Posted by myles on July 02, 2002 at 18:21:54:
Dianna I think there was an article around this site about discounting a mortgage with the bank…Check the finance forum. I believe you have to negociate with the bank directly. I don’t know, but I remember reading something to this effect.
I am a NEWBIE, so please don’t take this to heart. I just remember something about this in my readings. I am telling you, I will donate some $$ to this site once I am up and running in my business!!
Good luck
Preforeclosure - Get the Deed? or??? - Posted by Dianna
Posted by Dianna on July 02, 2002 at 17:01:14:
Here’s the scoop:
Person called us and they owe way more than the house is worth; however, the house is in decent shape. Some appraiser pushed value on the previous loan, so now they owe $250K and the house is probably worth about $215K. It is set for sale on 8/9. No other liens on the property.
They want to get out of it, but I think they want something to get out of it. The cousin has spent a lot of money and time fixing it up, and it looks good, but there’s no equity.
How to proceed? Negotiated short-sale with the bank? Get the deed? What are the mechanics? I’m getting all of these options mixed up…
Dianna
Re: Preforeclosure - Get the Deed? or??? - Posted by Matt (MPD)
Posted by Matt (MPD) on July 03, 2002 at 04:29:35:
Dianna,
Same phone call I get about 5 or 10 times per week. No equity, refinanced within the last 2 years and got a new loan at 10+% interest and can’t make payments and now they want out. Maybe that’s not all exactly like your’s but nevertheless same outcome with being upside down or negative equity position on the property.
Is there any money for the seller in this? NO. They’ve gotten their money either on a recent re-fi and took cash out or when they purchased it and gave too much to the previous seller and got suckered.
Can the cousin recoup any money for their efforts? NO. Unfortunately as in the above, the money is already gone.
Can you negotiate with the seller any further on this? NO. From here you need their authorization to speak directly with the lender and try to negotiate a “short sale” of their loan. I wouldn’t spend any more than 75-85% of FMV (fair market value) if the house were in “move-in” condition. Obviously I would discount from there any repairs necessary if it needed them. Can you get this lender to knock off 90k on this loan? Depends on how badly the borrower is performing. If they haven’t made a payment in 8-10 months your chances are pretty good. If they have had a slow pay or two in the last year or so the lender won’t be so motivated. If the lender has the appraisal on file for 250k you will be hard pressed to convince them that it’s only worth 215k now unless you are a certified appraiser or you get another appraisal from someone that is.
Is there a chance that this loan is an FHA loan? If it is, unless you are an FHA authorized lender typically you can’t get them to “sell” you the note. From what I’ve had to deal with here in IL, lenders won’t sell FHA loans to someone that is not FHA authorized, i.e. other banks, lenders etc. We investors don’t qualify. So this part all means you won’t get a discount. They’ll let an FHA loan get called, sell it at auction and collect the insurance from the gov’t.
You’ve got some digging to do if you don’t have those answers.
Get the authorization to speak with the lender, talk to their “loss mitigation department”, those that deal with short sales if they say they don’t know what you’re talking about… and see if you can’t get the note reduced. If you can, you’ll probably have to offer cash and then I wouldn’t offer more than 50% of FMV. If you could somehow bring the loan current and reduce the amount as well to something reasonable under FMV it might be a deal as well but that is such a long-shot I wouldn’t bet tip money on it.
I hope some of this helps.
Matt Yohnk
myohnk@mpd-investments.com
MPD Investments Inc.