# Can you calculate this? - Posted by Alexander (Fl)

#1

Posted by Eduardo (OR) on November 17, 1998 at 19:20:25:

Alexander–

Computationally, if no payments have been made, you merely take the face value and compound using the stated interest rate to the present. Then discount using your required yield rate. Practically, if no payments have been made, note is not “seasoned” and I, for one, would ask additional questions as to why obligor has not performed. --Eduardo

#2

Can you calculate this? - Posted by Alexander (Fl)

Posted by Alexander (Fl) on November 17, 1998 at 16:16:20:

The note states:

…\$3,700 face value note. First payment due 6/27/97 in the amount of \$75.02 with a principal payment of \$600 on 6/15/97 and another principal payment of \$600 on 6/30/97. One of the above principal payments will be the refund of the escrow account from the mortgage that is being paid off. The remaining payments of \$75.02 will continue until the loan is paid in full or the balloon in 12 months…

Curiously, no payment (zippo) has been made since the very beginning, it appears that the mortgage company simply “forgot” about this note.

Assuming an 80% CLTV, single-family between first and this second…what is this thing worth?

#3

Yes - Posted by John Behle

Posted by John Behle on November 18, 1998 at 24:59:51:

As Eduardo mentioned, the balance has grown by the amount of the accrued interest. In many notes there is also a “Default rate”. That rate is usually much higher and is the amount that any defaulted payment amount accrues at. There may also be late payment penalties.

What’s it worth? Depends on many more factors, like what is going on with the payor and what the property and market look like. There are also legal implications in buying a note that severely defaulted that would have to be weighed. A local buyer is your best bet for this if it is a note your are trying to move.