What am I missing?

[Matthew W.]

Please forgive me if this post is naive. 

I have a friend who has been investing in real estate for years. Specifically, he is involved in non-performing loans in the New York and New Jersey areas.  He always has told me how he buys mortgages from the banks at a significant discount, forecloses on the property, then takes the property to auction. He makes it seem so easy.

I've been given the opportunity, through him, to review a portfolio of mortgages being offered from a bank, and to make offers on anything I find interesting - there are hundreds.

The spreadsheet I looked at had the following info:

Property Address

Foreclosure Start Date

Original Balance

Current Balance

Corp Adj

Escrow Adv

Months Dlq

So for instance, here is an example (and the properties span the tri-state area):

55 Main Street, Newark, NJ

Foreclosure Start Date: 10/17/2013

Original Balance: $350,000

Current Balance: $322,000

Corporate Adj: -$5822

Escrow Adv: -$56,918

Months Dlq: 83

He tells me that the bank will probably accept an offer of 50-60% of the current balance (Again, he has done this dozens of times.) For the owner to become current they would have to come up with $322,000 + $5822 + $56,918.  The property is probably valued around $375k. When foreclosed and brought to auction, the loan value and interest and penalties are more than the estimated property value - so I would most likely wind up with the house.

I suppose I just don't get it...what am I missing from this picture?

Please tell me why this is a terrible idea to get involved with.