All Forum Posts by: Andy Mirza

@Don Konipol You're correct in that BK courts have some leeway and adopt specific practices in their courts.

However, I believe that the rules on the automatic stays are statutory. This website cites 11 U.S.C. § 362(c)(3) for the 1st filing after a dismissal and 11 U.S.C. § 362(c)(4) for the 2nd filing.

The tactic you mentioned is pretty common for residential as well. Usually, individuals will Quitclaim partial interests to other individuals who then file BK. This tactic usually won't work for very long since no one makes payments and we can get in rem even quicker.

I second what Chris said. My first JV turned into a very passive deal. We made great returns but I wasn't involved in the decision making and didn't learn the mechanics of note investing.

When I met my current partner, I came to the office 3-4 times a week and learned the business. Although we now live in different states, we're in contact by phone and video throughout the day. It can be done either way but you need to have that understanding with your JV partner from the beginning.

(Not legal advice; just relaying my own experiences & understandings)

When a borrower files a Ch 7 or Ch 13 bankruptcy, there is an automatic stay against all creditors from collecting on the filer's debts. As a lender, this means that you have to postpone any foreclosure sales and you have to get relief from the bankruptcy court before you can resume a foreclosure sale. You do this by filing a Motion for Relief (MFR), having the judge grant your motion, and getting a signed order for relief.

However, if a debtor files another BK within 1 year of the dismissal of a previous BK, then the automatic stay lasts for only 30 days.  In most cases, the debtor will file a Motion to Extend the Automatic Stay. In one of our recent cases where this happened, we filed an Opposition to the debtor's motion. At the hearing, the judge denied the motion, which meant that as soon as the 30 days expired, we were clear to foreclose and did.

If a debtor files a 2nd time within 1 year of the dismissal of the 1st BK, then there is no automatic stay. You are clear to foreclose without delay although you should prepare to oppose the debtor's motion to impose the automatic stay. 

We had another case where the debtor had two BK filings within 6 months prior to us purchasing the loan. We re-set the sale date and the borrower filed a third BK a couple of weeks before the sale. This gave him enough time to get a hearing for his motion to impose the automatic stay. Unfortunately, we had to cancel the sale but the debtor's motions were denied and we received in rem type relief, which prevented any future BK filings from stopping any future foreclosure sales within the next 180 days.

@Daria B. I am also not an accountant and advise you to seek your own accounting professional. Here is what I do and how I look at things.

When we purchase a NPN, we list it as an "Other Asset," which is listed on the balance sheet. Any money coming in or out regarding this asset, gets booked here. Any liquidation event (payoff, sale at trustee sale, REO sale, or re-sale of the loan) is the "sale" that you refer to above.

When this number is applied to the cost basis (the ledger of the Other Asset), we are left with the "Gain/Loss on Sale," which is an income account. In your example, $60k is the purchase price and cost basis. If you get a $120k payoff, $60k zeroes out the "Other Asset" and the other $60k is booked as "Gain/Loss on Sale."

This is how we do it.

@Account Closed I would start by combing through the last year or so of posts in this forum. Basic questions have already been asked and answered several times before. That would give you a base of current knowledge to start from. Good luck!

Cumberland County, NJ just opened up. We got a sale date in December.

What will inflation look like and how long will it take to see the effects? I think these questions need to be answered first before you adjust your note business.

The worst case scenario is the onset of high inflation in a short amount of time and would require the most adjustment to one's business model.

Yes, inflation will make some loans unattractive i.e. loan mods with very low interest rates.

If you bought a performing note on yield, then you should be ok as long as your return is still attractive in the inflationary environment.

If you buy underwater NPNs then inflation will help you as the value of the real estate will go up and you can collect more than you  anticipated.

"evicting a tenant on a non-performing note" doesn't make sense to me. You should have a borrower on a NPN and your recourse is foreclosure, not eviction. A very important distinction to understand.

(Forgive me for reviving all these alder posts but I find it helpful to see the end results of previous discussions :) )

In another post, I mentioned a success with using an APO to get a sub performing CH 13 BK loan with a serial bad faith BK filer to foreclosure sale.

That trustee sale happened in CA and we had no delays or issues because of this law. Good for us this time but, hopefully, it won't negatively affect us for future foreclosure sales.

@Chris Seveney That's an interesting point about not getting the property back.

I'm assuming that you're talking about loans with lots of equity where a 3rd party wins the foreclosure auction? For example, if your total collectible debt is $50k and the property is worth $150k, then you'll get a full payoff at auction and the property will go to the 3rd party bidder who wins at $120k.

In those situations, the sheriff's sale would probably be the fastest route. Going the PSO route takes some additional filings that add time.

With our second loan, total debt was $287k and the property was worth $320k. The bidding started at 2/3 of the sheriff's appraised value or $212k. We set our max credit bid to $287k because the house was built in 2017 and appeared to be vacant. We figured that if we took it back as REO, it would be a quick turnaround with a light rehab.

The online bidding made it to $265k so this is reverting to us as an REO. I believe that if this went to a sheriff's sale, the bid would have come in lower. The question is: which bid would have been higher given that the PSO sale had a 5% buyer's premium added to it? (The buyer would have to pay 5% to the PSO on top of their bid as the PSO's compensation.)

You could ask the same regarding auction.com. I went to several auction.com sales in 2011 and 2012 when I was buying condos at trustee sales. I bought maybe 2 condos near the beginning but stopped going because the bids went too high. They are very good at squeezing the most they can at those auctions. It's not like on the courthouse steps where if you pause for a few seconds you might lose the auction.

@Chris Seveney The two HECMs we bought were from K. The values were the opposite for us on those (our values same in higher than theirs), which is why it worked. We had to sift through a bunch of others and couldn't agree on price for those.

That segues into a whole other topic of dealing with sellers in negotiating bids. K has some things that make it more difficult to reach deals than with our other usual sellers but we were able to make other trades with them.