All Forum Posts by: Mike Hartzog

Be sure to get a title report if you haven't already, and check the tax status directly with the county. Also review the collateral file to ensure you have a complete assignment/allonge chain, and a scan of the note itself.  Wayne is right, the price seems too low for a first position, even in NY with a deceased borrower.

@David Shertzer

The foreclosure wipes out the first (because it is foreclosing) and any junior liens including the second (your loan).  So no, if you bid and win at the auction there is nothing more owed to the 1st lienholder.  What you likely don't know at this point is the opening bid that the first lienholder will set.  I would assume that the first lienholder will set the initial bid for the amount of the full judgement (156K).

One key piece of information that is missing here is the value of the home and the balance of your second lien.  Your equity position will be helpful in determining the best approach.  If there is a lot of equity, you are probably OK at an auction sale and you would go to the auction merely to ensure the high bid is at least the amount of the 1st judgement + your second lien balance.  (In that case your lien is paid off from sale proceeds.)  If not, you are best focusing on Jay's recommended #2 and #3 strategies.   

@Ryan L.  Congrats on your first note purchase!  Now the real work begins...

Electronic recording is great but unfortunately it does not work everywhere yet.  The guidance you received from the recorders office is legit and is the way it's been done for decades.  You can send them in by mail, but personally I like to use FedEx rather than USPS, because I am a little paranoid about losing original documents in the mail.  The other reason is that I can require an "adult signature" on delivery which could serve as proof that the docs have been received by the recorders office. 

I send the docs in a ledger sized FedEx envelope and include a letter sized return FedEx envelope complete with attached shipping label addressed to my offices for return of the docs.  Finally, I include a simple cover letter which defines the docs I am recording, number of pages of each, and payment allocated to each.  The letter also references the envelope for return of the docs.

Also, if you decide to go the FedEx route, I recommend setting up an account on their website so that you set up the shipment and print the labels out yourself.

@Jordan P.

I am not sure why you care about asking prices.  They are anything but consistent on FCI, and most performing deals I see offered don't have an asking price.  I think you are on the right track with your risk based model though, if it gets you to a "max purchase price".  My advice would be to stick to your criteria and throw a lot of bids out there based strictly on that criteria. 

I agree with Brent Coombs & Mr. Christopher. :-).   It's a tired old scam that apparently still works.  "We will lend you money if you will only pay an up front fee."  Yeah right.  The fact that they contacted you is also a major warning sign.  My advice is to cut off all communication with them and move on.

It makes a difference if you need to foreclose.  Non-judicial states are quicker and generally less expensive because the foreclosure process does not go through the courts.  RealtyTrac has a decent summary by state:

http://www.realtytrac.com/real-estate-guides/foreclosure-laws/

@Linda Hastings  Must have been a temporary site issue.  They are working for me...

There is note rate and investment yield.  @Pari Thiagasundaram is illustrating the calculation for investment yield.   The note rate refers to the interest rate of the loan.  It's one of the things that is called out on the note itself.  Generally speaking,  higher is better, but it is the investment yield that is most important from an investment evaluation perspective, and that is heavily dependent on the amount you pay for the asset.

@Jay Hinrichs - I think that's a good approach as long as there is a pre-agreement with the bank to a short payoff.  The borrower would also need to cooperate.

@Lisa Edwards - To answer your questions, the 50c/dollar language is typically in reference to UPB, but confirm with the bank. They could be talking about 50% of total debt. As a first step I would ask for the loan details. They should be able to get you a reinstatement or payoff report which has the basic info. Once you have that you can put in an indicative offer which is subject to your review and approval of the collateral file.  There should be no escrow or earnest money associated with this.  You will typically have a week or two for review, but that is negotiable with the bank. 

I would also recommend engaging a local RE attorney to help you with doc review.  You will want to get a title report to check if there are any municipal or tax liens that you would be liable for.  Call the county tax office to understand the property tax situation, i.e., delinquent taxes and outstanding tax lien certificates.  When you buy a non-performing note, assume the taxes and municipal liens are now your problem, because of you take title to the property via foreclosure or deed in lieu, they will be yours to deal with. 

If you decide to move forward, your attorney should help you with closing the transaction, i.e., review of the loan PSA and ensuring that the transfer documents (assignment and allonge) are done properly and recorded. 

Once you have the note, you have the following primary options for moving forward:

• Foreclosure - Wipes out junior liens but not tax and muni-liens.
• Deed in Lieu - Doesn't clear anything but your note from title.  If you have a clean title this is often the best approach.
• Short Sale - May work out depending on the lien situation, i.e., the seller must deliver a clear title so all liens and taxes must be paid off.  You are accepting something short of full payoff for your note.

Hope that helps.  Good luck!

I agree with Wayne.  Seems straightforward to me.