All Forum Posts by: Tiger M.

@Bill Gulley You should be an example to all the newbies. Starting in traditional notes first prior to tackling NPN even at your experience level is telling.

I would like to see @Dave Van Horn chime in since he has been discussed above,

"Even after I took Dave Van Horn's terrific course, I have decided to tread lightly. I have purchased several and even a note fund, but I am treading lightly until I get a better grasp and do more research. I would urge other "note newbies" to do likewise."

Dave, why is it that folks can be enlightened but are still so cautious? No one seems to want to believe notes that we have all been conditioned to believe are bad, actually produce cash flows. After all, buying a note is really just buying a monthly payment stream.

@Eduardo Cardena check out the other post @Dion DePaoli made ,click on Dion Post

Dion Post, it may fill in the gaps that a greenhorn would need to consider. I'm not trying to dissuade you or encourage you. I simply think the depth of where your heading may have some enlightenment with the post discussion. 

here is the article in the RJ Click here

Wanna bet the banks start paying the HOA fees current now....

Those that went all in and purchased at the HOA foreclosure sales just hit their number on the roulette wheel.

@Dion DePaoli know that I read all yours posts, appreciate their value and your attempt to cover the questions posed. When I see folks talk about notes its almost like talking about old cars or a "box of chocolates" as Forest famously said. We talking 246 GT Dino Ferrari, 1939 Packard, 68 Pontiac Firebird or 1970 AMC Gremlin= owner carry, 1st position, 2nds, under water Vs. equity, performing Vs. default seniors, purchasing partials. They are incorrectly dumped into the generalized discussions. I don't think note investments are for greenhorns, especial NPN 2nds. Start with a simple OWC and work up.

1-Why=The past years of hard money lending have given an opportunity to compare both notes and REI. @Bill Gulley already mentioned the lack of toilets in notes. Rentals, whether commercial or residential, require active involvement Vs. little involvement in the notes(thanks to servicers). Availability of NPN 2nds over next 3-5 years is a factor because I can't compete with Oak Hill and buy $659 million from Freddie Mac at .76 UBP or Lone Star Funds-John Grayken, paid almost 66 cents per dollar of unpaid balance at the June HUD auction, winning bids on all 16 loan pools of NPN 1st's. I'm a minnow see.

2-Note returns= vary as well based on goals and product type. 15-20% yields for 1st's(its fine, boring but its mailbox money). Underwater 2nds can be a total loss to a 600% return. Our investors worst NPN 2nd pool was a 25% return to date.

3-Time=performing notes take about 15 minutes a month to account for each one at most. Pools need about 2 years on NPN 2nds to work through with servicer and take patience.

4-6 Investment amount and exits= It might help to answer the rest of the questions as a BEST CASE, hold for long term, cash flow, NPN no equity 2nd scenario. The other obvious exit to long term hold is a sale of 6 month seasoned reperformed notes at a 15-18 yield. Compare note potential to REI potential. Will have to generalize to make this work.

Assumptions NPN 2nds underwater based on past experience:

Price of notes: 20% of UPB (some are cheaper, some are more expensive so pick a blended number)

Face interest of note: 10%

Face value of note: $70,000

Percentage of complete loss of notes: 20%

Percentage of settled of notes: 20%

Percentage of settlement rate: 180%. i.e. 100k note, 20k purchase, 36k pay off

Percentage of re-performing notes: 60% at 7%

Terms of re-performing notes: 7% interest, principal paid off when property is re-financed or sold.

Term of performing note till property sold or refinanced: 15 years (historically 7-9 years but these may be less apt to sell due to value issue)

Example:

Buy 5 million face value of notes for 1 million.

20% are wiped out leaving 4 million of notes

20% pay off for 360k leaving 3 million of notes

Basis; 1 mill

We use the servicer to negotiate and complete the forbearance and/or mod. There are more states requiring Debt Buyers licenses too. Georgia is always fun: 

"This application is to be completed and filed by each applicant, regardless of whether it is organized as a company or sole proprietorship, for a license or registration to engage in a mortgage business as a lender pursuant to the Georgia Residential Mortgage Act. A mortgage lender means any person who directly or indirectly makes, originates, or purchases mortgage loans or who services mortgage loans."

the above is off the NMLS web site  if you would like to check each state before you buy a NPN.

@Eric Fernwood that post rocked! You need to post more often because you have the goods to share. You said what I was thinking but with color graphics.

What type? I can give you several to choose from if I know what you need them to do. rehab, new construction, residential, commercial, etc

A non legal advice, non tax advice,  personal opinion from a natural born fool, response as follows: 

(A) look at the origination date of the loan. If originated prior to Jan 2014, DF doesn't apply. After that period, be cautious of OWC originated without a LO and verify everything. If mom and pop carried a loan when they sold the family homestead to retire, it's simple. If its a rental property LLC creating 3 or more seller carry backs, its complicated.

(B) CFPB is your concern when working out more than DF in most cases, instruct the servicer and have them contact the borrower with the proposed solutions. Last thing you want is to be the guy trying to help someone and you end up with a juicy CFPB fine. 

@Phillip Dwyer knows his stuff. Agent, PM and appraiser