Non-performing note, couple of questions

[Malhar B.]

I read through a bunch of posts about non-performing notes and I haven't really been able to find the answer I'm looking for. If I could get some help on this I'd appreciate it.

I work mostly with REO property, but a seemingly lucrative note came to me recently. I have the opportunity to purchase a note for about $400-450K on a property that has an ARV of over $2MM fixed up. The original mortgage amount (note amount) is $1MM. The issue is that the Deed is not held by the mortgagee. The note is a first position note and the foreclosure process has been started already. Is it possible to foreclose on the property and still take it even if the owner on title is different than the mortgagee? What should I be careful of? How should I be going about the due diligence?

My intention is to purchase the note and work out a deed-in-lieu (which I don't think is possible because the mortgagee doesn't have the deed to the property) or wait until Sheriff's sale, take possession of the property, fix it up and resell it. The property has already been boarded up by the note holder and the tenants no longer live there. I've been told that the property owner was collecting rents and not paying the mortgage. Any advice/words of caution? Thank you in advance.