Posted by David Alexander on May 25, 1999 at 10:20:35:

John Boy,

that’s what you’ll find when you start taking in more payments, you just want to get payments and you’ll work with people if you can to keep the payment streams current. Although this sounds extreme to me, like you said. In one aspect it sounds like an Institutional lender because he just wants to cut his costs regardless, the numbers are meaningless, on the otherhand, it sounds like a private company, where their willing to go out of their way to work with them.
Regardless, sound like you have agood contact, figure out away to get a deal or two done with them and it sounds like you have a lasting relationship.

Keep us posted, interesting.

David Alexander


Posted by BUYING DEFAULTED PAPER FROM A LENDER on May 24, 1999 at 14:50:10:

I have a lender that has a property that they have been trying to get back for over 2 years. The guy living there will not take any money from the lender to deed the house back and just leave. The lender has offered him $5k cash and a condo to live in for 9 months rent free if he would just sign the deed over to them. The owner said no! He plans on staying as long as he can. He said he knows he’s going to eventually lose the house but until then he stays in it for free. He hasn’t made a payment from day one and that was 2 1/2 years ago!

The lenders attorney kept screwing up on the paper work and has missed dates so this guy keeps falling through the cracks and keeps living there for free until his final foreclosure goes through.

I can buy the mortgage from the lender for about $80k. The original loan was for $140k and they recently had a drive by appraisal done that came in at $190k.

The lender might consider selling me the paper for $80k and financing it at 11% with 0 payments for 12 months while I foreclose on this guy.

I talked to an attorney that handles a lot of foreclosures and bk’s. Usually for the defendant but he also handles for the plantiffs also. So he knows all the tricks on both sides and said it could take up to 9 - 12 months to get this guy out if I foreclose. It would cost me $1500 to have him handle the foreclosure for me. That’s cheap enough for me!

The problem is I don’t want to get stuck making payments while I foreclose on this guy. If the lender goes along with the 0 payments for 12 months then that would be ok.

Any other ideas on how to approach something like this? Were looking at a potential $110k equity on this deal.

Thanks for any feed back.


Re: JohnBoy - Posted by JPiper

Posted by JPiper on May 27, 1999 at 12:48:23:

Obviously making 0 payments is the best possible situation. But assuming the lender isn’t OK with that…and they might not be…I can’t see walking past $110K because I didn’t want to make payments of $800 per month. I wonder how many people are around in your locale who would be willing to loan $800 per month for a $10K profit at the end?


What’s the address? - Posted by John Behle

Posted by John Behle on May 24, 1999 at 18:42:15:

Just kidding. I’d do the deal. You’ve structured a great deal so far. David’s post brought up an interesting point. The question of why he hasn’t paid and is so adamant about it and inflexible - and why the lender and their attorney haven’t gotten him out.

Granted, it may be an inept or even un-scrupulous attorney. We had one very similar where the law firm took a couple years and foreclosed as a mortgage instead of a trust deed to run up the fees. I still don’t understand why the lender put up with it. The guy never made one payment and milked the property for the rents (the lender had a stronger term they used.)

You don’t say whether the lender is institutional or private. If it is seller financing, there could be some offsets. The fact that the lender has tried to buy them out instead of just playing hard ball with a competent attorney sounds like a private lender to me.

I hear one side of the story - the lenders. Is the buyer not paying because he was mis-represented on a seller financing deal? That could be a mess of problems. I’d want to find out more. At this point I’m not willing to just settle for the in-competent attorney explanation.

If you suspect problems, this may be a deal where you would get a binding option from the lender and then go talk to the payor to begin a deal or at least confirm that there aren’t any hidden pitfalls.

Let me know more about who this lender and attorney are. Otherwise, sounds like a fabulous deal. I like 6 figure profit deals.

Re: JohnBoy - Posted by David Alexander

Posted by David Alexander on May 24, 1999 at 17:26:28:

I would think that If you can get the paper for 80k, then there is still plenty of room. time to find the guy and take him to breakfast. He’s got to have a number, and with that much room I’m sure you’ll find it. Also, if he doesn’t know you know whats been offered to him I wouldn’t start at the 5k, but lower.
Maybe, besides being a complete deadbeat there’s a story there, and he’s really upset at the bank.

David Alexander

Re: What’s the address? - Posted by David Alexander

Posted by David Alexander on May 24, 1999 at 19:37:36:

Gee John, you say that so casually, “I like 6 figure profit deals”, I myself just “like sound of that”.

I’m gonna get there.

David Alexander

Re: What’s the address? - Posted by JohnBoy

Posted by JohnBoy on May 24, 1999 at 19:33:38:

It’s an instituional lender. Their attorney that was handling the foreclosure was eventually fired from the lender because of screwing this up from the begining.

The guy is just a deadbeat that doesn’t care. He’s now on disability from his postal job. The local branch manager stopped by on Sunday when he noticed 2 cars in the driveway as he was passing by the house. He thought the guy had moved out, but caught up to him at the house on Sunday. He tried again to get the guy to just deed the house back and offered cash to leave.

The lender said the guys actually a nice guy but he told him that he knows it’s just a matter of time until he loses the house and since they keep dropping the ball on this foreclosure process he’s just going to stay there living for free until they finally get him out.

The attorney the lender hired kept screwing up the foreclosure process. Then they had to start all over again. They finally fired the attorney and got another one but now they have to start the process all over again. Meanwhile the local branch manager will get $20k a month written off as a loss against his branch for each month this loan is in default. Eventually the lender will get it back and sell the property for as much as they can get.

The local manager says he has $30k a month in losses being docked against his branch right now and this additional $20k will bring him up to $50k a month in losses against his branch. This was also the very first loan this manager did when he was transfered to this branch. So he’s kind of desperate to save as much of it as he can before it’s written off against his branch as a total loss.

He told me he has people that are in default where he tells them he will cut their payments in half for 3 years with a balloon due and if they keep current on the new payment they will refinance them in 3 years to buy them time until they’re financial situation turns around. He said he can’t even get these people to agree to that. They have to end up living somewhere and they tell him they can’t afford to pay anything.

He’s got another one that he just sent the paper work down on that is going into foreclosure. He said the loan is $39k and he’ll let me have it for $30k right now. The loan is about 2 years old. 2 story house, needs a little work on the outside but doesn’t know about the inside yet. It’s right next to a college campus which would make a great rental property for someone.

It amazes me how much this lender will bend over backwards to help these people to save their home rather then foreclose on them. Cut the payments in half in hopes that their financial situation will get better in a few years. Has another one that the payments were about $1100 a month. The womans husband split town and she just wants to give the house back. The lender has agreed to take $300 a month until she can sell the property.

I can understand the lender wanting to avoid the costs and time with foreclosing, but this seems a bit to much to me. If I was to ever run into a problem on my loan payments I have with them I hope they’re still being as generous. :slight_smile:

Not Surprising - Posted by Carmen

Posted by Carmen on June 10, 1999 at 10:46:43:

Not so surprising.

I work for an international finance company, and we have shareholders to report to. When Brazil went belly-up in January, it looked like we would have about a 60% delinquency rate from our corporate clients - totally unacceptable to our shareholders! So we scrambled and begged and made offers to postpone payments for a year or more and split their payments up into installments, or threw the “delinquent” balance onto the end of the loan on many, many of these as long as they signed an agreement “by the end of the month”. Brought our delinquency rate down to 7% by quarter’s end (people like the one you mention above who refused every possible offer)- everyone was happy. We looked like heroes.

Of course, now the shareholders are looking at us saying “how come you restructured/refinanced 60% of your portfolio”, but that’s for us to solve by next quarter! :slight_smile:

Our bonuses, etc. are based on how we “look”, so we’ll work as hard as we can with our borrowers to make ourselves look good!

To me, it’s all fun and games, but some people take it VERY seriously - and people do get fired over what the numbers say.

It does sound extreme - Posted by Sean

Posted by Sean on May 26, 1999 at 14:01:57:

I mean, I don’t see the point for a bank to agree to anything less than all the interest accruing monthly plus at least $0.01 to go towards principal. Admittedly it will take many, many years to pay it off at that rate but the person may sell or refinance. I heard that most people only pay on their loans for 7 years before they sell or refinance.