Modifying a non-performing note

[Anh N.]

Hi!

I recently attended a meetup where the speaker said that if you buy non-performing note, you can work with the borrower to modify the note so they will start paying again.  But then she said you can't change the terms or sign a contract for a new loan with the borrower because it may violate the safety act.  I had to leave early and couldn't ask for clarification.  Can someone please clarify what she meant by that?  Doesn't modification require changing loan terms and having the borrower sign a contract agreeing to the new terms?  Thanks!

[Bob Malecki]

You can generally modify an existing note with a borrower without violation of any CFPB regs. If you originate a new note and the borrower occupies the property, then you will need to have it originated with a qualified loan originator, like a mortgage broker, and make sure that the borrower has submitted the proper financial data to qualify for the loan. If the loan is with a non owner/occupant, like an investor, then you can self originate as long as the borrower does not live in the property. 

We buy distressed debt that is bank originated and then modify that institutional paper with O/O so that the terms of the original paper (created by fairly expensive bank lawyers) are still in effect. 

Bob Malecki