Note purchase, UPB and "Estimated Payoff"

[David Hite]

Good evening everyone!

  So, I am looking at my second note purchase, and I have a question for those with more experience!

So the note I am looking at has the UPB of say: $21,000. Further down the tape, it shows "Estimated Payoff" of say:$30,000. Now, other notes on the tape have their estimated payoff close to the UPB.

Am I correct in assuming that the difference in the estimated payoff and UPB are any accumulated arrears, fees etc? If that is correct, the next question: how do we figure when that arrear/fee balance will be paid off.

This is a performing note. So, when you plug in the P&I payments with the UPB balance, interest etc.... we get the NPER of say 100 payments left. However, if you plug in the estimated payoff amount, then its more like say 150 NPER left. So, do we assume that the note will continue to have the same interest and payment and just keep on until the estimated payment amount is paid in full. Or, is it more like a balloon where once the original maturity date hits, or the NPER with the UPB only, will everything else come due?

  Thank you!

Dave

[Bob Malecki]

Hi David, yes the estimated payoff is the upb plus all arrears fees Etc. This would be your total recoverable amount should you foreclose or should the borrower refinance or pay off the loan, assuming there is enough equity in the property to cover the total amount. 

I use the P&I payments on the upb to calculate my annualized return on a reperforming note, but I use the estimated payoff to calculate my overall net profit should the loan payoff early or go to foreclosure. 

Bob Malecki