1 Note: 3 counties/ 2 states

[David Rosenhaus]

I have a note holder who has a single note covering 26 properties in three different counties and two different states. UPB is in the vicinity of $700k. Is this even saleable? When I asked him what his attorney said as far as ability to foreclose if necessary, he replied, "in my opinion, it would take a little longer, but that's all." I'm not positive he even checked with an attorney. Any input is appreciated. Thank you.

[Don Konipol]

@David Rosenhaus

The foreclosure procedure for each of the two states would have to be carried out separately adhering to the procedures established for property in that state. Further each county in the one state would necessitate a separate foreclosure. So you would be looking at 2 1/2 to 3 time the cost of a single foreclosure, and of course 2 time the cost if the borrower were to file bankruptcy, or fight the foreclosure.

I have paid $600 to foreclose on a property, and over $75,000. It depends on the state, the actions of the borrower, the “bias” of the particular court should the borrower file an “action” (bankruptcy, wrongful foreclosure, temporary restraining order, non enforceability of mortgage or deed of trust, etc.).

Suffice to say that few note investors take into consideration how much it MAY cost if the borrower decides to fight foreclosure. That’s why I have a minimum note size of $400,000 that I will invest in, and I prefer $1 - $4 million.

On another but related topic, I have owned, or my company has owned over 650 notes over the last 20 years. On 2 of these we were wiped out or near wiped out totally. Here are the circumstances of each

1. We financed an apartment complex and of course we’re named as loss payee on the fire and hazard insurance. The borrower committed arson and burnt about half the complex. The insurer refused to pay because it doesn’t pay when the insured commits arson.

2. We financed a medical office building and the borrower filed multiple bankruptcies, switching ownership interests, etc. During the debacle, while we are attempting to convince the bankruptcy judge to give us possession, a hurricane does damage to the building so extensive that the building is a tear down. The borrower had shown the court proof of insurance prior, unfortunately it was fraudulent documentation created by the borrower. The court neglected to verify the insurance. We received the property and sold it for about 25% of the balance we were owed. Charges while filed against the borrower by the AG, but we did not recover any money