Non performing notes in PA

[Terrence Evans]

Hello everyone... I was wondering if someone who has bought NPNs in Pennsylvania could chime in here.  I am interested in one there but I'm wary of jud states.  My 2 current notes are in non-jud states.

Can you give me an idea of what to expect timeline wise? and ballpark cost for legal fees?  I have more questions but let's start here first.

Thanx,

Terrence

[Chris K.]

@Terrence Evans

It depends on the details:  

• "Residential" notes/mortgages have more procedural requirements that you must comply with compared to "commercial" notes/mortgages. This may vary by county as well since some counties require mandatory mediation for residential foreclosures. 

• Legal fees also depend on the location. For example, the legal costs and attorney's fees in Philadelphia are much higher than say Scranton. 

• There's always a learning curve when you work with a new legal team. So between working out all the kinks in the beginning, I would say it would take you at least 6 months to get through a new uncontested foreclosure action that goes smoothly.

• There are 100 other variables that can come up. For example, the death of the borrower can cause delays and additional fees if the court requires you to publish notices in the local legal paper and newspaper. Bankruptcy is also a common curveball you need to deal with. Any kind of IRS or federal liens also adds complication since the attorneys need to carefully comply with the rules in trying to divest their liens regardless of seniority position.

In short, you could make money buying non-performing notes in Pennsylvania. I know many folks who do this at a pretty substantial level (e.g. buying +$1 million notes at a time). But like any other investment, you need to be selective and do your due diligence.

In terms of judicial versus non-judicial states, I don't have a strong opinion on it since I never practiced in non-judicial states. But I would think that the NPN market would adjust depending on the difficulty of the legal process. In other words, if non-judicial states offer better protection for the lender, presumably the notes are sold at a higher value than judicial states where there are more challenges. While not always true, I think there is some truth to the notion that higher risks could lead to higher returns.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.