All Forum Posts by: Dion DePaoli

Done this and often. We always consider the borrower as the first tenant resource.

There is a pride of property ownership. This really only comes from folks who want to stay in the home and have plans of one day being able to repurchase the home back.

My only complaint is that in some cases that laundry list of deferred maintenance the husband/boyfriend put off on the property will usually end up on your desk as a new landlord. To some extent, you can get some chuckles out of the stuff they request. After the first couple sets of these we did, we put some plans together, asset specific, with the ex-borrower/new tenant related to the repairs. This helped ease the relationships in those situations where we didn't want to become the new handyman husband with a pocketbook.

I don't think it is a universally applicable concept. If the tenant can't pay, they can't pay and must leave. It must be on a case by case basis.

One good story to this idea we had was foreclosing a family where the child had gotten extremely sick and hospitalized. The mother, who made the most money, was forced to quit her job to take care of the child for father/husband career reasons. The mom, could get a job again when things got cleaned up, the husband would have had a tough time and the husband had good benefits but a low salary. By the time we finished foreclosure, the wife had gone back to work and they were making good money again. We allowed them to stay in the home they started their family in and eventually purchased the home back from us. I think these types of situation are just as abundant as having some deadbeat borrower or straw borrower, but you have to look. Doing what we do and being able to add some additional value and help out a family does give a greater sense of accomplishment to the task, IMO.

I think perhaps this is a tough conversation to have and the knee jerk reaction is simply get a new tenant to extinguish the baggage. I could understand how some more landlord types may not like having to really dig in to see and give a chance to the borrowers to turn things around financially.

There is no public information related to the purchase or sale of a mortgage/dot for price. The only public document which accompanies that transaction is the Assignment of Mortgage/Lien however it does not contain any price information.

Sharing that information would create havoc in the marketplace. Borrowers, short sale folks and every other REI person would jump on bandwagons looking for principal reduction based on sale price or short sale amounts based on sale price, etc. We have been involved in cases where the borrower was hunting down potential note buyers for their own note so the borrower could get a modification that they felt entitled to but the mortgagee did not. Usually, in my experience, pigs get fat and hogs get slaughtered on the matter.

Wayne is right, the valuation of what the asset is worth will be rooted in the FMV which is separate from the judgement amount. Rules from county to county and state to state dictate what minimal amount of an opening bid can be set by the mortgagee in FCL auction. In some MSA's this is it's own barrier. For instance, in places where RE value faded significantly, the mortgage UPB can be say $200k (let's just assume the only portion of the judgement is the UPB for simplicity sake) and the home is worth only $50k. If the county requires a minimal bid of 33% of the UPB, then the opening bid for this asset at $66k exceeds the value of the home before bidding even starts. In those cases, the asset reverts to the mortgagee as REO. For clarity, the judgment summation is the combination of the UPB, advances and fees.

I suppose knowing the rules of your county and state of operation might give you some insight into what assets to target at auction. In addition, it may also illustrate which assets have a higher chance of reverting back which means you simply need to go find the real estate agent that will be assigned to the REO post FCL auction. In most cases there is an REO agent assigned within 1 to 3 days of REO reverting back to mortgagee.

As Steve simply pointed out, going back to the title company or closing agent who handled the transaction may yield the Satisfaction of Lien/Mortgage for the payoff. If the actual title company as an agent is not around, you might be able to try the actual insuring title company. They would have required the same satisfaction in order to insure the Greenpoint mortgage was in first position.

If that is not possible, then you have to contact the 1st Mariner successor, which it sounds like you did.

I suppose you could try and speak to the current Mortgagee or Mortgage Servicer and ask them to try and help you a little. They will want their payoff. The current Mortgage Servicer may have access to the Greenpoint Mortgage file, which should have a copy of the title policy. You can use the policy to call the title insurance company and work through the issue. The alternative would be processing a claim on the title insurance, provided the title policy did not exclude this lien for some reason. In addition, if they have any closing document or similar, that might expose the name of the title agent who handled the transaction, if you need to source them. If that doesn't work, you will have to get paperwork from the seller.

To a large degree, I think this title company, you are currently using might not be the best fit for this work. It really seems like they don't want to help do their job, which is help clear title. I would talk with the Seller and look into choosing a different title company. In addition, the statement in your last post where you mention the Title company asked for a cancelled check to show payoff for the outstanding lien is a flawed concept.

A borrower does not send in their own payoff check. That money is sent from the closing agent. The borrower would not have a cancelled check, the borrower didn't write the check. If this is what the title agent really asked for, I would suggest they seem a little incompetent.

To a large degree this is simply a customer service problem at the title company. They don't want to do any heavy lifting for the closing. Not all title companies are like that, for sure. When the public has clouds on title, they turn to real estate attorneys and title companies to help. Having the common public running around trying to cure clouds on title is an exercise in futility, since they don't deal with this stuff everyday. This is the role of a title company. If you are not getting what you paid for, go somewhere else.

Jessie Martin, it sounds like this is being made a mess.

This is not that bad really. You have one lien that needs to be dealt with.

Residential Funding was a division of GMAC. FYI.

When you say you found a 'settlement' on the property, what exactly do you mean? What did you find and where? We are looking for instruments attached to the real property, a 'settlement' is not an instrument. A mortgage, mortgage satisfaction, assignment of mortgage (or substitute the word 'Lien' for 'Mortgage') are all instruments.

Mortgage 1 is the lien that needs to be extinguished. As the story goes, the lien was originated and perfected in the name of 1st Mariners. This is the name of the lender on the recorded mortgage.

Next in title, you want to see who has been assigned this mortgage. There should be an assignment of mortgage which transfer the mortgage from Mariners to Oceawen, even if they are a company successor, since they do not operate under the same name. It's a one or two page document and says Assignment of Mortgage or Assignment of Lien, etc.

I am not clear what the Greenpoint Mortgage statement means as I mentioned above. Is there a new mortgage recorded with Greenpoint as the Mortgagee?

If there is not a mortgage with Greenpoint on it, then did you see an Assignment of Mortgage to Greenpoint?

I am not understanding why you are just calling everyone. Take a breath and spend a moment and write the actual chain of ownership of the mortgage down, line by line. You only need to call the last owner in the chain. Calling or worrying over the other mortgagee's is just a waste of time. They can't help you beyond what you likely already know. The only entity that can satisfy that lien is the last owner of record. The owner of record is determined by the last Assignee located on the last Assignment of Mortgage recorded.

Chain:

1. Borrower to 1st Mariner
2. 1st Mariner to Oceanwen as successor

The confusing part from your post:

3. Oceanwen to Greenpoint - ?
4. Greenpoint to Capital One as successor - ?

Separate the idea of which mortgage company bought or owns the other. The name on the Assignment is what matters. Do not complicate the story or your course of action by pursuing a successor company if you don't need to.

If you clean up the post so it is clear, like I am formatting above, I might be able to give you a couple names and numbers to call as I have worked with all of those firms for AOM issues.

Additionally, the $30k to insure title is wacky. My honest opinion is this is not all that complicated of an issue, so I have to pick on the current title company and agent and say they seem to not want to do the work to clear title. I would seek a different title company. If every time a cloud appeared on title, the title company just said 'Oh Well, just pay $30k....' we would be doing much real estate in the US.

In order for you to research this you can simply go to public record and see what is recorded or ask the title company to send you the abstract for the title commitment and the supporting documentation. I would pull the mortgage and assignments out and stack them in chronological order.

When you identify the last owner of the mortgage, when you contact them be prepared to show them the full chain of ownership including the last assignment of record showing them, they are the owners.

This whole thing could likely be resolved by a title agent who knows what they are doing in a week or so.

She can take the collection to a collection company. Those firms will either purchase the collection or will partner with her to collect. Obviously the price is severely discounted. Old debts which have no collection activity will lose collection capacity sooner or later. The collection company will walk you through all of it.

You could try and do this yourself but I personally would advise against it. Debt Collection is a licensed event in most states and collection laws need to be known by the party working the collection. Violations of said laws can result in fines.

On a general price indication the debt will likely sell for 1% or 2% of the balance. That might even be a little high, it might be 0.5% or 0.25%. It's been a long time since I priced any out.

If she actually has a judgement against the tenant, those are worth more as the judgement will allow the collection company to pursue garnishments and other legal remedies to collect.

There is no easy way to know if a bank uses Fannie Mae guidelines and sells loans into the GSE's without asking. Start with small community banks and/or credit unions. Work into larger banks from there.

When you speak with them, be blunt about the situation. You have been in the Contract for Deed (or Land Contract) for 3 years and you want to refinance and pull cash out. The good news is you seem to be requesting a favorable LTV at 38%. That should turn some heads at the least if your property value is accurate. I would think that concept along swings the odds into your favor, you just have to find the local bank that will do the loan.

Good luck.

Let me see if I follow your two open liens correctly:

Chain looks like this:

$333k Mortgage 1
1. Borrower to Lender (1st Mariners)
2. 1st Mariners to Ocwean
- Should be a satisfied lien

Ocwean purchased by GMAC. GMAC became Ally. Ally is open and active pretty easy to reach.

$800k Mortgage 2
1. Borrower to Washington Mutual
2. Chase as successor to Washington Mutual
- Should be the open active 1st lien

So you have two liens to deal with, I think, if I understand your post correctly.

For Mortgage 1, you can contact Ocwean directly and see if they will provide a satisfaction. Just because their parental ownership changed does not necessarily mean that the mortgage was assigned to the parent, it can still be satisfied by Ocwean. At the least, they should be able to look up some help at either Ocwean or Ally to help you.

For Mortgage 2, this should just be requesting a payoff for the lien from Chase. I assume this is pretty easy since it would seem that the borrower is making payments on this mortgage or at least getting Mortgage Servicing correspondence for this lien. So get a mortgage statement or coupon or letter from the Seller/Borrower and get your payoff.

Both Ally and Ocwean are open for business and you can contact them for help to satisfy the lien as needed. Don't let the parent corp situation blow your mind, still go to the company in name if they are open, they will either direct you properly to the right department or simply take care of themselves.

If you are in contract with the Borrower/Seller, then you can contact the bank and explain your interest in the property which is you are buying it. They may only want to issue the payoff statement to a closing agent/title company but they still should chat with you. If they don't for some reason, they will certainly talk with your closing agent title company to put out a payoff statement.

When you contact Ocwean or Ally (start with Ocwean) they may have to go dig up the account and ensure it is not an active account. You may want to be prepared with evidence of the refinance which can be substantiated if the Seller/Borrower has a copy of their HUD 1 from the refinance. This will also help bring to light the closing agent/title company that should have paid the lien off and received and recorded the satisfaction. It might take them a couple days to sort this out, so be patient but be persistent.

For piece of mind, remember that likely in your purchase contract the Seller has agreed to deliver clear and marketable title. Failure to do so, such as right now in this transaction, is on the Seller not the Buyer so you should not have any EMD risk.

In the event for some odd reason you can't figure this out and get what you need to clear up title. The Seller/Borrower might have to do a Quiet Title Action to remove the 1st Mortgage lender from title. If that process is too long and the Seller doesn't want go through it, then it might not be a bad idea to think about the additional title coverage. You as the Buyer, purchase the additional coverage then start a QTA on your own so you don't run into problems when you try and sell.

The GSE have guidelines on these events. If the bank or lender sells loans to the GSE or uses their underwriting guides with their own overlays the following applies.

If a land contract or contract for deed is refinanced prior to ownership seasoning of 12 months it is generally treated like a purchase money mortgage. Once the 12 months have passed you can do a limited cash out or rate and term refinance.

A Cash Out Refinance coming from a land contract is generally not allowed and can not be sold to the GSE.

A local bank might have the ability to portfolio a loan like this (cash out refinance from LC). That is sort of what you need to ask about. I would think they will require you to show LC, repair breakdowns and all sorts of stuff if your going to pull cash out. That will be without consideration of the new LTV. So in other words, even though you might have an LTV of 25% the bank may not let you get back the money you put in as then they will be the only one with skin in the game.

No. It can also be in the form of cash. Checks are a little more secure since they are made out to the escrow company. Usually if you use cash, they will make a copy of the actual deposit dollars for the file.

Certainly this is a personal preference/outlook thing but I think this argument gets tossed around under bad pretenses with improper assumptions. Tom mentions the possibilities are endless with no debt, I am not sure I agree nor even understand what a long list of alternates look like. I tend to think the list is extremely short if we truly compare apples to apples. I would like to know some of the items on this list. Remember, that using any type of seller finance, is debt. So I don't agree there is a limitless number of ways to buy a property if you don't have the capital.

To me this is simple:

1. Investor either has or does not have enough capital to purchase 100% of subject property.

a) If investor has total cash to afford purchase, the investor has an option to take on debt or be debt free.

b) Investor does not have 100% of the capital needed. In this case, unless 100% is raised, there is no transaction. How then is the money raised? Well in form of debt or equity.

2. The core issues still stems from the cost of said debt. Does the debt cost more, less or the same as equity? Well typically debt is cheaper. Today's prevailing rate is around 5%. You will struggle to find an equity investor willing to only take 5% for real estate investments. Equity will cost 8% or more. Equity also is usually a percent of the net income, which means increases in net income create increases in proportion to the investment. Debt does not ride on the back of the net income. So with debt, increases in net income, mean increases in bottom line.

3. Since we attempted to look into the future, let us also do that with debt. As interest starts to rise again, so will return demands on equity for investors. Today's acceptable equity returns at 8% will rise as interest rates rise. In the event, I go out and get a loan right now for 5% interest, 10 years from now, if prevailing rates are at 8% interest, I am hitting a homerun. I have outrun the cost of debt, by getting cheaper money when it was around.

In step with this idea, now is the greatest time ever to actually take some debt on so as rates rise, you lock in at the bottom.

4. The lack of combining debt with equity puts all the pressure on the equity return. And this argument, when posed in the other couple of threads seem to ignore the question, what is the cost of equity. I think this is an important question to address and has two ideas that go with it:

a) Either you have 100% of the capital or you don't.

b) If you have 100% of the capital, then you clearly do not need to raise more equity. You then create your own opinion on what level of equity return you desire and whether that is acceptable. Since this is a personal idea, we need to bring it back to reality a little bit with a comparison of other investments and returns. Certainly the investor who uses 100% of their own capital can ride the return to zero. However, in a market where returns are pushing say 10%, the investor starts loosing out on opportunity where the same capital can be making a better return. So while personal choice will allow the investor to ride to zero the realty is not a competitive advantage if we put a rule on that investor equity that must match the prevailing return on equity.

Another misstated line from above, "Do you own the real estate investment if there is a loan secured by the real estate?"
- Tom answered, "No"

- Tom, while I understand the point you are trying to make, you know the above statement and answer couldn't be farther from the truth. If I buy a property with a loan, I own the property not the bank. Does that bank have an interest in the property? Yes. But that is not the same or even close to the same as owning the property. A bank can not use the property the same way I can. A bank can not freely enter the property as I can. The enforcement of the security instrument and note for the loan can result in a foreclosure auction, where the bank still does not own the property but causes the property to be sold. The bank can not do this unilaterally. I as the real owner can sell the property (provided it pays the lien) to whoever I want. I can wake up one morning and paint the house pink with polka dots. Clearly, that statement is a massive misnomer and is really simply false.

Another point, the crisis didn't happen because of debt. Please stop kidding yourself that what the media tell us we should believe. The crisis happened because borrowers felt they no longer had to live up to their obligations, which meant paying the loan back. The crisis was not caused by putting the money out in loans, the crisis was caused by the money not coming back in as payments for the loans that were made. The root of many of the foreclosures were the borrowers not making payments not a thing which does not act nor causes action.

In step with the idea of defining the cost of equity is also the idea of growing the overall equity. If I invest 100%, my growth rate is limited the free cash flow. Against a property that cash flows, the growth rate of leveraged equity far out runs the unleveraged. If the property is $100k, the equity guy needs to make the next $100k from the property which could take years. With debt, the amount of equity as entry is far less. If debt services takes place, not only do I have a lower barrier of entry, but I can stand to earn more equity over time. The same $100k affords me 5 properties, which as payments are made across the portfolio will earn more equity faster than only equity.

I agree, this is a conversation of preference. I am still interested to hear what infinite options there are to debt.