BK Filings are ticking up
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.
- Chris Seveney
