit special like a ranch or something. A standard residential property (single family home, condo, town-home) will cost $350 plus or minus a couple bucks.

Section 805 - Credit Report - this is another flagrant fee. Credit Reports are restricted from being a revenue center for brokers and lenders. This means the cost of the report can be passed on but with no margin (profit) to the borrower/customer. A credit report for most lenders is around $9 to $12. This document shows it at $100.

Nothing stands out on page two that is not seemingly ordinary.

Based on the entries for 805 and 804 along with the confusion of 802 my radar for what this broker is doing is at concern/alert. Some of this can be attributed to lazy and lack of attention to detail put that is not to be confused as a reason for it to be improperly setup.

The issue you have with that is only the Good Faith Estimate is governed by regulation for proper estimates of numbers. So this form, while used by some lenders is not really a regulated form and since you didn't make application there is no real complaint.

IMO, you will do well to go sit with a bank and get them to give you a quote. You will find their closing costs will be much lower and in many cases more accurate. It is good you are doing research before jumping in. If you run into other questions post them here in BP and you will get answers.

Welcome to BP.

Bond for Title (BFT) = Land Contract = Contract for Deed

BFT not as common a term as the others which might be why there has not been many responses. For the sake of the rest of the post I will refer to it as a CFD.

The tenant/borrower can obtain an insurance policy which will look similar to a renters policy. The CFD does not convey title to the real property until the contract obligation has been fulfilled, so you will still want to carry insurance as you are still own the deed. So you carry more of a landlord policy and have them get a tenant policy. This also makes the DOS trigger concerns moot.

As far as insurance companies holding potential customers hostage for additional types of insurance policy sales, well that seems like a silly business practice. Be sure you are not getting involved with recommending or suggesting an insurance agent or company to use, that can be deemed as you selling insurance with no license.

If you search the threads for the other terms you will find many threads with a variety of sub topics. Welcome to BP.

Originally posted by @William Byers:

Thanks to all for the insightful information. I also posted this issue on my local REIA thread, and everyone is clamoring for the details. A few more facts I have discovered in due diligence and in conversation with others:

1. Marshall Watson was the foreclosure agent (I was told they were a mill that got shut down). It got dismissed for lack of prosecution after no activity for a year. I have confirmed this.

2. The jurisdiction is Florida.

3. The home was rehabbed, fairly nicely. Current status unverified.

4. Taxes are current (2013 is paid), liens have not been verified yet but I can order a title search for $35.

5. Exit strategies suggested thus far include friendly short sale and modification rather than foreclosure.

6. It was never a contested foreclosure, and as I am told under the new laws, if I re-start the process, they would only have 21 days to respond or they could be defaulted.

6. This property is in my area and I am comfortable with values and can verify condition.

7. 2nd mortgage is satisfied.

Thanks again to all.

Yes, Marshall Watson went down in a blaze of glory. I use to use them back when they were around but about a year and half prior to their close, they were not very good at their job.

I am slightly concerned your referenced title report is not a proper one or two owner title history of ownership and encumbrances. Usually those reports are closer to $100 as a pretty standard price. The price you list of $35 is pretty below the fairly common industry price. Just be sure you go back at least one owner and get a full abstract for liens and encumbrances.

I don't know what you are talking about with 21 day idea. When you file a foreclosure complaint in Florida, you will have to serve the parties through process or public notice. Just because the prior complaint did not get responded to doesn't mean the time on this compliant will be shortened in the favor of the plaintiff. This is a new complaint, it all starts over. A shorter time would be less equitable to the defendant.

Additionally, I do not think you mean "defaulted", the borrower is already in default, that is what provides you the pursuit of foreclosure. I think you are confusing a new law which allows for a fast track foreclosure if the property is proven abandon. Logic dictates that an abandon property foreclosure doesn't experience a foreclosure complaint response from the defendant (borrower). So complaint is still filed. Process still takes place. Then your attorney would file to prove the property is abandon and file motion for summary judgement based on the property being abandon. That process can reduce the total time down to around 90 to 150 days depending on court schedules, etc. If the property is not deemed abandon by the court, the acceleration to summary judgement will not be granted.

I notate the description is vacant. A vacant house is not necessarily an abandon house.

The suggested exit strategies sound more like inexperience folks just tossing out what they believe they know. There is nothing in this loan based on this post that would remotely have me thinking a modification is something you want or even likely. I am having a hard time thinking the borrower here has any motivation to cooperate and a short sale would require that as well as a modification. So I would say do not spend too much time on those ideas and continue down the FCL path. You will exit the loan at auction and either get paid or get the property. If you get the property, you can sell it or rent it, etc.

The second mortgage being satisfied is a surprise. I do not fully understand how this claim is made with no title report. The satisfaction should be recorded in public record. Perhaps this was not really a second line in the first place but rather the last first lien they had. Again, some of this might be being convoluted by conversations with the Seller opposed to verified on title reports. That said, the story there has some background merit. How recent is the SAT might tell a story about the borrower's presence and willingness to want to stay in the property (ownership wise). That second lien could have been discounted for payoff. I have a hard time believing a borrower shells out $50k to pay off a second lien and then leaves the first to default. Just as an additional supporting idea, the borrower seems to have made roughly 60+ payments. The balance is pretty close to where it should be based on those regular payments being made. In other words, evidenced by the UPB it doesn't seem like any prepayment occur. So while not impossible but rather in the ranks of less likely, I don't see this borrower all sudden posting the significant cash needed to pay down the second lien. I would look for the time period this SAT took place and then look to the servicing records of the first. See what was happening. A borrower satisfying a junior position should have triggered somebody looking at this at the previous mortgagee or servicer office. Any satisfaction of this second lien post default, even if shorted and certainly in full is concerning. There is a story here, not sure how much I have have stumbled my speculation onto of it but I think I would certainly get a better understanding of this idea and event.

With that, happy diligence. Who needs True Detective when we have such entertaining mortgage files to play with?

Originally posted by @Joseph Enbody:

How do I contact the folks at SDXS? Can't find a phone number anywhere on the web.

I might know how to get a hold of SDXS Joe. I am pretty sure you and I are connected already as well. Feel free to send me a message.

Well, this is interesting. First, ALL money is fiat. This includes commodity back money. Shiny things do not innately have value, they are just shiny. Second, inflation is a constant, we only stand to control it. Our current target is 2.0%, which are under at 1.7%. Third, and likely the underlying concern, our deficit is a none issue. In our economic history surplus results in recession. In that regard, we want a deficit, since a surplus pulls private capital out of the market. Like it or not, the reality is the government by design is the greatest distributor of money we have. Our issue is the second best are banks and they are not doing so great. National economics do not function like business or households. The US dollar is the only Risk Free investment in the world. It's not going any where any time soon. The idea of being reserved is for international trade, like oil. We are not the only reserve currency the pound, yen and franc also share that role only lesser amounts in percent. It's more a function of consumption than anything else. We Americans consume a lot. Unless that changes, we have nothing to worry about. They need our dollar because we buy their stuff. As far as that article link, it is the biggest bunch of crap I have read in a while. The largest holder of US debt is the US citizens. We own over 40% to be frank. So the 250 Billion in interest actually pays your Social Security and many base cash flow for retirement and 401k accounts. So thank yourself for that. Our debt never needs to be repaid, that is media talking head crazy talk. We issue treasuries with short maturities. When due due, we issue new ones, like a refinance. Since the expected life of the USA is infinite, there is no real need to pay it to zero. Nor would you want the end of the world that would follow. Since by our constitution you have to pay taxes in dollars and we own the lion share of out own debt, much of this debate is moot. Had to comment via mobile app. I will be back with a keyboard later.

I agree with what has been stated already. More important details are missing.

The borrower went into default at the end of 2009. Last payment was 8/1/09, so NOD could have been issued Dec '09 to Jan '10. So the credit union's response time seems in line in Feb 2010. In the follow up response it is mentioned the CU 'vacated' the FCL action shortly thereafter.

I am not inclined to think that is for a lost note. I know the public likes the conspiracy idea of lost notes, but frankly it's not all that big of a deal for a mortgagee. With a proper Lost Note Affidavit, there is no real counter effect to foreclosure. Makes for great bar conversations and that's about it.

So, as Chris mentions, I am inclined to think the property has some issues that have not really been flushed out yet. Perhaps title is riddled with liens and perhaps the property is in bad disrepair. If the property is in disrepair, there is a good chance of both.

As Bill points out, the Seller of the asset seems to be trying to focus on the wrong thing and missing the picture altogether. There is an issue in this sector where investors invest in NPN assets and expect for there to be some innate value increase when nothing happens. It's one of the most ridiculous ideas in the asset class unfortunately. The under-current of the idea is that these assets function like real property. They then try to market them like real property making a side note of the security instrument and process that it takes to disposition the asset. It does seem like that is the case here.

In regards to the information provide and the best guess. No, this doesn't look like it is a good deal. The Seller is looking for about 30% of RE value. Not sure what state this is in. This really looks like it has the making of being capital intensive which will be a barrier to that price. We have a low level RE value, so this makes advances hard to recoup in the first place. Then we seem to have some property or title defects (otherwise FCL would have proceeded), likely both causing additional advances. If you glance at property taxes, I am guessing a couple years are outstanding, nobody has tried to do anything with this since FCL in 2010. These are common issues with low value assets like this. So I think (completely speculative), it is more than likely a bit over priced. How much over price or if the deal is a complete 'No' can not be determined.

There is a possibility there is a price above zero for this. Abandon properties in some states can enjoy a very accelerated FCL process. So most of the downward pressure on the price will come from the cost of advances and curing any defects that stand in the way of running through foreclosure. Looks like generically there is about $31,000 to play with. That is, assuming your RE value is correct and the property value is around $53k. I would look to the elephants in the room first as to eroding that number, such as the taxes, liens and estimated property preservation or even repairs that may be required to make. If my speculation is correct, I would go back to the Seller and get pretty blunt about the bottom line number. I wouldn't be surprised if proper price on this asset is closer to half of what he is looking for. Get real about the number and make sure you are not wasting your time with a wishful thinking Seller. That said, there is still a chance this is a big fat zero too.

Good Luck.

Originally posted by @William Byers:

I have been offered a non-performing 1st and have the due diligence package along with my own comps and assessment. Anyone care to share their wisdom to determine if this is a deal or a dud? I can forward or share particulars thru a PM or email.

We can give you some opinions. I would start your own thread though. Don't post borrower information but you can post balances and results of your findings.

If you tag me when you do it, I will glance at it.

@Gautam Venkatesan

Notes are not real property. So you can't make them out to be the same, they are not.

I have no idea how much money you have attempted to reserve. Somehow I get the notion that it is likely more than I would. For each his own. Default risk and prepayment risks are evaluated when investing in notes. So in response to your question, how do you judge these things, the risk of having to foreclose is default risk. To some degree you always have default risk but that risk can be offset by other factors like down payment. Advances made can be recovered if there is equity.

All that said, this idea really doesn't change your return. What ever you want to do with the money is your business but that doesn't change the numbers. The yield on this note will be just shy of 10%.

Principal prepayment only impacts return if you have discounted the principal due in a purchase. In a par investment the interest is your return. You are always only getting 10% interest. When the loan prepays, the unpaid principal is paid with no interest. In that case early payoff does not elevate your return.

Well your math is wrong. In year five your capital basis would have also been reduced by principal payments. Apply the principal reduction to the amount invested and see where you end up in return.

Originally posted by @Roy N.:

@Dion DePaoli

There should be a "Clear All" button on the screen that lists your alerts.

LOL...that is what that does??!?

Thanks Roy!