Lis Pendens and Buying the Note

[Peter Halliday]

I'm wondering if anyone has use the strategy of buying a note after the Lis Pendens has been filed? There's a couple of properties in the area that have enough equity and I'd love to try to rectify the loan, but if not I wouldn't mind them as rentals. They are likely dated with one owner for a long period of time. I'm wondering what usually you should expect to pay of UPB in situations where they already filed the lis pendens, and there's a bunch of equity?

[Bob Malecki]

If the home sold at auction, the lender receives the TAD, or total amount due which is the UPB plus arrearages, corp. payments to any taxes, insurance as well as legal fees (in most states). When I evaluate a distressed note I use the TAD as my basis for value, assuming it is lower than the value of the home. Else I use the home value as my basis.

Also, just because FC has been started doesn't mean that it will go that way, the borrower may want to have a mod/forbearance to stay & pay. We buy distressed debt with the goal of keeping the borrower in the home and restructure their debt to accommodate their budget while providing us a good return on the investment.  We generally will file FC so the borrower knows that they have a deadline to deal with and as a tactic to bring them to the table to start a dialogue for loss mitigation. 

Yes @Jay Hinrichs, if the property is sold at the FC auction, the home owner/borrower would get the net equity after the lender and any other senior liens are satisfied like IRS or state/local income tax arrearages.