All Forum Posts by: Andy Mirza

I believe that this will be the last one. I read an op ed in the WSJ last week written by a Dr at John Hopkins who believes that things will start to return to normal in April. By the way COVID numbers are continuing to trend down, I believe it, too.

Politicians will be slower to act but it'll be hard to continue making this an emergency when the hospitals are empty again.

@Chris Seveney Haha! I love those!

In my opinion, if you could make a case for a bad faith filing right away, I would do it and go for MFR. I don't trust borrowers like that to complete their plans in 5 years.

I have one where the debtor's been sub-performing for almost four years. I switched attorneys, learned some new tools, and we should be close to getting relief. You can only sell a sub performing BK loan at a significant discount so your only option is to hold it if you want to make money on it.

My understanding is that they were insured by FHA and that our seller bought these loans from HUD. Post sale of the notes, the seller will need updates on the disposition of the assets so that they can report this to HUD.

We have a liquidation model for our funds so we'll sell these to a 3rd party at foreclosure sale or take them back as REOs and sell those on the market.

Our attorney said that we should have an NMLS license to buy and sell notes in OH, although he also indicated that there has been virtually no case law concerning the consequences of not having one.

You can say the same thing about IL. Our attorney there recommended that we register our LLC to do business in IL and that would cover most issues.

Licensing and compliance can be tricky things and you have to evaluate the risks and necessities of being licensed vs unlicensed. It's easy to say, "Yes, you need a license to do that." What about the costs & time involved to get every single license that "they" say you should get? What if you're doing all of this activity for nothing or for a minimal consequence?

I think you have to look at situations differently and weigh the risks and penalties. My understanding is that GA actively looks for violators and we've heard of one investor having to dump his portfolio right after buying it. We don't buy there now but will as soon as we get licensed to do so.

@Chad U. @Bob Malecki Gentleman, thanks for your input!

This is in line with what we've been hearing from our other sources, especially about the interior condition of the property.

Yes, it's the company that starts with the K. We were thinking about hitting them up to do interior inspections so it's good to know that you were able to.

We're looking at a tape consisting mostly of defaulted reverse mortgages. The borrowers have passed away and no heirs have showed up to take care of the estates. Most  are underwater but some have equity. All are vacant.

We've never acquired reverse mortgages before and are reaching out to our various sources to learn more and understand the risks. I thought I'd reach out to the group as well to see if someone could share their experiences.

What are the pros & cons of reverse mortgage NPNs?

It seems like the risks are low:

The payoff increases with time

Borrower has passed with no heirs to interfere since oftentimes the estates are insolvent

Vacant

Cons:

The rare heir who might raise issues after you purchase the defaulted reverse mortgage

Dealing with probate (we already do this regularly on other loans)

Having less tools to work with a borrower (not really our business model)

Higher chance of getting an REO (not an issue for us either)

Other thoughts out there?

We have more of a liquidation model. We target the loans and that have the largest delinquencies where the most likely outcome is foreclosure. Usually, borrowers in these situations are too far behind and are just trying to stay in their properties by paying as little as possible. 

In my world, Deed in Lieu, Short Sale, Selling to a 3rd party at Foreclosure Sale, and selling the REO are our most common tools. Every now and then we get a re-performer and we sell those after some seasoning.

My favorite exit strategy is not necessarily the most profitable but it's the most personally satisfying. We get a lot of borrowers that file Ch 13 BK and abuse the BK system. I get satisfaction out of figuring out how to resolve bad faith BK cases as quickly as possible.

Many new note investors come from the real estate world. Although notes are related to real estate by the collateralized property, they are a different asset class with some very important distinctions. You can't take everything you've learned in real estate and necessarily apply it directly to notes. That being said, knowledge of real estate is a big advantage over the hedge funds and big banks who have very little knowledge of real estate and mostly flip paper.

@Reginald Ross You know all the details of your note. Most note investors won't see it the same way you do. Most won't spend time to verify all the details plus 5 years is a long time to wait to get paid. To most note investors, it's a matter of yield and discounting every item that adds more risk to the deal. Better to keep this in your portfolio, like you originally planned, and be happy if you get an early payoff:)

@Don Konipol Exactly, haha! You would think that people would understand that principle. If you apply it to so many situations, you could clearly see how mis-aligned incentives (even when the original intentions are good) can screw everything up.