notes in Chicago, IL

[Robert D.]

lets say in 2006 somebody bought a house for 200K (Chicago, IL). it appraised back than and the note was signed, mortgage was recorded. Then the note was assigned several times. Now the house is worth around 20k in as-is condition. I would like to approach whoever holds the note asking them to assign the note to me for say 15K. the note is non performing at this point. I would like to start my own foreclosure. I am taking a risk so i need a discount. I am interested in the property. if I buy the note for 15K …and I spend 2k in attorney fees and year later the case goes to judicial state (IL is a judicial state) how much maximum can I ask for the opening bid to be ? In ideal case I would like to ask for more than the value as-is (30K ?), this way the property will not be purchased by anybody at the judicial sale it will go back to me, I will get the deed. so I guess the question is …is the opening bid at the judicial sale somewhat correlated to how much I paid for the note ? I know I can go lower ..i.e. $100 but can I go higher ? i don't care about deficiency judgment against the homeowner ..

[Dion DePaoli]

As @Wayne Snell rightfully suggest, you as the Mortgagee will be able to submit a reserve bid which will set the floor bid and any bid to purchase will have to exceed that bid in order to get title to the property.  Upon foreclosure judgement there will be an awarded amount to which the mortgagee is owed and the reserve can be set as high but not higher than that amount.  That amount is based on the total due under the note including principal, interest, fees and advances.  It is not based on your purchase price.

The bigger idea in your post is really your idea of how much this will cost. You will be looking at not just the cost of a foreclosure attorney but property taxes, forced place insurance, servicing fees and property preservation at the least. The budget of $2k is not sufficient. You will need closer to $10k before it is all said and done unless you cut corners which could jeopardize your interest in the property or create additional costs, regulatory concerns and issues with bring the REO to market.

Lastly, what you are thinking of doing is often referred to as a reverse inquiry, where an investor attempts to purchase a loan through the front door of the servicer as opposed to the note being offered for sale in the market by the holder.  This is task that has a very, very, very low chance of success.  The system is not built for reverse inquiries.  Prepare to be frustrated and don't get your hopes up too far as it may be a fruitless exercise.