All Forum Posts by: Andrew Faulkner

Thanks, Joshua. Hopefully he will find success in the marketplace. I know we are all working for the same thing here.

I disagree that I am obligated to respond to commercial solicitations that were posted in response to an unrelated inquiry. None of your posts were in response to my actual questions, so I didn't see any need to respond. That doesn't have anything to do with professionalism. I also don't respond to SPAM email notifying the sender that I'm not interested in Canadian pharmacies or replica Rolex watches. I figure they'll know if I'm interested if I place an order. Finally, you post in a thread that I started, that "this Andrew" has not responded to your many solicitations, with the implication being that something nefarious is going on ("it seems he won't input his contact information at all for anyone"). Like many posters here, I get an email when a thread I'm following receives a response. I don't see the need to make myself any more available than that, certainly not to someone trying to contact me for commercial purposes; it's actually a pretty strong argument against providing too much contact info in a public profile. In any case, I'll let you have the last word on this, as I suspect it could go on forever.

I came here for advice, Darryl, not to have someone help me part with my money. I have intentionally not responded to your invitations to invest with you. I believe Bill put it best when he stated that the that I am undoubtedly aware of your invitation and that maybe the forum related to commercial services would be more fruitful in attracting new clients. I think you should accept my lack of response as a lack of interest. As far as inputting my personal contact information so I can be solicited, and I am saying this because I can see you are the type of person that has to hear something directly rather than pick up on cues that someone is not interested in doing business with you, I have not given you my contact information because I am not interested in anything you are selling. I hope this clarifies my to-date ambiguous position on the matter.

Wow. This is more feedback than I could have hoped for. Thanks for all who have taken the time to respond. I honestly did not realize that a first-position lender had any obligation to return any proceeds above what satisfied the payoff back to the defaulting borrower. Not that this is of huge consequence to me, as I could hardly complain if I bought a note at a discount and was able to sell the property and receive face value of the note. I certainly do not like the idea of being a "vulture," and it really is not my intent to start throwing people on the street. On the other hand, it seems like some of the best deals can be had on non-performing notes, and sometimes it would likely be necessary to foreclose when all else fails. NPNs just appear to be an overlooked opportunity by many who prefer to buy performing notes for the monthly return or to flip. In my backwards way of thinking, NPNs offer a greater opportunity for a strong return and seem the most appealing, assuming, as Eric points out, that the home has enough value to justify the investment in the paper. Also, I should stress, that I do not intend to foreclose on anything, but I'm a worst-case scenario kind of person. As long as I know the collateral can be used to satisfy my investment in a worst-case, I am comfortable making the investment. Ideally, I would buy a note with a high interest rate, and offer the seller 50% or less of the unpaid principal. I would then offer to restructure the note by adding missed payments to the term, and to refinance by cutting the rate in half. If I bought a $100k note for $50k and cut the interest from 10% to 5%, I would think the borrower would be thrilled, and I'm effectively still making around 10% on my money, as I'd be earning 5% on $100k, but I'd only have $50k invested. I know it is oversimplified, but is a scenario like this possible?

To answer Eric's questions about which notes on FCI appear to be worth investing in, I would answer that I don't really know yet. I have found several that appear to be worth a fair amount more than the asking price of the note (maybe not as much as the original principal, but more than the seller is willing to accept). At a glance (this was the fourth one listed under non-performing notes on the FCI nationwide search, so I have by no means vetted this or given it more than two minutes of thought. I think it does illustrate that opportunities are out there, though), http://www.fciexchange.com/FLORIDA/Residential/Non-Performing/0010474.html appears to have 33% LTV if the seller would part with the note for 15% of the $59k principal balance ($8,850). While I haven't done an appraisal, it appears homes in that area are worth around $30k. If I offered to reduce their interest to 3.85%, and tack missed payments onto the end of the loan, and if they really want to live there, I would think they would be thrilled. If not, I could surely recover my $8,850 in a foreclosure. Best case scenario would be they stay and accept the modified payment, and I would earn 3.85% on $60k, while only putting $8,850 at risk.

I'm braced for the blowback, so please fire away with any and all criticisms to this approach to investing in notes....

Thanks again to all.

Thanks to you both for the responses. I have my attorney looking for another attorney that deals with this type of thing. He wants to make sure I do this "eyes-open," and this is not his area of expertise. I understand that at some point there will be a taxable situation if I foreclose on a discounted note or if I am paid off. You mentioned a few other things that got me thinking. I was wondering if you could expand on them a little. I know that the process of foreclosure itself does not transfer the property title to me (necessarily), but if no one else shows up at the foreclosure sale offering to satisfy the 1st position lender, isn't this effectively what happens? At that point it seems it would be the same as fee simple ownership. I understand there may be liens that must be satisfied, and presumably this would be factored into what I would be willing to pay for a note. Are there other debt obligations you think I would be obligated to pay?

Finally, and this is really the reason for the original post, can someone tell me why note holders on in a senior position would sell a non-performing note for 25% of the principal amount owed rather than foreclose? I understand there could be tax liens and such that in some circumstances would make it less than worthwhile to foreclose. Also, in cases where the property values have declined so dramatically that it isn't worth foreclosing I can understand the logic, but it seems most of these deeply discounted notes are on properties worth well more than the asking price of the paper. It's hard to imagine they all have huge tax liens, which I believe are the only liens superior to a first mortgage....

Thanks again to all, and please keep the great advice coming.

Thanks for the good advice, Kent. I will take your advice to start small. Any suggestions as to how to do due diligence without ordering a $125 title search on every property I look at? I would, of course, order a title search before making an offer on anything, but it seems impossible to even compare different notes/ investment options without one on every property....

Any other advice from the members here is more than welcome and much appreciated.

I have around $250k to play with, and I'm considering buying notes off FCI. Can anyone tell me what I'm missing? Many of the 1st position notes (non-performing) sell for a fraction of the value of the property. It seems like I could buy one of these and immediately begin foreclosure proceedings and net a considerable profit. I understand that I'm oversimplifying, and that foreclosure is more difficult in some parts of the country than others, but nevertheless it seems like a no-lose situation. Of course I'd make sure there were no liens or second positions, or if there were that they could be retired and still leave plenty of equity in the property. I know it can't be this simple, otherwise the note holders would be doing it. I'm just wondering what I'm missing....

All this is to say, I don't relish the thought of taking someone's home, and I don't know that I'm comfortable profiting off someone's misfortune. In any case, any and all input is appreciated. Thanks.