All Forum Posts by: Dion DePaoli

Also, be careful with your interpretation of this Foreclosure Radar report, it looks and sounds like one instrument is being double reported. Citi may not even be the current Mortgagee. Only glancing at this. Will look again later with some additional commentary.

There is zero (nothing) in any title report which will give you an update status if a borrower's loan account. Title will show the instrument filed, but not current indebtedness.

Yes. So is getting hit by lightning and winning the lottery.

It sounds like you have a specific home in mind. If not, you can simply go look for houses that might or do offer Seller financing.

There is not really enough post information to comment too much further. Finding someone who will offer financing and you liking the finance offer given such as interest rate and down payment requirements may not be the same thing.

Some areas are more prone than others. You can, from time to time, negotiate some of the city and municipal liens down or away. (or any lien for that matter) If you pull the lien and call the lien holder they 'may' give you a reduced payoff. That said, some municipalities have zero desire to allow a discount.

In my experience, it is not uncommon to see a large building violation lien which costs a fraction of the line to fix. Simply fix, reinspect and pay the reinspect fee and all done.

HOA liens, not so easy. Smaller municipal liens not so easy (they already have money problems).

If you are trying to work properties in this sort of state, you best get a little better at dealing with these liens. They are generally conducive to abandoned homes and neighborhoods. Perhaps even to a point where you offer a better 'package' to your client with remedies to the liens identified or similar.

Keep in mind, there are those you will not reduce or work through. Need to know when to cut chase, for sure.

Whether or not you want to play with those as a function of your time is up to you.

In most cases, if a loan is registered with MERs, when the loan falls into default it is taken down from MERs. This has been a practice since all the MERs problems of the recent past. When the loans is removed from MERs there will be an Assignment of Mortgage or Lien in the property records tracing to an investor who owned the loan from MERs.

Is that the current investor who owns the loan? Once can not be sure and it depends on some other things.

Another couple of concepts. Understand the Plaintiff of the Foreclosure may not be the current owner either. If the loan is traded there might have been Plaintiff substitutions in the Foreclosure proceeding (or none). Usually if the asset goes to auction, the current Investor will ensure they are properly in title for ownership so the Sheriff Deed can have the correct name on it. That may not take place until the week of the auction or similar. It is true, sometimes the named party might include the Servicer as well.

Usually when a loan is in default status, the investor through their servicing company will have an agent already assigned to the house. The agent acts like the investors eyes, ears and legs. This too can vary based on occupancy. If the property is vacant, you can look for some type of agent securing the property. Or some type of agent dealing with other property preservation ideas like mowing lawns or taking steps to avoid municipal liens, etc. The downside here, is you likely have to run a stake out on the property to catch them at the property which may or may not be feasible.

I suppose you can alway put a flyer on the door or business card, etc. That might get you a call. If I found one of those or heard one of my agents say they found one, I would call. All leads are welcome. Do make sure the document is professional or it might end up in the trash.

I will point out, there is a growing practice that recently foreclosed homes must be or should be listed for a minimal amount of time prior to accepting an offer. Which also means they must be put into MLS so the public can view and make offers in an open market. Not all investors or servicers will work this way but there are some trends, nonetheless. This practice gives limited partners or limited owners (like in securities) piece of mind that the best fair market price was received.

@Jacob G. , I agree with Tom. You might want to do a little more research on the topic of buying loans. I would say both legal and practical.

There is an undertone of wanting to get the deed out of this event which adds another layer of complexity and is not a direct result of purchasing either a 1st or 2nd lien.

To directly answer your question, a smaller bank will have a bank representative who has responsibility for the loan that is in default. Sometimes in smaller banks this is the banker who originated the loan, sometimes it is just the guy/girl in charge of delinquent and defaulted loans.

Your steps would include look up the property and pull the instruments or names off the instruments. This will include any mortgage or deed of trust and any subsequent assignments. This will lead you to the last know investor who owned the loan. Then how you choose to make contact with them is up to you and a matter of practicality. If the bank is local, perhaps you go in to chat. If not, you will be forced to call. Understand if you are calling into the servicer and not the investor, the servicer in many cases will not be able to do much for you. They do not always possess rights to sell off the loan only to service it, so in that sense you are not talking to the right person/entity.

Understand the investor who owns the loan and the servicing company who services the loan usually are not the same entity. Nor are they related oftentimes. They are more so directly linked when dealing with small community and local banks.

You can give it a try, for sure. Results will vary.

Also understand, you are more than likely viewed as a counter-party risk. Sometimes banks simply will not sell to a novice. Can often be the case for small community or local banks who want to stay on the good graces of the community. This is because bad collection attempts or violations of regulations can reflect back onto the bank which sold you the loan. Say for instance, you desire the property (clearly the case) and the borrower wants to reinstate. The borrower sends in sufficient funds to reinstate and you as the new mortgagee deny the borrower, after all you want the deed to the property. Borrower will sue and the list of defendants will include the prior bank owner of the loan and you. They include the former institutional owner as usually they have more money and assets for lawyers to try and go after for damages. The public seems to be fond of 'blood from a bank'. Additionally, no bank wants to be headline news with bad press.

There then is the whole valuation barrier which gives way to the offer you make on said note. You mentioned either a 1st or 2nd which are certainly similar assets but the lien position changes the value and disposition strategy at times. 2nd liens can be more of a collection play opposed to really being able to have the property revert back through foreclosure as a remedy. In the event the property has two liens and regardless of which one you pursue, understand there is now two investors who desire to recover from the property the unpaid balance of their loan plus fees and interest. To that extent, you compete with each other.

I am a firm believer there is a price for every asset which if offered a Seller will sell. That price is not always relate to what the Buyer wants to offer or should offer. So there is an on-going gap between the bid and the asking price for distressed loans in the marketplace right now.

Originally posted by Jeremy Merwarth:

I am like beyond novice at this but my partner and I are thinking about starting to invest in notes. His son is an attorney and we have the financial backing to handle it.

Our initial thought was to purchase non performing notes, foreclose on them (where his attorney son comes in) and then flip them. Again, this is probably showing my low experience level but I just wanted to hear the groups thoughts on this strategy.

Thanks.

Jeremy

That is certainly a very high level plan. Nothing overly complicated, folks do that everyday. However, this is also where folks divert into some misguided assumptions on the asset class.

I agree, the attorney in the group sounds great but if they have not practiced real estate law, including actual litigation, there might not be too much of an impact. That said, managing the legal vendors you use can be a full time job so it does depend on how you set things up.

More importantly and also less inquired about is the reality based questions that don't get enough initial attention. How will you value the asset? What type of discounts will you need to really make things work? What will you do better?

Often times I have heard the high level plan put on the table and then upon drilling into the plan find prerequisites on pricing or discounts to be unrealistic. In addition, expenses are commonly grossly underestimated. In addition, the probability of the real property reverting back tends to be over emphasized. Which in some misguided models inflates the real returns.

That said, there is a market for the new investor to carve out which has roots in a locally constructed niche. Street level knowledge of markets, being able to kick the tire and have face to face interaction with the borrower is powerful stuff. Hands on nimble management should outrun the more lethargic institutional counterparty in most situations. But who's game are you playing? Yours or the institutional seller? Are you setting the trend or following it?

So a newbie has to get comfortable with the industry and confident in their model including how they can internally exploit their model for better returns. I always like to say, no Seller is going to hand you an easy return. The easy returns stay on the Seller's book, the hard stuff get's sold off. There are always diamonds in the rough if you look but I am not sure by finding just those diamonds a robust business will emerge.

There are not too many 'new' ideas in the world of mortgage investing. There are ideas new to the person but not new to the industry. So I ask, what is thought below the high level idea of, "Let's buy foreclosures and sell off the REO". What will you do better than the instutional owner of said asset? And what will you do better than your neighbor competitor who competes with you to purchase said asset?

Originally posted by Cameron Ellis:

@Jon Holdman of course. So far the hardest part is understanding who/ how to assign the contract over

Curious what do you mean by this? Are you trying to double close this pool you are talking about?

Also, what are the other things you have figured out by speaking to your attorney?

Wendell,

I am going to go my personal experience of reviewing literally thousands of credit profiles and reports for borrowers having varying ranges of good and bad credit. The fairly extensive credit training I have received in the industry and the fairly detailed knowledge I hold on loan origination and credit impact. Essentially I am not basing my commentary on one or two examples as my tenure is a bit over a decade.

Certainly a properly discharged BK will increase credit score as the BK discharges derogatory debt in many cases. My point is, that doesn't make it 'better'. The impact of a foreclosure, a bankruptcy or even a 120 day past due can have similar effects on a person's credit. The overall impact of any derogatory credit line is offset by positive tradelines and vice versa. FICO and other credit scoring models are not simple cause and effect equations. The tradelines matter, debt balances matter, payment history matters and time in both macro and micro events matter. Trying to break it down into a simplistic cause and effect is an injustice to understanding credit. Just because Bob's net score effect was -200 doesn't mean that Larry's will respond the same. Credit profiles are more like snowflakes in that sense. There are generalities, all snowflake are made of frozen water but upon a detailed view, they are different.

In some sense of quantifying the impacts of a Short Sale, Deed in Lieu and Foreclosure we can simply look at one of the more relaxed set of mortgage underwriting guidelines, which would be for FHA loans. Simply stated all these events are treated the same. There is a 3 year exclusion for all of them. There is a difference with Short Sales which deals with whether the borrower was specifically current during the entire 12 month period prior to the short sale event. If they were current, the is no exclusion. If they have delinquencies, which most Short Sales do, they are treated the same with a 3 year exclusion. Thus it makes it difficult to define anyone of them 'better' than the other.

In regards to the deficiency and 1099. The point I made challenged your comment which you wrote, "....or the bank can issue you a 1099 for the deficiency (and now you owe the IRS taxes on it)", which is not a correct statement. They are two separate mutually exclusive events and you do not get a 1099 for a deficiency, you get a 1099 for income not debt. Additionally, your post reads like it is all inclusive, that deficiencies can occur anywhere and everywhere which is false. A borrower with a property in a state that doesn't allow deficiencies does not have to fear deficiencies, they are not allowed. In states where deficiencies are allowed there is criteria which excludes the pursuit of deficiency in some cases, thus borrower would not have to fear that event either.

We agree, none of this is easy for a borrower to go through or consider, which is why I choose to fill in some of the gaps here. The best thing a borrower can do is become properly informed about all options so they can make a decision that is right for them.

So I download the application and installed. Love it.

The app crashes when I attempt to click on My Subscribed Forums. Not sure if that is known.

I am curious, will the application auto update or should we check for updates periodically?

Also, I noticed yesterday there is no way to retrieve or view inbox messages. Is that feature in the works?

Any other cool stuff in the works for it?