Can financing be obtained to buy a note? - Posted by ScottE

Posted by ScottE on March 28, 2000 at 09:02:18:

Sorry I didn’t elaborate more. Yes, this is a $55,000 1st mortgage @ 8.5% for 360 months with the first 8 payments ONLY made. Now 5 (almost 6) months in arrears. No balloon. Held originally by Countrywide then assigned to Bank of New York who is now foreclosing. No seconds or other liens.

I understand what you are saying about getting it signed up, but I don’t have an exit strategy (to fund it) and I have been stuck in this situation before.

Since the borrower and I didn’t part on the best of terms, I’m not sure I can strike a deal with him.

Thank you, Carol!


Can financing be obtained to buy a note? - Posted by ScottE

Posted by ScottE on March 28, 2000 at 01:48:58:

I got jacked on a flip of a fourplex about 16 months ago. I ‘lost’ about $5k that I would have made. Anyway, the property is now in foreclosure. Here’s the skinny on it when it was purchased in Jan. 1999:

4,000 sq ft
Purchase price: $55k at 8.5%
PITI : $623/month
Appraised @ : $103k
Rents were LOW@ $950/month

Needed some cosmetic work (which, of course, those clowns didn’t do), but good building in great area.

These guys are 5 months behind. The property is NOT the owner’s primary residence, so even if he filed BK, the stay would get lifted quickly for not being homesteaded property.

Can you obtain financing to buy a note like this? What kind of discount, if any, could you expect a national lender to sacrifice?



Yes - with the right source of funding - Posted by John Behle

Posted by John Behle on March 28, 2000 at 09:55:26:

I doubt you would interest any national lenders/buyers in this note. Even at that LTV, they still shy away from non-performing notes. Most broker or fund their portfolio in a manner that they would not want a foreclosure no matter what the LTV.

But… a private investor would have little risk in this. You could offer a great rate of return or a piece of the profits. You would just need to find or cultivate a private investor. Your first stop might be a local REI group, but I would have the note tied up first.

In a first position with a 50% LTV, the lender would have little reason to discount - but it doesn’t hurt to ask. They may not have a good idea of the value and might be aware of the condition.

Yet, it is likely they won’t discount, but may be very open to selling at face. You take the risk of no profit if the owner came up with the back payments or paid off the loan, but it doesn’t sound like they are moving too quickly to do that.

I would contact the lender and strike a deal on the note and then search for an investor. I’m the first one to be averse to making an agreement that you cannot yet perform on, but I would not worry too much here because finding an investor would be fairly easy.

Re: Can financing be obtained to buy a note? - Posted by CarolFL

Posted by CarolFL on March 28, 2000 at 08:07:37:

Scott, I’m a bit confused… maybe I need another cup of coffee.

Just what IS the note? $55000 @8.5%? 100% financed via this 1st mortgage? How is the note structured? Is there a balloon? Who’s holding the note, and what is the objective here?

Maybe it’s just me, but i’m missing something. If all that is between me and a $100k+ piece of property is a non-performing note for 50% LTV, and there are no other liens on it, I’d hunt down the note holder, strike a deal, and figure out how to fund it later!
Good luck.

Thank you, John (nt) - Posted by ScottE

Posted by ScottE on March 28, 2000 at 17:52:28: