All Forum Posts by: Account Closed

@Bob Malecki - out of curiosity, how did you handle that loan when the servicer didn't board it?

That's a great point too

@Luis Cruz 

I think what you are looking to do is get the lender to agree to a short sale (assuming the property is valued less than the remaining loan balance). It's not impossible to buy NPLs from banks, but I don't think focusing on that is the best route here, because even if you do successfully go through the negotiation process and buy the loan, after you acquire it you then have to go through the foreclosure/deed in lieu process to take control of the property from the current owner. Why go through all that if the owner is already looking to sell? Plus, in case the owner changes their mind about leaving, you may not want to run the risk of having to foreclose a New York NPL without prior note experience, since the foreclosure process there can be terrible. Given the current owner wants to sell, I would just focus on the sale route, unless there are other factors we're missing. 

Hey Matt - using private money or hard money to buy a home, then refinancing with a bank loan is a very common process. The bank is going to underwrite the property, and depending on the institution will also underwrite you as a borrower. If they are happy with that, it doesn't really matter that you use the funds to pay-off the private lender. In fact, it will be required as the private lender will need to release their security over the property.

If you're using another line of credit (e.g., business loan) to pay off the private lender, that's typically fine too, although you just want to double check the terms of the line of credit and be mindful of things like not using one LLC's line of credit to pay off another LLC's debt.

@Varinder Kumar @Bob Malecki @Will Barnard @Eric S.

Thank you for the feedback guys, these are all great suggestions and very helpful! So to summarize - it looks like the due diligence is mostly the same, however there needs to be even more caution taken when checking and verifying the payment history, so make sure to do things like obtaining bank statements and even an estoppel like agreement. And Bob's example shows that you want to get a new servicer involved as early as possible to check for any unintentional CFPB (or equivalent) issues, particularly for loans originated in the last 7 years.

Thanks Varinder - just to confirm, I would have a servicer once I own the note. Just asking what special considerations to keep in mind when purchasing it from someone who hasn't been using a servicer

Hi all - I"ve come across several seller-financed notes where the seller/note holder is "self-servicing" the note vs boarding it with a servicing platform. My initial thought is this would be a deal killer since you want to know it's been properly serviced, but does anyone have experience working around this? Aside from making sure title is clear and insurance/taxes are being paid, are there any other important items to look out for? Is it just a matter of finding a new servicer (e.g. FCI) who would be willing to take it on? Thanks!

Hi Kristina - I also found NotesDirect to be pretty helpful for practicing due diligence (as well as seeing what's currently on the market). If you sign up for their portal they list what assets are up for sale and the relevant collateral packages.

(I have no affiliation with them, just passing on things I've used)

Awesome, many thanks for the information everyone

@Dave Van Horn - thanks (as usual) for the recommendation! I'll reach out to Riley

@Bruce Lynn - thanks Bruce, is this the same Eddie from Colonial Funding? I'm actually a member of their note directory and database, good idea to reach out to Eddie considering i believe they are based in the area

@Gary Baker - appreciate the word of caution Gary, notes are definitely a tough asset class and certainly have many legal pitfalls/nuances. I'm solely focusing on the DFW market (including upcoming travels there) and secondary purchases of first lien performing notes. That said I think it makes sense to build a relationship with a law firm who is also knowledgeable about NPLs and new originations (particularly from a compliance perspective) since eventually I want to broaden to that as well. Big fan of the NoteMBA podcast and actually an LP in Dave's fund too!

@Scott Carson - perfect, thanks for the website and Scott recommendation! I actually remember passing by his website previously when reading up on TX foreclosures

Hi all - I was wondering if anyone had recommendations for DFW lawyers experienced in the note space (e.g., origination of new notes, non-performing workouts, note purchase contracts, etc)? I browsed through the forums on this, but looks like most of the questions were focused on lawyers for investors seeking to buy properties (vs just the debt). Thanks!