ADVANCED - Anyone found a way to lookup current mortgage payoff?

[Rodney D.]

Hi all,

This is actually a 2 part question for fellow foreclosure investors:

1. Mortgage Payoff

Has anyone found a way (or pay-service) to obtain a CURRENT mortgage payoff for mortgage/note WITHOUT owners authorization?   (note: this is NOT the recorded trust/note - I've got that already from title search)

Why?  I'm seeing a lot of second notes being foreclosed subject to payoff of the 1st.  Problem is, many note payoffs are actually HIGHER than the original amount recorded in the clerks office.

so this leads to question #2...

2. Any ideas on how a mortgage/note ends up 50% HIGHER than the county recorded amount?  (refi's are recorded as new notes and satisfy the original note so they don't count in this scenario)

Why?  Many investors here in Northern Virginia, are purchasing 2nd position notes/trusts via foreclosure subject to payoff of the 1st.  Problem?  When going to settlement the note, lets say a $300,000 trust recorded in 2004, has now become $600,000!!  Yes, let me repeat, that is not a typo, its over 50% MORE than the original recorded amount.  

This has left many investors scared to purchase 2nd position foreclosures.  When doing our due diligence before the sale, we call up the 1st position(trust) noteholder (located via MERS) and ask them for payoff.  They state that information is private and can only be released with a signed authorization from the homeowner.

In reply, I say to the noteholder, "great idea, let me call up the homeowner who is facing foreclosure, and who is hostile as hell, ask them for their payoff amount on their 1st mortgage, or, authorization to contact their bank to find out." <click>   The noteholder of course says, "sorry sir, we cannot release that information without authorization."

ANYONE else encounter these 2 problems??

Rodney

15 year investor

[Dion DePaoli]

Cleaning up some thoughts on this matter.  When an investor bids at auction they are not purchasing a note, they are purchasing an interest in the real property which was granted via the mortgage or deed of trust.  Only that interest is up for auction.  As such, a bank/lender is not actually selling a lien at all at auction.  Nor do they overly control the process or its outcome.  

What is actually happening is the right of redemption, which in Virginia is pre-auction, is being extinguished.  Any party with interest in the property is subject to notice requirements and has a right to redeem the property from the debt.  That party has a right to know the balance in order to redeem.  That said, with no current interest, a third party has no right to that information.  

If an investor does purchase said interest at auction they automatically step in to a position where they must be granted a right to redeem which will also include notice requirements.  So for the record technically it does not mean the investor looses, he/she can redeem if they so choose.  If they choose not to redeem, they choose to loose their capital.  I acknowledge it is a funky form of equity but it is what it is.

This also means, while your frustrations are not without some merit, the actual process and system is not specifically designed to create a property sale.  Rather, it is designed to terminate the redemption right of interested parties.  Hopefully we can start to see how these two things (property sale versus termination of redemption) are not the same.  The two parties, the auction bidder and the lien holder are not acting with the same intentions.

There are numerous reasons why a balance would jump up so high which has been sort of stated.  All interest arrears, which can be at the note rate or in some instances a separate legal "default rate" may apply.  In addition all advances are subject to recovery which includes legal fees and tax and insurance advances.  When larger balance mortgages or deeds of trust foreclose it is not uncommon for the payoff to become much larger than the balance simply by nature of the math on a large number and the high costs that would be associated with a high value property.  Now add time and you get a big number.  

In the example given we have 10 years between the two figures.  Does that mean it was 10 years of interest accruals?  Maybe not but it could happen in some certain setting where a Borrower defaulted and was granted a forbearance or modification which only forgave previous interest and fees upon successful completion of payments.  If that was not accomplished then the entire balance would become due again.  A couple years back (4 or 5) this was a common structure of modification with a couple major servicers.  

Could a loan have stumbled along for over 10 years?  To some extent yes, even though it would not be overly common.  It could also be a perfect storm of sorts where it was negative amortization and this same type of agreement that went south.  Ten years at 10% interest is going to add up if it is all due.  Moral of the story, we will never know without seeing the note terms or any other agreement made which relates to such things.  Again, the trustee has an obligation to make sure the math is correct.  The backup to that is to sue based on some type of injury if one is taking place because a balance is too high.

To repeat one other idea that was stated, second liens are not very valuable for this exact reason.  The chances of any type of recovery are simply not that high.  

To obtain a payoff statement from a superior lien or any lien holder for that matter, you would need consent.  The whispers you hear are probably more BS than reality.  I suppose someone could try and work the system by going through an interested party and obtaining either a payoff statement or a redemption balance or maybe math based on a credit report trade line but again somewhere there has to be a party with interest in the property with a right to redeem cooperating.  I don't see a list of such things being overly available as that likely takes a bit of work.