All Forum Posts by: Bill B.

@Brett DeLine

I can give some insight but I strongly suggest that you get a "second opinion" from someone with more experience than me.  Taking it line by line:

-First Mortgage Note /70%LTV/12% ROI

The note is the primary mortgage, not a second. (Or third, or fourth, or an equity line) firsts usually (not always) represent "purchase money". That is, the money used to buy the house. This is important because the first gets paid before subsequent loans. 79% LTV (Loan To Value) is the balance of $41300 divided by value of $59000. 12% ROI (Return On Investment) is what the Craig's List poster believes your return to be if you purchased the note.

-$41300 balance/12months seasoning with cancelled checks 

$41300 balance is the principal that remains outstanding to be paid and the basis from which interest due will be calculated.  Twelve months seasoning means they've received twelve months payments and have copies of the borrowers checks to prove this statement.  It MAY (just MAY) imply that they are servicing the loan themselves.  If they are servicing the loan themselves, it is a red flag unless they are licensed to do so or have a TON of experience.  The documentation should be reviewed by a reputable servicing company or other qualified entity in ANY case BEFORE a purchase, but ESPECIALLY this transaction to assure all the documentation is complete and adheres to all regulations.

-Home appraised value $59,000

Self explaining.

Some very important information is missing. Term (the date the loan is paid off if all pmts are made when due) the Interest rate, the address (you don't want a note secured by a property in the middle of a very high crime area, etc). Without that information you can't verify the stated ROI.

I hope this is helpful.

Bill

@Mike Hartzog please forgive the delay in saying Thank You for your post.  As always, you distill it down to succinct usefulness.  

Bill

You made my day!!!

GREAT to hear that you got your earnest money back!!!  I made the mistake you just missed.  So I know how easy it is to try and "force" a deal, cuz I did!!!! (Years before this post...)

Again congratulations and good job because sometimes the best deals are the ones from which  you walk away!!!

Hi,

Newbie to newbie. I have one NPN currently in forbearance. We've received 5k in earnest money and are expecting the first of six monthly payments tomorrow!

• Should I start off with a pool:  If a pool, no more than two or three.  If your doing it part time (full time job?) I'd stick to one.  There are a LOT of moving parts.
• Should I cherry pick: see above
• Non performing 1st or Performing 1st: full disclosure, again I have only one note. It was not performing. You'll learn from both, but less from a performing note. The complexity is FAR greater for NPN.
• Non performing 2nd or Performing 2nd:  I'd stick with 1st position as there are far fewer things that can wipe out your investment.  With 2nds you are investing more in the borrower than the note as the first position note rules your world when you own the second. (Unless you have the pockets to cover the first in short notice.
• At what point do you get a servicer(before getting a note or after the purchase). Find, vet, and complete all the paperwork with the servicer FIRST.  I had not and it turned the transfer into a needless fire drill.  Had it been in place, the transfer is a simple phone call.
• Total funds needed ( 10K, 20K or more). Like Dion said, this is an it "depends". The key point here is, if you decide on a NPN, you must have enough capital in reserves to work out the note. That dollar amount varies depending how the loan workout progresses. Foreclosure is normally the most expensive process. I've read (NO personal experience) is to reserve 5k for FC. You MAY spend much less than that.
• Solid due diligent techniques needed to separate the good from the bad notes.  Again, keep in mind that I'm a newbie, too.  If you have a mentor, they should be looking over your shoulder.  That said, be CERTAIN, you have a period to review the collateral AND cancel the purchase IF you cannot review the collateral before making your offer.  Whenever you gain access to the collateral, if you do not have a mentor, Richmond Monroe and/or your servicing company can review the collateral for flaws.  DD on the Real Property securing the paper is like evaluating any real estate, good comparable (recent) sales; good neighborhood; etc

All of the above is the just the highlights, but enough to get you started.  I hope this is helpful.  Be well and prosper.

@Bill Gulley

Thank you all for your contributions.

Bill, your experience speaks for itself.  Your mission to scare the holy hell out of me is completed once again.  (I've read many of your posts.  I get it.  I really do. Notes are FINANCE not RE. Notes have more boobie traps than a Mekong Delta free fire zone.  I get it.)  But, like the title of the post says, I intend to do this properly. I don't have a seven, eight or nine figure net worth. I'm just trying to help provide for my family and notes "fit" the circumstances of my life as it is right now.

Dion and Scott have given me the rest of the nuts and bolts to try and determine a way forward that (hopefully) excludes any close encounters of the worst kind with the FBI, the SEC, the CFPB, the FDIC, the DOJ, DHS (they are into EVERYTHING) and ALL their friends in acronym hell.

Again, I'm drawn to Finance because, right now, we're helping a man keep his house.  All the credentialed people that you mention, Bill, don't seem able or willing to do that.   If I can (Legally, Morally, and Ethically) profit while helping people stay in their homes, or helping them get a fresh start, I will do my best to be active in this area.  Again, while doing it properly.  And without blowing what little capital I have left on high priced attorneys.  I don't even know what questions to ask if I did want to part with several hundred dollars for one hour of their time.  

My experience in life leads me to believe that no matter how much I pay to the "best and brightest" attorney I can find, the reality is that some bureaucrat will find a flaw if they want to.  Like you said, Bill, NONE of the banks or brokerages are in compliance.  Lawyers and bureaucrats have needlessly complicated things so that CPAs and attorneys can continue to generate "good billable hours".   In sum, more "good government" driving up the cost of living on the poor and middle classes, to the benefit of the ruling class.  Don't get me wrong, I'm a proud, card carrying Tea Party Capitalist.  That means I'm wholly against government contrived distortions of markets.  What you describe above, Bill, is the Websters Dictionary picture definition of a government contrived distortion of a market. My uninformed guess is that we could sweep away 80% - 90% of regulations surrounding Finance and still provide reasonable protection for those who actually need it.     

Again, I'm focusing on Dion's and Scott's posts to work my way forward.  Like Scott mentioned, using a good servicing company covers a lot.  And we have the current loan serviced by an entity that I vetted through Richmond Monroe.  RM said they are one of the best.  That said, I MUST find a legal way to use OPM as I don't have my own.  I need to keep this as simple as possible to hold down costs, but again Bill, I have never run fast and loose with the law, and don't intend to this time either.  If you have any suggestions for a way forward, Bill, that are useful to a fifty-eight year old (I can't do twenty years in a mortgage banking environment, too late for that) I'd LOVE to hear them.  Your expertise is vast and would prove very useful to help bend the learning curve.  I've started some readings based on a previous post you made.  Others, like Dion and Scott, also advocate knowing local laws and regulations.  Finding them, knowing which to focus on, those issues are the time wasting/losing propositions.

Dion and Scott, I'll endeavor to leverage you advise to the maximum that I can.  Thank you both for your time and effort.  I WILL find the proper way to do this.  I WILL grow my business to a level where I can work with each of you professionally to our mutual benefit.   

This is disjointed and largely incoherent. Sorry.  LONG week.  

Again, thanks to all for your contributions.  

@Bob Malecki

Well, it is clear that I have more work to do with the jargon....sigh.....thank you for correcting my error. That is the only way to get through my prodigious cranium. Do you believe that a HML would enter into a JV in that manner? Also, is establishing that JV running amok of anything in the current regulatory environment?

@Wayne Brooks

Thanks for your input. Wouldn't an assignment of mortgage (AOM to save typing) include the HML if they chose to invest? If I had a rich Uncle and he funded my deals, I'd make sure that the AOM included him after the note was purchased. Am I incorrect on that assumption?

@Bob Malecki

Thanks for your reply. I understand your response, but I don't understand the why. If an HML is on title, and I"m buying the note at less than half of FMV (based on very, very thorough vetting) why are they "out of their minds" to invest in NPN? They would have a note secured by re worth double their investment. If I can make money with those margins, they are much smarter than I. Is it just avoiding the hassle?

Hello,

Thanks in advance for reading this and any help you may provide.

I am a note investor.  We have one note in Ohio.  We initiated FC.  However, the borrower, just Friday, wired $5K and begins making $913 payments monthly starting 4/1/15.  (all payments are being handled by the a licensed servicing company) This is beginning our forbearance period.  If the borrower performs, we will negotiate a modification.   I can't adequately describe how gratifying it is to help someone keep their home.  The communications from the borrower to the servicing company are filled with thanks and gratitude.  The icing on the cake is that we stand are projected to make a forty percent return on our investment.  That will be in just over a year, if all goes well.  

We're doing the happy dance. 

This, obviously, has wet my appetite for "more".  I want to jump start this and start dealing with small pools of three to ten NPNs.  I come from a family of modest means.  So, I can't approach them.  Even if I did, the most significant resources in that area are prohibited to me by federal law.  

So, I'm contemplating HML. BUT, I am not afraid to admit that I don't know what I don't know. I understand how the HML lender would be on title, that there are points and higher interest involved, etc, etc. I just want to be certain that I am not approaching HML companies and asking that they violate some law of which I'm not aware. I don't want to make my first contacts with this industry make me look like a complete dolt.

Also, can anyone point me toward an HML willing to loan to a relative newbie for investing in NPN? I have several that I plan to contact, but the faster I ramp this up, the faster I can start reviewing NPN portfolios to purchase.

As usual, a lot of background and a short question.  

Sorry for not being more concise.  

Any help/insight is most appreciated.

Bill

Hello @Andy Mirza 

Thank you for your interest, and I hope that this thread remains useful to you.

The collateral file is whole and complete.  All assignments have been recorded and allonges are safe in my fireproof file cabinet with the rest of the originals.  This is important because having the assignments recorded is what will cause us to be notified if the county initiates a sale for unpaid taxes.  I've called with county and made certain that nothing for tax sale has been started.

We've done a "door knock" campaign to attempt contact with the borrower.  There was no response.  We're initiating FC to "get their attention". 

I feel a bit guilty doing this during the Holiday Season, but in January I'd feel guilty because of the Holiday bills coming due, and February for Valentines day.....etc.  So, I have to keep reminding myself that this man has lived rent free for years. 

I hope this is helpful. 

Here is wishing you hand yours, and the entire BP Nation a Peace Filled Holiday Season.

It sounds like you need a change of scenery. 

In an earlier post you said that your kids are five.  Even if they are in school, take them out and go on a family trip. 

(at five they are able to make up ground very easily....and you can reinforce reading (the most important skill) while you are on the trip) 

Get outta Dodge for a while.  Visit Washington D.C. and see the Declaration and the Constitution.  Walk Arlington. Visit your Congressperson and tell them they are an *** or a hero (whichever fits in your view) Go to Gettysburg, Antietam Creek, Appomattox Courthouse.  Go to Yorktown, do the Freedom Trail in Boston, see Constitution Hall in Philadelphia, go to Four Corners in the South West, Carlsbad Caverns in NM, Meteor Crater in AZ, .  There are places like Vicksburg, Southern Plantations you could visit, visit Kennedy Space Center; Disney World, you could visit the Presidential Libraries, Mount Vernon, Montpelier, Monticello......

You could spend time in So Cal; As opposed to Squirty Worm in Lima, we have two the Getty Museums, The Norton Simon Museum, (those three museums alone are world class and destinations all on their own) Hearst Castle, Santa Barbara, some of the California Missions are very interesting and fun (Santa Barbara comes to mind again), Disneyland, I could go on and on and on and on and on.  In our local area, we have fruit packing house tours, four or five of the 21 California Missions are within an hours drive, visiting wine country and all the tasting rooms to our north (use a designated driver, please), there is Yosemite, Bryce Canyon, Zion National Park, Yellowstone, Glacier National Park......

All of the above are just the things in the United States.  If we discuss international destinations, the list grows exponentially.  There are far, far, far too many things to see and do and learn to be board. 

You've worked damn hard for an extended time.  You've earned some time to enjoy the fruits of your labor.  The five year olds will be entering more critical (harder to get time off) times in school soon.  Take an extended trip now.  You'll build a life time of memories and see things that you've never seen.  You could start an annual family tradition this year!!! (there are a couple of weeks left....)  :-)   Pick a place and GO!!!

Enjoy a bit of down time.  A brief "exit" (respite) from RE to refresh your mind, if you will.  (and also give some of the market forces time to clear) 

A fresh (refreshed) perspective may be all that you need.