All Forum Posts by: Andy Mirza

@Chris Seveney I don't feel like subjecting myself to 208 pages of brain damage, haha! Did you read it? What are the Cliff's notes?

My reading of FCI's e-mail makes me think that it won't affect any of our loans. We like the loans that are severely delinquent & intentionally look for ones that were delinquent before COVID hit. All indications we were seeing were that pre COVID delinquencies were not being affected except by the general moratoria.

What concerns me more about this new rule is that privately owned investor notes are being targeted now. Hopefully, this will be it. But it's also possible that we get swept into the same rules that affect GSE backed loans. 

I received a general e-mail this morning from FCI alerting note holders of a Final Rule from the CFPB that affects private investor owned notes with borrowers that have been affected by COVID.

The CFPB Final Rule amends RESPA and requires note servicers to comply with "procedural safeguards" prior to initiating foreclosure between August 31 and December 31, 2021.

Exceptions are loans that were 120+ days late before March 1, 2020, loans where statute of limitations expires prior to January 1, 2022, or if borrower abandoned property.

Bottom line: it looks like there will be more red tape navigating "procedural safeguards" if you want to foreclose on a loan that became delinquent during COVID.

For more info, try googling "CFPB Final Rule Part 1024 - Real Estate settlement Procedures Act (Regulation X)."

Definitely call your servicer or foreclosing attorney if you think it might affect an upcoming foreclosure.

@Chris Seveney Bummer that you had to go through it again but, like you said, not really a big deal since you'll take the property back.

I don't see how you could reasonably avoid this. When I was new, I would take the time to read all of the fine print so I could learn. 

Multiply that by all of the loans in your portfolio and it's too much time to spend when you're trying to run and expand a business. We have to rely on our vendors to do their jobs right. To me, I'd give my attorney slack on this one. 

It's annoying when they're making easily avoidable mistakes or make mistakes on things they really should be much more careful about, though.

I try to minimize "emergencies" in house by keeping track of milestones so that we have more time to address the emergencies caused by our vendors, haha!

We book everything to the asset and take the gain/loss all at one time when the asset liquidates. It makes sense for us to do this with non performing notes.

@Peter Halliday For Quickbooks, we list our non performing and performing notes as "Other Assets." The purchase price is the opening balance and then all costs associated with that asset are added to the cost basis.

On our balance sheet, the cost basis is listed and not the UPB.

Update to this situation:

Getting the Assignment of Rents worked out perfectly & I would absolutely do it again for any NPNs that we have where we know that the property is tenant occupied.

We bought this loan in Oct, 2020 that backed a duplex in NJ. During DD, we saw that the borrower filed numerous BK's in the past in apparent attempts to stop foreclosure sales of his rental properties. (He had so many rental properties that his last BK had to be converted to Ch 11!)

When a borrower has a rental property with a loan in delinquency, he's typically skimming the rents and not paying the mortgage. With a borrower with previous BKs, he's also not afraid to keep filing BKs because his credit is already ruined. Take away the rental income and you take away the incentive to file BK, right? That was my line of reasoning in getting the assignment of rents.

Once we got the assignment of rents, our receiver/property manager started collecting rents for us in Jan, 2021. It was nice to start receiving payments for a change!

We waited until Sheriff's Sales resumed and set the first sale that we could. In NJ, the borrower is allowed to postpone the sale for 30 days. He can do that up to 2 times and there's nothing you can do to stop it. 

This borrower postponed the sale twice. I assume that he did it just because he could and maybe he hoped something might happen that would stop the process. 

The property sold to a 3rd party bidder and we just received our net proceeds yesterday. Very happy with how this deal turned out!

If we didn't get the assignment of rents, I'm sure that we'd be filing a proof of claim for the borrower's instant BK case and would be waiting 6 months to a year to get relief before the borrower filed a 2nd BK.

Being able to foreclose in a timely manner far outweighed the little effort needed to get the assignment of rents. Collecting rent checks was pure, delicious gravy.

@Jim Stanley I suggest doing your first few deals without putting your own money into it. Collect whatever bird dogging fees you might earn but focus on getting the experience you mentioned. When you have enough experience working with your mentor, then consider co-investing.

My 2 cents. Good luck!

@Chris Seveney I found out this morning that we won't be able to do this because the IRS wasn't named in the initial foreclosure complaint. Maybe next time.

@Chris Seveney Same with us. I don't believe we've ever had to do anything specifically and the IRS lien seems to go away magically on its own.

However, we're in a situation right now where we need to expedite the removal. Is submitting the 14135 form the way to do this? In our situation, the property sold to a 3rd party at sheriff's sale in early June. The title report missed the IRS lien and now the bidder is considering filing a motion to vacate. How long before you hear back from the IRS on the 14135? 

How long before the sale in normal circumstances do you submit the form? It makes sense to do this just to remove this obstacle if you can do it easily.

@Jim Stanley I would add that the property type for your first deal should be your run of the mill, vanilla type suburban or urban property that has a lot of demand and will sell easily. Stay away from properties that are very old or unusual.

To reduce the risk of having your money tied up for too long, make sure the maturity date on the note is for one year or less. 

As Chris pointed out, self directed IRA funds are inappropriate in the scenario you laid out. Self directed IRA investments are supposed to be passive. You're not allowed to do work on the actual investment.