All Forum Posts by: Mike Hartzog

@David Sharp

Regarding cost of quiet title, you would have to discuss with an attorney.  Regarding redemption, yes that means prior owner can pay you off and get the property back within a certain timeframe, but my understanding is that this is rare.  One approach to avoiding a quiet title action is paying the prior owner a few bucks to quit claim the property to you.  That would clear the potential redemption claim.

David,

A tax foreclosure will typically wipe other liens out, but it is best to get a title report and make sure.  I use ProTitleUSA.  Also, there may be a redemption period wherein the prior owner can pay the amount of the tax bill that was foreclosed and get the property back.  I believe it is two years in Texas.  You may need to file a quiet title suit fully clear the title. 

That part in bold about the client is referring to you.  I think he's saying that you don't have any funds at risk because your bid was  a credit bid which is covered by the amount of the judgement.

@Mark Gibbs Yes that's right, however, loan mods are not typically recorded.

Hi Mark,

I would do a loan modification which has a trial period built in so that the mod will not take affect unless the borrower makes consistent on time payments for a period of time (say 6 months or a year).  You can put the foreclosure on hold during this period.  If the borrower satisfies the terms of the trial period, the loan is brought current with any arrearages capitalized into the new principal balance. 

You could also do this as a two step process, with step 1 being a forbearance agreement and the second step being a mod if the borrower complies with the terms of the forbearance.  I have used both approaches, but prefer the mod with trial because it requires document shuffling one time rather than two times.  Fee free to give me a call if you need to talk more about it.

Hi Bill - I haven't had to deal with one of these liens directly.  I would recommend engaging an MI foreclosure attorney for a review. 

Chris nailed it...

A focus on percent discount is missing the point. Buyers of performing notes are buying an income stream which provides a certain yield on invested capital. So let's say you were looking for an 8% annualized return on your capital. You could achieve that by paying 100% of UPB (unpaid balance) on a note with an 8% rate. You could also achieve the same thing by buying a note with a 4% rate at a discount to UPB. You will need to do some financial math to determine how much of a discount is required to achieve your target yield.

There are other factors which drive performing note pricing as well. If yield were the only consideration, life would be simple, but unfortunately we must also consider risk. For example, a loan with a UPB which is 50% of the collateral value (50% LTV) is much more secure than one with a 90% LTV. The quality of the collateral, as well as how quickly and cost effectively a foreclosure can happen in the state (where the collateral property is located) will also influence the value of a note. Borrower credit score and the borrowers payment history of the loan are also key factors.

Experienced note buyers will have a target yield in mind and will work to find notes which can deliver that yield at a level of risk they are comfortable with.

@Michael Spadoni

The information regarding where the check came from would have to come from the servicer.  I have not tried to get this type of information from a servicer but I would expect that the request would be declined.  I think the key thing here is to know your seller well if you are buying re-performing assets.  Jay has an excellent point, i.e., once a borrower has defaulted once they are significantly more likely to do it again, so your risk is higher on these.  That said, you can typically buy them at better yields, but you need to be prepared to deal with defaults.

My advice would be to start with performing assets which are under professional licensed servicing and where a complete pay history can be provided which shows consistent payments and loan status is current.  Also, there would be no loan mod or forbearance associated with these as there typically would be with a re-performing note.

Be very careful with re-performing notes.  Unscrupulous sellers have been known to make the payments themselves to create the payment history.