How to track a performing notes tax lien

Question

I purchased a performing note and it looks like the borrower has not paid the property taxes in 2.5 years. How do i track this property before it hits the tax sales? Is that automatically tracked by the servicer ?

Mike Hartzog · Answer

I simply call the county and ask when the next tax deed sale is scheduled.  Then I make sure to pay it off prior to that.

Ned Carey · Answer

I can tell you the advice here is legitimate. I have taken properties that had loans on them because the lender or servicer was asleep at the wheel.

I actually had one servicer cal several times for payoff information while the tax foreclosure was happening. Once the foreclosure was final they still kept calling for a payoff amount. It took about three or four calls before they finally understood that their interest in the property had been wiped out

Rick H. · Answer

@Pari Thiagasundaram There property tax monitoring services offered by/through title insurance companies. We order the service during escrow and they deduct the cost of the tax monitoring from borrowers loan proceeds. The term of monitoring is determined based on remains term of the loan.

If you are servicing your own loans, it's not difficult to make a tickler file for checking taxes and insurance.

If you use a commercial services duch as FCI, most lenders elect for the basic service which excludes tax and insurance escrow accounts or monitoring.

Since I do my own loan mitigation, I have no problem pushing the issue with a borrower. When the monitoring service notifies me, I send copy to borrower and check to make certain they paid the taxes. If not, I advance, give them a reasonable period to repair me (plus a charge) and may ultimately foreclose.

I've got to pay my bills. Why should they avoid paying their obligations and jeopardize my collateral?

What you need is a system and a written policy for how you treat borrowers who misbehave. Treat them consistently and stsy compliant.

Jay Raught · Answer

Take all of the advice here, you are on the hook for the taxes now.  That is one of the things we look at when considering bidding.  You should have learned that before you purchased the note so you would not be surprised, good luck and I hope you get it resolved before the sale.  If you get the note reperforming make sure you collect the taxes as part of the arrangement.

David Dey · Answer

Check with your servicer and make sure it was a Piti loan, if it was an equity loan, many of those are not the servicers job to pay.

but don't leave it at that.

Follow up directly with the local tax collector what the time frame is for that county before tax deed can be applied for and make sure you keep the taxes under that time limit.

Steven J. · Answer

I'd suggest you contact the servicer and check what their policy is. Hopefully, this is all a miscommunication but I would be really nervous if this is the case. A property tax lien trumps any other lien positions so if this turns into a tax lien sale you could lose all your investment.

Double check whats up with the servicer.

How to track a performing notes tax lien

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