Looking for a flowchart or process flow for handling a NPN?

[Tyron McDaniel]

Does anyone have a flowchart of process flow for what they do after they have purchased a Non Performing Note! I invested in a NPN with a friend on a property in Milwaukee and was looking for some insight. Thanks

[Mike Hartzog]

Here's a high level checklist, assuming you have done all of the important due diligence up front, especially the tax and title review and BK search.

Initial Steps

• Board the loan to servicing
• Review the hard copy collateral and make sure everything is there - Original note, assignments, allonges.
• Record your assignment
• If you don't have a BPO, get one or find a local agent to do a drive by and give you a first hand opinion on value and condition.

Contact the Borrower

If the borrower is in active bankruptcy, the following bullets do not apply.  You cannot make direct contact with the borrower.  You must work that through the borrowers BK attorney, preferably through your own creditor side BK attorney.

• Attempt to make contact with the borrower.  Different folks do it differently.  I use a servicer, because my servicer is fairly good at it.  Others do it themselves, but fundamentally you want to make contact and gain an understanding of the situation.  Once you have this understanding, you can proceed down a path that makes sense for the situation.
• If you can't make contact with the borrower, I recommend sending out a field call to do a door knock, take pictures, and leave a communication if direct contact cannot be made.  At minimum this is a second read on condition and, more importantly, can tell you if someone is living in the property or not.  Some servicers can send out a door knock, but if not you can hire a company like Sandcastle to do it.
• Another thing you can do is skip trace the borrower to find phone numbers and addresses .  Most servicers can do this, and there are online services as well.
• Another thing that can be done is contact the local power utility to see if the power is on.  If not, its a pretty clear signal that the property is vacant.

Vacant or No Contact

If the property is vacant or you cannot make contact, there is little to do but begin a foreclosure process.  Many times that is the ultimate wakeup call which can establish motivate the borrower to contact you via your attorney.

If the property is vacant, you have the right as the lienholder to secure the property.  You can hire a property preservation company to do things like re-key the locks, put a lock-box on the door, board the windows, winterize, etc. as appropriate.

Made Contact

If you can make contact, the first order of business is to assess the borrowers situation and determine why they are not paying and establishing what they can afford to pay is the first order of business.  Once that is done we can look for solutions.  You may be able to get them to reinstate the loan, or you may need to modify it.  You may also determine that they have no ability to pay and work out a short sale or deed in lieu solution.

Hope that helps.