BK Filings are ticking up

[Chris Seveney]

As predicted due to significant equity growth and lack of housing, we are seeing large upticks in BK filings. As a note investor, we would like to provide several things to consider:

1. Make sure to run numbers based on the potential for a BK. We are seeing borrowers with interest rates in the 3-4% and monthly payments of $400 but a UPB of $75,000. The seller is noting FC in process and get paid off in a few months.... Well if the home is worth $200k, I would put the odds at 95% the borrower files BK. All of a sudden you paid $50k for a loan that nets you $325/mo after servicing which would take you 12 years to get your money back. After your tax burden you realize you could have invested in a 10 year treasury and done better....

2. Understand the BK process, including:

a. when to file a POC

b. who should file the POC

c. The costs, if they are recoverable for a BK

d. When to object to a plan 

e. When to possible file a motion for relief

Feel free to add/share any other key points to consider.

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