All Forum Posts by: Mike Hartzog

Agree with Bob.  Loan servicing is the first step because you need to stay RESPA compliant with your activities, and it is relatively inexpensive.  Generally when you purchase a note it is already boarded with a servicer, so you could either leave it there or have servicing transferred to your own servicer.  If you transfer servicing, you will need to wait for the "goodbye" and "hello" letters to go out before attempting to contact the borrower.

There are a handful of states where you need a license for debt collection, but most are not that way.  I contact (or attempt to contact) borrowers regularly as part of my workout strategy, but if I am working in a new state I check with the servicer since they know the state laws better than I do.

Regarding the loan modification question, you don't need a mortgage brokers license. You can change the terms of the loan within limits and your servicer should be able to do the loan mod on your behalf.

Hi Adrian,

Have you boarded this note with a professional servicer which is licensed in the state where the property is located?

Mike

Agree with Bob.  Banks generally sell notes in large pools to established buyers and don't do one-off sales to investors.  My advice would be to determine the equity position your grandparents have in the property.  If they are not underwater you could look at curing the foreclosure.  If they are underwater, you might be able to arrange a short sale or purchase the property at the foreclosure sale.

My approach is to always use a licensed servicer.  With that I am not worried about owning notes in any state.

Hi Josh - Is your intention with the review to establish that there are no legal issues with the language on the note and security instrument that would prevent you from pursuing a potential future foreclosure?  If so, I would use an attorney.  If you are taking that step you might consider having them close the purchase and sale transaction, which would include:

• ensuring that all note allonges and mortgage assignments are correct and accounted for
• ensuring that there are no title issues like junior liens you may not be aware of
• record the mortgage assignment with the county

Hi Josh - Perhaps I am misunderstanding your question. Your future cash flow is defined by the interest rate and P&I payment on the note itself and your purchase price has no bearing on that.  Your yield, however, can be different if you pay something other than face value (unpaid balance) for the note but this has no impact on future cash flows. 

For example, let's say you purchase a brand new 100K note with an interest rate of 9% with a 30 year amortization.  They monthly payment on that will be $804.62 and that is the payment you will get, regardless of what you pay for the note.  If you purchase this note at for 70K, your yield is 13.55% due to the fact that your investment is less than face value.

You will need to put an as-is value on the property.  If you are not familiar with the market you could contact an RE agent for help.  The other thing you need to find out is cost to cure the foreclosure.  There are arrears owing above and beyond the unpaid balance.  These consist of back payments, late fees, and legal fees that the lender has incurred which will need to be paid to keep the property out of foreclosure.  The owner should have this information from notifications received from the servicer, but keep in mind that this grows month to month so you need a recent statement to get in the ballpark of the real number.  From there you can determine if there is enough equity there to bother with.  If there is, the two primary options are buy it with cash  (unpaid balance + arrears + whatever you want to give the owner) or you could take the property subject to the existing financing.  This involves curing the foreclosure and having the owner quit claim the deed to you, and you continue to make the payments on the existing financing.  This is a bit trickier and there is a risk that the lender will call the loan due. There is also risk that there could be other liens on the property so you would need to get a title search.  There is plenty of discussion on sub-to deals on BP for reference.  I would not recommend sub-to for a first deal.  Best to buy with cash IMO and put some financing on afterward.  Remember that you need to get the property well below market value for it to be a good flip.  Doing the analysis on it will be good practice even if you end up walking away in the end.

I have found the trulia.com crime map to be a helpful resource.

Ohio, Rhode Island, and Illinois are also closed.  I am under the impression that they used all of their funding for the year and are closed to new applications until re-funded for next year.

Wow, looks like my table didn't turn out so well.  Looked great in the edit window...