Posted by Bill K. - FL on June 22, 2000 at 09:06:42:
How about having both parties execute a modification of mortgage/note so that it can be more marketable?
Note with no specified or implicit interest rate - Posted by Mike McGinnis
Posted by Mike McGinnis on June 21, 2000 at 21:35:18:
I have come across a “note and mortgage” that simply says that the mortgagor will pay the debt of $85.000 by making payments of $450 for 20 years until the entire remaining unpaid principal and interest shall become due. No interest rate specified anywhere in the document. The mortgagee says that the payors are good friends and will pay whatever he says at the payoff but he doesn’t know an interest rate. He would however like to get some cash back out of the note. How do courts look at a note that doesn’t specify a rate. If the payment is interest only, the rate is only a 6.3% return. Amortized, it is less than a percent. Any decent rate would negatively amortize the note at this payment.
Since the mortgagee is willing to take a discount I would like to do something if that is possible. Has anyone ever dealt with a note that didn’t specify interest rate or a balloon amount so a rate could be calculated?
“quirky” notes… - Posted by Michael Morrongiello
Posted by Michael Morrongiello on June 22, 2000 at 09:48:03:
Mike:
The funny thing about seller financed paper is that we see notes with all sorts of quirky language in them. I’ve seen notes that do not make mathmatical sense, Notes that were drafted by attorneys that look like they were using an ancient Egyptian language, notes with the wrong parties inserted,and the list goes on and on.
The KEY here is to counsel with the holder of the note and find out what the INTENT was when they created this note (debt). If there was to be NO interest, then each payment does apply to principal reduction. However if the note was to be fully amortized out over 20 years (240 months), then an interest rate of 2.49% appears to be what was intended. Bill, is on the right track about the possible modification.
Also find out what is the REAL CASH NEEDS of the note holder? Once that is asceratianed, assuming the payors will be cooperative, the intent and language of the note and mortgage instruments can be “scrubbed” up to make them more clear. Then the note can be sold to raise the needed cash your holder NEEDS and produce a profit (fee) to you.
To your success,
Michael Morrongiello