Risk on NPN 1st mortgage

[Jay Jasunas]

So I have been investing in buy & hold SFR. I am looking to juice my returns in a Solo 401k with about 150k in it. So I was thinking about note investing as the 401k will defer all the taxes.

What is the downside risk if I buy a NPN 1st lien for a huge discount and the UPB of the note is still only 50% of the market value of the residence it is securing.

I see upside if I can modify the loan to get them performing or if they start paying again. But in the case of getting a DIL or even foreclosing, would I not eventually get all my principle and more back along with interest and penalties. What am I missing?