All Forum Posts by: Dion DePaoli

Originally posted by @Dewayne Gammel:

How would an appraisal help me pre-construction? Will the pre-construction take into consideration all the repairs that will be done?

When the appraiser conducts a Subject To appraisal, it is subject to the completed repairs that he is given by you. This IMO, is a better future value after the work has been completed rather than a BPO.

I have seen lots and lots of BPO's and I just do not believe them to be sufficiently accurate when large amounts of repairs (sometimes just moderate) need to be made to the property. The repair cost estimates are off which usually affects the value they deliver.

Does an appraisal help or hinder you? Only so far as the BPO is not an accurate instrument of value. Could the BPO come back with an higher or lower value than the appraisal, yes, sure and vice versa. Clearly in this situation, the higher the value the more you can borrow and the lower the less you can borrow.

The HML will dictate what instrument of value they desire. If that works in your favor, it works in your favor (higher value). If it does not, then you may be able to provide support to counter the value. This can be done via the appraisal. This can also be done by supplying comps yourself.

Well, you need to ensure the ownership chain is in tact and perfected to your Seller. This includes assignments and endorsements/allonges.

The file should be in tact and original copies of the collateral should be destine to be shipped to you upon purchase. So the security instrument (mortgage/deed of trust), the note and the title policy.

You will also want to ensure you receive evidence of insurance, the servicing history, the servicing log and file and origination documents. All borrower accounting from the servicer.

The loan looks like it was modified, the remaining term is only 4 months into a standard term (360 or 30 year), it is assumed this is not a new origination since they would only now be considered defaulted, thus not a designation of 're-performing' it would simply be 'delinquent'. So the modification agreement, along with any forbearance agreement that preceded it should be included. The modification agreement might have been recorded already. It should be recorded if not done so already.

That is the nutshell based on what you described.

The exemption may expire if some degree of major repairs needs to take place on the property. What is a little more of the details around the structure that is violating the setback and how did it come about and what it is?

I have been a user of both types of reports. IMO, a BPO is not the proper value instrument in this type of situation (construction/rehab loan financing). I would recommend a full appraisal be completed Subject To the completion of the work. You would provide the schedule of work to the appraiser in detail and they would include that in their report. Usually a BPO does not include that type of detail. Nor does a BPO have a place to manually adjust each of the comp grids to provide for positive and negative adjustments of features of the property, which becomes important in this setting, IMO.

All that said, if the HML wants to use a BPO, then that is their prerogative. I personally would still purchase a full appraisal for my own piece of mind and as needed use that to defend any issues arising from the use of the BPO. If I had to pick, I would do a appraisal pre-construction and a BPO post construction (or CMA) to choose listing price.

@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.

@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.

one more idea, sorry on my mobile app and it doesn't read well. Can you make money in NPN investing? YES

Is it a statistical idea? NO (not even close)

I personally know of hundreds of millions lost in the asset class. By smart folks trying to make a machine out of the asset class. It's dangerous, stupid and risky.

Management is what wins, loss mitigation, ironically it's in the name. You do manage from a different perspective, a perspective of reducing loss, when translated into coherent distressed purchases can result in profit. It's tough. Margins are tight. You had better know your stuff or someone who does. Then, you can approximate the asset class. If not, the lessons of a lifetime, take a lifetime to learn.

$0.05 to follow the post. Bill's experience speaks for itself. Nemesis at times and advisors at others. That said, variety is the spice of this asset class. 10 loans don't make you experienced, 100 loans is barely a scratch in experience. Be careful, what you "know" can still be quite wrong.

A broker with a pool of Seller financed notes from around the country opposed to some local geocentric pool. Buyer beware.

SAFE Act became effective on October 1, 2010. Origination after that date are certainly included.

Can't speak to the quality of the notes in the pool without looking and that is not an offer to look. Many ideas will apply to each note in respect to how it was made, who made it, what state it is made in amongst other things.

The other issue in the post. If the loan is already made, there is no "New Title Policy". A lender can pay for a title endorsement but that is not a new policy.

Title companies are generally not used in a note sale transaction. This is not real property. If the notes are already originated, this broker has little clue of what they are talking about. That is a common attempt, to put a Title Company in a note trade, by brokers with little to no experience. In many cases, these are ghost pools and are not viable transactions. If there is any type of anonymity of the Seller, expressed by the broker, then RUN. This is garbage.

There is no such thing as anonymous transactions and brokers like to use that idea with a title company in the middle in some attempt to double close a note trade or other half cocked ideas. Big Issues with that. More often than not, the broker is not aware this action would break the chain of ownership of the mortgage and can could create affirmative defenses for the borrower.

These types of things also include high pressure due diligence and short time frames to fund. Usually attempting to deprive the potential purchaser of proper due diligence, most of the time since the brokers promoting the program have no experience in these matters. So, the faster the deal goes, the sooner they think they can get paid and the less likely a Buyer will back out. Sort of some weird attempt to guarantee a transaction before the transaction event starts.

If you can see the pool and speak to the current Mortgagee who can prove their ownership, then you might have something to work with. The burden of proof of ownership falls on to the Seller, that is not unreasonable to transact with someone you don't know. If they really own the loan, they should be able to prove it with a copy of the recorded assignment which can be obtained from public record by anyone. If you are being held hostage from speaking to the Seller by the broker in some attempt to force you to sign some fee agreement, then Run. This is garbage.

@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.