My first NPN story

[Scott Mclaren]

I thought I would tell my story so far on my first non performing note. I have learned a lot by reading on these forums so I thought I would share my story.

I found a non performing 1st lien on FCI. It was in an area of St Louis where I already had a couple of rental houses which gave me some confidence I could deal with it. The ask price was 15600. The UPB was 26k. I found out the house was occupied. I sent someone by the place to check it out and they met the guy who owned the 4 family next door. He said it was an older lady who was renting it. He cut the grass for her.

I could not tell what the inside was like because the occupant would not open the door to my manager.  At least it was livable. The outside looked ok from my manager report and pics he sent me. Ballparking the value it would range from 45k if it was nice inside to as low as 15k for a nasty inside type situation. One thing good is that the municipality it sits in has occupancy inspections for new occupancies and they are fairly strict, so it had to be fairly decent when she moved in . Whenever that was.  (That is the first time I have ever said that the occupancy inspection was a good thing! HAH! )

I went back and forth with the seller on FCI and we eventually settled at 9k. So with the 500 FCI fee I am in at 9500.  I had checked taxes and there were 730 dollars in back taxes due. About 100 in sewer bills. I checked with the city to see if they had any liens or charges against the place and they had 0. had talked to an attorney  who does a lot of evictions and she gave me a foreclosure price, all in, of 1600.  So I was going to be in at 11,930 .

I did take a risk in not doing the O and E report  but I was in such a low cost deal I decided not to.

I decided to go straight to foreclosure because it appeared this borrower had not been paying for a long time, I could see that the loan had been sold a bunch of times and had been modified several years ago etc. Attorney said sale would be in about 6 weeks.

When the sale date approached attorney asked me how much to set the bid price . Now this was something I had a hard time with. The pay history on FCI showed a recent boarded in date and an amount  of about 26k. I knew there was a ton of late fees and unpaid payments but I could not ascertain what they would add up to. Since I knew what I would have in it and did not want to guess I just said the the balance was 26 plus costs.  I told her to put in a bid for me of 14,900. If it would sell for that at auction I would not have to pay taxes and sewer bill so I would make 3800 for typing stuff into a keyboard and making a coup[le phone calls. as it turned out no one bid and I owned it as of the 16th of FEB. The borrower never made any contact whatsoever.

The attorney was able to get the trustee deed and record that day. I forwarded it to my manager and he went out the next and posted the door with a 24 hour notice of intent to inspect and a pay rent or quit notice. The next day the tenant called him and he explained her situation to her. She could either pay us or get out . They outlined a deal for her to pay 200 every 2 weeks on her payday. So like 13 months of 400 rent per year . They have an appointment to meet up Friday to sign the lease etc. Then he will be able to report to me the condition of the interior of the house.    

I am pretty happy with the whole deal so far as long as the tenant turns out to be a steady payer. I think I will just collect rent for a while. If she moves out I will renovate as needed and try to sell it.  I will post a follow up when I get a little farther along