Posted by AWWMi. on February 26, 2005 at 06:34:23:
Purchase assignment of second. Reinstate first. Foreclose on second. Try to negotiate settlement with first. If first buys out position at sale then you’ll still make a few grand on the deal.
Pre fclose Tip: Squeaky Wheel Gets the Grease - Posted by Ben (FL)
Posted by Ben (FL) on January 31, 2001 at 16:57:35:
A homeowner facing foreclosure called in late November in response to a letter I had sent him. He owes $73,000 on a first and $13,000 on a 2nd on a house worth $100,000 after about $8,000 in repairs.
I made an offer to settle the 2nd for $3,000 and made a short sale offer on the first for $58,000.
Well, the 2nd was held by Citifinacial who was in the middle of merging with someone else, so no one at the branch office had been informed of the foreclosure - and no, it won’t help if I bring them a copy of the Lis Pendens showing citifinacial as a defendant. Finally, in January after the new branch manager arrived, she got to looking into it. No one cold find the Lis Pendens that had been served to the company, so she accepted the copy from the homeowner, her boss counter offerered $5,000, I countered back $4,000, and everyone was happy. (By the way, I am hearing this more and more now “It’s not even worth our time to draw up the paperwork for only $3,000”)
On the 1st mortgage, the bank (Fairbanks Captial) sent a letter listing all the things they had to have before considreing a short sale offer including: hardship letter explaining why the seller can’t pay and financial package (tax returns, bank statements, pay stubs, W-2s, etc.). That was sent ot them in early December, and I got a HUD-1 and bank approval letter to them in late December.
The hearing was Jan. 5 and the auction is set for Feb. 5. Not until Jan. 24 did I find out that a different guy was handling the foreclosure for Fairbanks, and he did not have the sellers finacial info. Of course, the underwriter won’t even look at the file until the file is complete, and I won’t know if they are going to accept my offer until the underwriter looks at the file.
In the mean time, the sellers have finally found a house to rent (I need them out of there ASAP), but can’t pay the deposit and 1st/last month rent until I give them the $2,000 I am supposed to give them at closing (I know, it’s too much, but I caved into their sob story when we were negotiating the contract).
SO now I am faced with the prospect of shelling out $2,000 when I haven’t even heard from the bank…NOT LIKELY.
I have offered to give the landlord the security deposit, but he insists on it all - and I can’t say as I blame him.
LESSON: These people at these banks that are foreclosing have no personal stake in this. All they have is a stack of files on their desk that is preventing them from reading the Drudge Report on-line or playing Half-Life. If you don’t bug them, early and often, you may be overtaken by events and lose your deal.
Re: Pre fclose Tip: Squeaky Wheel Gets the Grease - Posted by B.L.Renfrow
Posted by B.L.Renfrow on January 31, 2001 at 23:11:16:
You are right about the big out-of-state banks and mortgage servicing companies: the drones who handle these files couldn’t care less whether the mortgage is foreclosed or not. The oft-repeated line that banks don’t want to own houses doesn’t always apply in these situations.
Rather than offering $4000 to settle the second, you might have instead taken an assignment of the mortgage. Then, as the second mortgage holder, you could bring the first current then take title subject-to.
Granted, you would have been in the deal at 85% without figuring holding costs, instead of 70% IF the short sale proposal is accepted. That seems to be a big if. Personally, I’ve never had any luck trying to put together a short sale, but perhaps your experience will be different.
But if you were in the second’s position, at least you wouldn’t be stuck where you are now, not knowing what the first is going to do and with the seller PO’d at you because they don’t have their $2k.
Brian (NY)
Risks with buying defaulted paper? - Posted by Monique
Posted by Monique on February 05, 2001 at 09:19:38:
Brian,
Your advise to have the 2nd assigned instead of satisfied by the lender makes sense.
I have heard (not yet verified) that there are risks with buying defaulted paper as a means of backing into buying the property. That there have been at least 2 documented court cases where the property owner, who was particularly litigious, sued and won over an investor who purchased their defaulted loan and then tried to foreclose to gain possession.
What they sued for … I don’t know. Unfortunately, I don’t have the details, yet. In the meanwhile, have you heard anything like this?
Monique
Re: Pre fclose Tip: Squeaky Wheel Gets the Grease - Posted by Ben (FL)
Posted by Ben (FL) on February 01, 2001 at 10:31:06:
I get what you’re saying, but to bring the first curret would take $7,000. Then the balance would be $71,000 and the balance of the 2nd would still be $13,000. Sure, I’ve taken it over, but I have a monthly payment of over $800 on a house that would onlt rent ofr $750 AFTER repairing the roof, some wood rot, new carpet, paint throughout, tile and fictures work in the bathrooms, updating the kitchen, etc.
The way Icame up with my short sale offer was to take the lowest range of FMV ($85k), subtracted out ultraconservative repair costs, figured in 6 months of holding time, payments the bank has already lost, and realtor’s fee, and came up with $58,000. Then I said, “Take your loss now, or take the same loss, and maybe much more, months from now” Basically they lose the same amount of money, just don’t have to hassle with the house anymore.
assignment of mortgage? - Posted by AWWMi.
Posted by AWWMi. on February 01, 2001 at 24:00:23:
Ben,
When you talk about assignment of mortgage how would you execute the transaction? What position of advantage does that put you in as 2nd lien holder?
Re: Risks with buying defaulted paper? - Posted by B.L.Renfrow
Posted by B.L.Renfrow on February 05, 2001 at 15:08:55:
Hi Monique,
I haven’t seen any specific cases, though I don’t doubt that it’s possible. Of course, anyone can sue for anything. Whether the homeowner prevailed would be the question.
Naturally, you’d have to be sure to follow your state’s foreclosure process to the letter.
Might be a good question for Joe Kaiser…I think he does - or at least he used to do - this pretty regularly. If there were any such court decisions, he’d probably know about them.
Brian (NY)
No… - Posted by B.L.Renfrow
Posted by B.L.Renfrow on February 02, 2001 at 23:42:03:
If you bought the second, you wouldn’t pay yourself, so the balance on the second would then be zero since you’d presumably file a satisfaction of mortgage document and eliminate it if you were taking title subject-to the existing first.
But I agree you’d be in a much better position with respect to LTV if they accept your short-sale proposal.
Brian (NY)
and the balance on the 2nd would be #13,000… - Posted by Stew (NE)
Posted by Stew (NE) on February 01, 2001 at 19:37:54:
Just checking. If you get the assignment of mortgage for $4K (which I personally think is too high), you don’t owe anymore on the mortgage. So why did you say "
and the balance of the 2nd would still be $13,000. "
Re: assignment of mortgage? - Posted by B.L.Renfrow
Posted by B.L.Renfrow on February 01, 2001 at 07:36:09:
It would put him in a stronger position when dealing with the first. As a matter of policy, senior lien-holders usually don’t foreclose on junior lien-holders who bring a loan current to protect their own position. Not that they couldn’t, it just normally isn’t done. That way, he wouldn’t be left to wait and wonder whether the first will accept his short sale proposal or let it go to auction.
It would also give him the ability – not that he’d want to, in this case – to go after the defaulted borrower for the balance and costs on the second.
To execute the transaction, you would simply send the second mortgage-holder the agreed-upon amount in certified funds and they would send you a standard assignment of mortgage document.
Brian (NY)