All Forum Posts by: Jason Antonio

And I have accepted! The problem with inspections as I mentioned, is that you need the borrowers' consent, they are really not a party to you acquiring a note and many times this is all accomplished without the knowledge of the borrower. And, in many cases, you don't want the borrower to be awar of it as they may seek refinancing and offer the seller a lower price for the payoff!

If the borrower will allow inspections, yes you can hire someone.

This really depends on the LTV WHERE YOU ARE BUYING. much of the discount allows for maintenance problems and the small stuff, so a real detailed inspection is usually not be done for a mortgage purchase, but inspections that were accomplished will give you a good idea as to condition.

Maybe the best thing for you to consider is having a Realtor do a BPO and just visially inspect from the street in most cases.

Your assumptions here are that the collateral is sufficient, if the note was made at 90%CLTV (70% first and 20% second for eaxmple) and you disount the second another 25%, your CLTV is at 85% from the sale price, so some assumptions are part of the game.

And, Welcome to BP! DOn't forget to vote! LOL Bill

Jay, I assume you are speaking of privately originated notes, not from an institutional lender.

The first theing is to review the note and deed of trust and the closing documents. The note holder should have all of the settlement documents.
Make sure the liens were filed in proper order and recorded. Check the closing documents to ensure proper accounting on the HUD-1 or settlement accountings if it is a commercial deal.
If the loan was serviced by a third party, you'll want to see the payment history. If it was not under servicing, then I have gone so far as requiring the seller to show the deposits of payments in their bank account. People don't really get cancelled checks any more but any proof that payments have been made need to be examined.

Another check on payments having been credited, but not the timing of payments, is having the sller provide the existing balance and having the borrower acknowledge the balance.

You'll want to see that taxes have been paid and are current. You need to see the current insurance policy, the deck page, with the lender being listed as loss payee.

The collateral should be examined as musch as possible. Borrowers having knowledge of what's going on may be participating in the process for many reasons, if so, veiwing the property may be possible. If not, someone should at least do a driveby and look at the current condition.

If the property was sold through a Realtor, get an authorization from the seller to review all related documents to the sale, including inspections. Realtors (Brokers) are required to hold all related documents to any transaction from 3 to 5 years, sometimes longer. Ask them for the listing, any appraisal/BPO, comps for the listing and inspection reports done. This can be a pain, since the Realtor see this as a no money in it for me deal, but they are obligated to do so.

What you're looking for are discrpencies in value anywhere along the line of listing, sale and other lending arrangements. You can assess this against tax records.

In your purchase agreement for the note you will ask for these guarantees from the note holder and buy the loan with recourse, meaning you can force the seller to repurchase the note in the event of any decreption, false statement or error that is significant to your purchase. This does not mean that you have recourse in the evnt of default of the note, but you can also purchase with such a guarantee.

What you're looking for is the borrower's capacity to pay. Getiing any information about their employment and where they work, how long and income is a good thing too. Many notes are made with authorizations to verify tax records, employment, credit and deposits at the time the note was made, these items from the seller will shed light on the borrowers' capacity and credit.

Credit can be verified if authorizations were signed.

Run the name of the borrower through your local legal news potings and at the court house for any suits, bankrupticies and actions of public record. A borrower in a divorce can be a problem, even if they have great credit!

Collateral needs to be "audited" as to the type of property secured. A multi-family is easily inspected and check for compliance in that area with applicable codes. If you end up with a building that can't be sold until it is put on the new sewer or re-wired, you might lose any discount you gained in the transaction.

This is just an overview. As you dig into the file, you need to be aware of the kinds of problems that may arise in the event of foreclosure or disposing of the property.

I mentioned commercial deal above. While federal law was passed holding lenders harmless under EPA reqirements for clean up of conatmination, a private note holder may not.

Hmmm, this is getting too involved, if you need more on a specific deal, post it here or PM me! Good luck, Bill