All Forum Posts by: Patrick Desjardins

Have you looked at all of the filings in BK court? You can find a ton of information about the borrower and their intentions.

I don't know his specific classification but in general there are multiple categories of notes. For example a 50k first mortgage on a 100k house will have a much better "grade" than that same note on a 25k ghetto house. Each person will have their own characteristics.

Does the house have equity and you'd want to live there? Are the borrowers professionals that you can expect will fall back on their feet? In a state where if you need to foreclose it would take 3 months? A grade

Would you need a bulletproof vest to drive by the house? Is it worth 12k with 20k worth of back taxes? Is the house owner-occupied (by squirrels and vermin)? E grade

 Irrelevant. Depends on equity, borrower and collateral. Tell me why a 2nd mortgage would be more risky if it's covered in equity, on a premium home worth 300k, with borrowers having good stable jobs? Versus a 1st mortgage worth 50k somewhere in the hood?

 Obviously, yes. If there really is no equity or It's close (5k-ish) and they file for bankruptcy, you can be stripped. But I think you're misunderstanding what that means.

The way you phrased it isn't clear. Combined LTV isn't as important as equity above the first.

100k house, 120k first, 40k second = no equity

100k house, 90k first, 40k second = partial equity, shouldn't get stripped

You don't need "equity in the house", you need equity that protects your position. The more you have the better since you would recoup more at FC sale/REO but it sounds like you're buying a performing note.

 I can pretty much guarantee you that NREIG or FCI and their forced place provider can solve your problem. Let us know how you do. 

 As I've mentioned before, I do like FCI for performing notes and having the taxes/insurance escrowed makes it almost set and forget.

With that said, why were the insurance companies turning you down?  A popular company for investors is NREIG. They are very easy to deal with, have quick turnaround etc. I try to use the servicers' forced place insurance provider but if not, NREIG can most likely do it. 

 No, if the note is performing then you're golden. But for NPNs, there are two phases where they are incredibly helpful:

1) During due diligence, having a reliable real estate agent in the area is very helpful so he can give you values. Having an attorney in that state is also good in case you have questions about a specific note/collateral.

2) When you have to foreclose, which happens a lot with NPNs, then you'll very often end up with the house if no one bids on it at foreclosure auction. In that case, as with any real estate, having an agent/contractors/closing company/attorney/property management company can be very useful. That's a lot of people, which is why experienced note investors recommend starting out with a handful of states. 

You can't be so specific that you'll only buy in certain zip codes for example, or you'll barely ever find notes. But you have to focus on specific markets where there is inventory and you can develop relationships. I would buy a slightly worse deal in the market where I have a network figured out, over a better deal where I have no one and have to restart from scratch.

Just my 2 cents.

There are a few states/localities where you have to register as an out of state company, or get licenses. A lot of the drawbacks are pretty common sense, like you won't have a team on the ground right away and will need to build one. With that said, it's easier than owning real estate out of state since once you get it reperforming it's the owner's job to take care of the house.

 Quality - most if not all BPO providers provide ****** quality values. I'm looking at a note for sale where they list a BPO value even though an appraiser friend pulled comps and there hasn't been a comp there in 3 years. That BPO value literally has no weight. I recommend only using BPOs to give you a starting point. My goal is to find a value within about 10% of real sales price.

Timeliness - Never had a problem with timeliness using that provider. Have you tried writing in the note that it's time sensitive and you need it in 2 business days?

@Bob Malecki thanks for the heads up. There seems to be a void for a good chop shop that buys pools and splits them up for smaller buyers. The ones I know of aren't super reliable. What kind of short term funding are they using to buy the pools before they resell most of it?