Top Real Estate Articles

Buy Notes - Hitting a Put Shot With a 9-Iron

May 28, 2009 Real Estate Properties

Buy Notes - Who is Your Borrower?

I just got off the phone with the Sr. Vice President of a California bank in charge of note sales, and a note broker friend of mine who set up the call.

The Sr Vice President advised me that they had 3 non performing notes that were commercial loans in the LA area.

A Buy Notes Lesson about Golf Clubs and why to Communicate with Your Borrower

Stay with me here…

As we continued our conversation…the SVP at the bank notified me that one of the loans had a scheduled foreclosure sale in 2 weeks.

The bank had not been in contact with the builder/developer (borrower).

I asked her if she was worried about possible problems when taking over the properties through foreclosure. And if she had any other concerns regarding the loans.

She let me know that the bank didn’t have too many concerns because the property values were enough to pay off their debt.

My Concerns With This Buying Notes Situation

The most important thing that I have learned is that building the relationship with your borrower is key. This is probably one of the most important concepts in the note buying business. Manage your relationships.

By not working with your borrower, you can really mess up your chances of getting out of your note deals.

And here is the reason…

There are basically 5 Exit Strategies in Note Buying:

reperformance, refinance, short sale or deed-in-lieu, refinance, note sale, foreclosure.

Foreclosure and note sale are the only 2 exits that you can do with no communciation to your borrower.

But the risk that the foreclosure runs - and foreclosure is the path that the banker is taking in this example - is that the borrower may file for bankruptcy and postpone the time when you recover the property.

My Advice on Buying Notes

Buying notes can bring you high returns without have to foreclose or to sell the note to someone else.

If that’s true, then losing contact with your borrower essentially kills 60% of your note buying exits (3 of the 5).

Would any professional golf player get only a course with 5 out of their 12 clubs?

Would that be somewhat limiting to their game?

Probably.

But boy would it look funny hitting a putt with a 9-iron.

Working with your borrower is essential when you are buying notes. It can be painful, but it is what has to be done.

This is the advice that I gave to the SVP at the LA bank today.

We’ll see if she takes my advice - we’ll be tracking her nonperforming notes to see if any of them end up in bankruptcy.

If those notes do end up in bankruptcy, it’s for certain that she will be wishing that she kept communication with her borrowers.

Tags: buy notes, Foreclosure, home loans, how to buy notes, Mortgages, note buying, Real Estate, Real Estate Properties, residential housing, sell notes, selling notes, Short Sales

How to Buy Notes - Note Buying, Knowing your Enemies

Apr 28, 2009 Real Estate Properties

How to Buy Notes…You and Your Seller

You’ve probably heard of Sun Tzus (the famed Chinese warrior) instruction to his soldiers to know your enemy before going into battle.

Well the same is true with note buying.

Every note buyer and brokers should use “know your seller” as their mantra.

Why you ask?

Not knowing your seller will place you in a position where you will be entering a negotiation with no idea of what your negotiating tactics will be.

A How to Buy Notes Example,My Recent Bid

A bank has the mortgage on a house in Salt Lake City and they want to sell the 1st.

The note had matured over 2 months ago and the borrower hasn’t paid on the note in over 120 days. Technically the loan could be called due.

No foreclosure notice has been served by the bank.

The bank has called you to see if you want to buy the nonperforming note and mortgage.

My first objective was to determine how much I could offer for the loan. So I contacted a local realtor to provided me with some comps and then compared it to the BPO and title report that I pulled.

And we put in our bid.

My rep at the bank hinted that she would need approval from a committee of senior staff at the bank.

But she was very cagey about answering any of my questions about where she needed pricing to be in order to sell, and what the status of the borrower was.

Her behavior was suspicious to me so I decided to probe for more information. When I did, she clammed up and would not discuss anything further with me.

There was something fishy going on with this note buying deal.

Especially in this circumstance with one individual loan, I found it very odd that the bank rep would react the way she did. This was my first time experiencing this.

How to Buy Notes-Tips on Talking to the Banker

So I called her back again, and tried a little exploratory language with her.

Would it be safe to say that the bank has a unique relationship with this borrower? I asked her?

Absolutely, she immediately replied.

I was curious - what was going on here in this defaulted mortgage deal?!

I was aware that she wouldn’t reveal any information to me other than yes and no answers, but I kept probing.

Is there a reason why the bank hasn’t foreclosed yet?

Again…she answered, yes.

And youre probably not at liberty to tell me, but this sounds like its a difficult relationship for the bank to foreclose on, is that correct?

Yes, that is right. I can’t share anything further with you.

I have one more question. Would the bank be more open to selling this nonperforming note if they new what exit strategy I would be pursuing? Rather than bassed on price?

Yes, she answered briefly again. That would be correct.

What is going on with this note deal?

Well, what I learned in two more phone calls with the woman I was negotiating with at the Bank was that the borrower was extremely well connected in Salt Lake City political circles, and her ex-husband was a close friend of the banks President.

If the bank foreclosed on her, they might find themselves in a political nightmare. And that is why they wanted to sell the nonperforming loan to a 3rd party investor.

Lessons Learned on How to Buy Notes

Take the time to learn why the seller is trying to sell the loan, know the circumstances. If you don’t, you may completely miss out on what your negotiating points should be.

The bank was more concerned with our exit strategy rather than price. They wanted to know how we would work out the note with the borrower.

How to Buy Notes - Action Items

1. Understand why a bank is selling their notes or pool of notes.

2. Figure out the negotiating points and what are the reasons why the bank is trying to sell their defaulted mortgage to you. It is usually one or more of the following:

a. Price

b. Speed with which you can close

c. If you are able to close (price you are offering on a discounted note won’t matter, if you can’t close a deal)

d. Your note buying exit strategies

The next time you are talking to a bank to buy notes, think about all these points.

You will become a much better note warrior!

Tags: buying notes, find notes, Foreclosure, home loans, how to buy notes, how to find notes, liens, Mortgages, note buying, Real Estate, Real Estate Properties

How to Purchase Non-Performing Notes: The Good Brokers

Apr 15, 2009 Real Estate Properties

Purchasing Non-Performing Notes, the How To

If you have a good broker that you are working with in your note buying business, you will be very successful.

This past week, I received 4 phone calls from one of my Good brokers.

He was checking up to see where I was on my non performing note bid.

Example of a Good Broker when learning How to Purchase Non-Performing Notes

A friend of mine that had previously worked at an investment bank had brokered a pool that I put a bid on.

Always polite and professional, he would ask me, how is your due diligence coming along? Is there anything you found that you didnt expect?

Or he would say something like: “So which notes have you kicked out due to value, if any?”

He would always make me feel that he was doing everything that he could to keep myself and the seller on the same page.

He would always say something like “Well, what I’ll do is to tell John what youve just shared with me in case you havent already told John, and then I’ll let him know that you’ll be contacting him again once you’ve finalized everything. When do you think that will be?

How to Purchase Non-Performing Notes- Good Brokers are Key

A good broker is always adding value and helping the relationship. This broker never got in the way and simply improved the buying process.

He knew everything about my bidding process. He knew what my bids meant and why I was bidding on the non performing notes.

He was aware of the potential “kick-outs”, in other words, notes that I might pass on. Some reasons to pass would be title issues.

Remember this, if your broker isn’t making your non-performing note purchase easier…then you are not getting the value for the commission that you are paying.

Tags: how to buy notes, how to purchase non performing notes, Non Performing Notes, note buying, purchase non performing notes, Real Estate, Real Estate Properties

Cash Flow Note Business Success - A Story About The Lone Wolf

Apr 9, 2009 Real Estate Properties

A Look at the Cash Flow Note Business

A friend of mine, Heather, flew in for her 40th birthday this weekend.

We just spent four hours catching up over expensive white tea and salmon salad at the Samovar Tea Lounge near our house.

It was great.

She told me about a current project that she was working on, and it really left an impression on me.

I automatically thought about how it related to my Cash Flow Note Business. Because of the simple fact that the story had a direct impact on you, your life, and the way you interact with people in your community.

The Cash Flow Note Business and its Relation to Heather

Heather’s an artist, a very talented one, who has specialized in story-telling through different media. Very different from my speciality which is buying notes.

Her current project involves a Native American woman from Washington. She is a member of the Sakgit Indians, and Heather has been documenting the life and wisdom of this woman.

Heather interviewed this wise woman, who was considered her tribes community builder. The woman told her that people were no longer fulfulled and they became emptier and emptier.

This when Heather brought up the Hopi poem about the Lone Wolf.

I just read it, and it struck me that I needed to share this with you to point out how it can serve as wisdom to all of us, especially for those of you starting a new cash flow note business, a new venture explored, and striking out on your own.

Cash Flow Note Business Success, Words of Wisdom

Let me share the poem with you ..

“There is a river flowing now very fast. It is so great and swift that there are those who will be afraid. They will try to hold on to the shore. They will feel they are torn apart and will suffer greatly. Know the river has its destination. The elders say we must let go of the shore, push off into the middle of the river, keep our eyes open, and our heads above water. And I say, see who is in there with you and celebrate. At this time in history, we are to take nothing personally, Least of all ourselves. For the moment that we do, our spiritual growth and journey comes to a halt. The time for the lone wolf is over. Gather yourselves! Banish the word struggle from you attitude and your vocabulary. All that we do now must be done in a sacred manner and in celebration. The poem ends with the words: “We are the ones we’ve been waiting for.”

Cash Flow Note Business, How Does This Poem Relate?

Here’s how this applies to you directly in your (and my) Note Buying Business.

a) The river flowing fast resembles you, and the unknown world of investing in nonperforming notes. It must terrify you.

b) The other people who are less adventuresome than you will “hold onto the shore” while you proceed.

c) Trust in the river - and that it has a destination - one that you’ll be able to reach if you allow yourself to “flow” with it. (example: multiple exit strategies for you defaulted mortgage business)

d) The time for the lone wolf is over, think of it this way, if you want to really succeed in your cash flow note business; you need to reach out to people, whether those be bankers, investors, real estate agents, or title officers.

e) Don’t ever think about this as a “struggle” - this is you learning how to swim in a river that moves faster than you’re used to - but once you learn how to float (in regards to the cash flow note business - you learn the lingo, you learn what a trade looks like, you study the process and you eventually close your first deal), you learn to let the river carry you along.

A Tip on Your Cash Flow Note Business

The important lesson learned? “We are the ones we’ve been waiting for.”

So listen to what I’m saying. Write this down, put it on your beside table or your desk even. This is your new motto for your new Non Performing Note Business.

You can do anything you put your mind to. There is no one else you need to wait for.

Imagine the conversation: Me, meet Me.

The power of this simple realization should not be underestimated.

As Heather put it to me earlier tonight, she said: “the most powerfully creative moments for an artist are when we get out of our way, and just let our creative energy flow.”

Remember, it’s YOU that you’ve been waiting for.

Make use of all the wolves out there and get out of the river.

Tags: bad paper, buy cash flow notes, buying notes, cash flow note business, defaulted mortgages, Foreclosures, how to buy notes, Non Performing Notes, note buying, Real Estate Properties

How to Buy Mortgages from Banks - The 4 Buckets

Apr 4, 2009 Real Estate Properties

On How to Buy Mortgages from Banks

Let me share with a commonly asked question.

“My understanding is the federal government is going to be offering financing to private equity and hedge funds to buy up the bad debt aka defaulted mortgages.”

If anything it would seem this would at the very least invite a whole heck of a lot of competition.

“What are your thoughts on this?”

My thoughts are this:

4 Buckets - How to Buy Mortgages from Banks

The competition is adding to the deal sources when buying mortgages from banks.

There are 4 “buckets” in the note buying industry:

a) Big Boys - buy $100 million +

b) Mid boys - buying $20-100M

c) Small boys - buying $1-20M

d) Mom and pops - buying less than $1M

A lot of the shifting is happening between the big boys and mid boy stage. That is just my opinion in terms of raw dollars.

So lets think about these investors financials for a second.

They are only concerned with their yields on their note buying investments.

How to Buy Mortgages from Banks, Your Deal Sources Definted

If you fall into the mom and pop or small boy category, guess who just became your new deal source for buying notes? Yes, the mid and big boys.

They are looking for a huge internal rate of return (IRR) so they are buying more aggressively than what you will see compared to the small boys and the mom and pops.

Come up with some kind of approach where you would offer them 5 points or so in exchange for picking and choosing from their portfolio. They will become your new note buying source so partner up with them!

So you don’t have to be worried about the the water from the your fountain being intercepted. All you have to worry about is repositioning yourself in a way so that the water still drips in your direction.

And you can always look for other opportunities to buy your non performing notes.

Hope this information helps you.

It’s time for some action!

Tags: buy mortgages from the bank, buying notes, cash flow note business, Foreclosures, how to buy mortgages from the banks, how to buy notes, learn how to buy mortgages from the bank, note buying, note buying business, Real Estate Properties

How to do Short Sales- A Short Comparison to Buying Bank Notes

Apr 2, 2009 Real Estate Properties

How to do Short Sales, Not so Easy!

This article is for those of you who have tried your hand at Short Sales and realized that they’re harder than they look.

A side by side comparison…

How to do Short Sales…What is Required?

Short Sales are transactions that involve a willing borrower you’ve spent time convincing that they would be a likely candidate for a short sale.

And a loss mitigation officer overwhelmed with short sale proposals who often takes forever to get back to you documentation.

Compared to buying bank notes, short sales require bank statements, tax information, proof of income, letters explaining hardship, closing statements, and cash.

If you’re able to close a simultaneous short-sale, you may not have to fund anything. Otherwise, you have to finance the purchase from the bank.

How to do Short Sales Compared to Buying Bank Notes

Real estate note buying won’t require you to gather documentation. You will be working with a secondary asset manager or loss mitigation officer who already has the documentation for you, all you will need to do is review the information. The documents that you will need to worry about are the purchase and sale agreement and the loss mitigation officer. Most lenders will follow the same process.

Yes, in defaulted mortgages you will need money buy the bank notes. There are many strategies that you can look into that require very little capital. I will tell you more about that later.

California - Short Sales and Buying Notes

When you are taking title as part of a deed in lieu negotiation, the constraints that equity purchasers have don’t apply. You are also exempt from Civil Code 1695. There are multiple exits strategies that you can pursue, these include deed in lieus, loan modifications, refinances, or even reselling the note. In short sales, you are limited to the need of finding a buyer and selling the property.

There are no licensing requirements when you are buying bank notes with a singular interest.

Potential litigations will not arise for you as they would with lease option deals. (a lease option deal is interpreted as another loan and you will be accused of equity stripping). Your real estate note purchases will allow you to modify the loan. Just remember that you will be subject to changing foreclosure laws because you will be the new lender.

A Thought on Short Sales and Buying Bank Notes

I’ll leave you with this - whereas you may have thought short sales were a pain-in-the-butt because of the uncooperative lender you were negotiating with. You may find yourself on the other side of the table if you buy a bank note, and have an investor come to you with an offer asking you if you’ll take a discount on your defaulted mortgage in order to sell the property.

That would be a good change of pace right?

Tags: bank notes, buy notes, cash flow notes, how to do short sales, Mortgages, note buying, Real Estate Properties, REOs, Short Sales

How to Buy Notes - A Note Buyers Dream…Understanding Your Borrower’s Needs

Mar 28, 2009 Real Estate Properties

One Lesson on How to Buy Notes

Its funny how the little things (so u think) are actually a big deal for your borrowers.

What am I saying?

I have two stories to share with you. They are about Natalie and Judy, 2 borrowers that were included in one of my portfolios.

A Story on How to Buy Notes…Introducing Natalie

My first example is about Natalie, she had a performing first mortgage that was included in the pool of non-performing notes that I purchased. Natalie was an ideal borrower, whose mortgage payment was due on the first of every month. She owed $93,000 and paid a monthly payment of $680 like clockwork, the only thing was that the payment was received around the 5th of every month.

So, when I called Natalie for the first time, guess what her biggest request was? She asked me sheepishly if I might be able to push her payment due date back from the 1st of the month to the 7th of the month so that her paycheck had time to clear in her account!

What does this have to do with make money as an investor who is learning how to buy notes?

Because of one simple thingin the market today, and just in human relations in generalthere is one fact when it come to the financial relations of people.

It’s sometimes the little things that matter the most.

As an investor in non-performing notes, when a borrower like Natalie asks me if she could pay her mortgage a few days after her due datehow did you think I responded?

I said of course, what date works for you?

You mean, you CAN do that for me? She sounded incredulous.

Thats all it takes, just me asking?

Wow. Eye-opener for me in this business of how to buy notes, I tell you. That something as simple as changing a due date could make such an impact.

So of course, my next step involved asking Natalie if I could refinance her real estate note. I asked her if I could put her in touch with a specialist that worked on my team, and because she now trusted me.she provided all the information that I asked from her.

A Lesson Learned on How to Buy Notes

If you actually listen to what your borrower is saying, and can determine their needs, you can create a relationship based on the fact that you helped them. Anytime that you help someone in need, they automatically feel an obligation. Use that feeling of obligation to your advantage.

Another Example of How to Buy Notes, Judy’s Story

I have a 2nd story that I want to share with you. This one is more recent.

Judy is from Tennessee, she has the cutest accent that Ive ever heard.

Her accent is so sweet, you cant help but smile every time you hear her voice.

And when Judy spoke, what do you think she said in regards to her defaulted mortgage?

Dean, I owe you all a HUGE thank you for paying my taxes.

My first thought wasWhat?…taxes?? So of course, I looked through my file to see what I did. I quickly realized that after running my tax check (something we do towards the last business day of the month), it was in my best benefit to pay her taxes current.

How to Buy Notes-Benefiting Both Yourself and Your Borrower

We advanced it to her loan obviously (property taxes advanced by you can be charged to the principal of the loan), and since her delinquent note rate is pretty high, we get to accrue interest on that advance. So from my perspective, it was both protecting our interest as well as making a smart business decision that would make us money.

And from hers, it was the sweetest and nicest thing we could have done, because we were looking out for her. The actual words she used with me were: Dean, I want to thank you for helping me keep my house. Ive been here 20 years and now Im finally caught up thanks to the patience youve had with me.

I was floored. Absolutely amazed at how a simple decision to protect our real estate note position, pay the taxes owing so they wouldnt fall further delinquent and threaten a tax deed sale (Tennessees a tax deed state, not a tax lien state - more on that in a later post), could be perceived by the borrower as a generous move to protect her own interests.)

You can only imagine how the rest of my day went, it was wonderful! Nothing feels better than to sit there and receive such gratitude over the phone. It really touched me. In the business of buying notes, experiences like this dont happen very much.

And I also learned today how useful it would be to explain advances to pay taxes and insurance for any other borrower in terms of helping to protect their home and to help them to protect their home.

A situation where everyone wins doesnt seem so clich now does it?

Not when you look at what Natalie and Judy taught me about the experiences in how to buy notes.

Tags: buy notes, discounted mortgages, Foreclosures, how to buy notes, learn how to buy notes, Mortgages, Non Performing Notes, note buying, profit from buying notes, Real Estate Notes, Real Estate Properties

Buying Notes-Where’s the List of Banks That Sell?

Mar 26, 2009 Real Estate Properties

Investing in Notes-The Most Common Question

What is the most common question asked? At least 58 different people have wondered the same thing that I did when I completed my first course on How to Buy Notes 4 years ago. Where is the list of banks that sell?

That was the only question I had for my instructor, Mark. By the time my 3 day workshop was done, I was so eager to get a hold of the list. I didn’t understand why he was waiting so long to give it to us. Why couldn’t he have just handed it out at the beginning of the course?

The “Magic Binder” - Banks That Sell Notes

When Mark handed it to me, I wolfed it down. I skimmed every page for nuggets, details, of every bank that “the Master” knew. And here’s what happened. Here’s what I did with that information…Exactly … nothing. Why? Let me walk you through what happened after the course was over.

a) For one thing, a good number of the banks werent in business anymore. (If Indymac was a bank I wanted to pursue, I would probably have a hard time trying to deal with the FDIC).

b) Most of the phone numbers were useless. They were just main numbers, the same numbers that I could find through a google search or in the phone book.

c) Some of the banks weren’t selling their notes anymore

d) There were banks that weren’t on the list that actually did sell notes and defaulted mortgages

e) Once I had the name of the bank itself, I still had to make my presentation to the right person - and that had more to do with what I needed to talk to the banker about than about whether the bank sold notes or not

And now…what do you think happened to the magic binder of banks that sell? It is still propped up in my bookcase and hasn’t been touched.

So What’s my Point on Buying Notes here?

The list is huge. There are so many banks that sell notes and defaulted mortgages.

And it’s based, in almost all situations, on who you know.

In fact, the people that know the list inside and out more than anyone are … Let’s think about this for a minute:

a) less than 3 dozen banks and lenders that sell notes.

b) People that I know in this industry buy from less than 20 lenders. These are people who run a $1-50 million dollar fund. A lot of them have no more than 10 people that they purchase from. (some advice, good brokers are a gem. Treat them well!)

c) An individual that I worked with in the past became very wealthy from one relationship. He spent 7 years buying notes from The Associates. They were his only seller.

d) Everyone who’s a “professional” note buyer has one thing in common… and here’s the secret so listen carefully:

The Secret To A Note Buyer’s Success

They can talk the talk and walk the walk. The professionals not only know exactly what to ask for, they know what to do with the information once they’ve received it. You get that? What you do with what you know is more important.

Now, imagine yourself with one of the most successful Note Buyers (the Zen Master of Note Buying). The both of you are on the top floor of a New York City building admiring the view of the lower east side.

It is an amazing view…all the noise of the city is muted. She asks you to join her onto the fire escape so you climb through the window. All of a sudden you can hear all the sirens and honking cars in the noisy background. She says to you…”Look….that building right there…there they are”. You have a puzzled look on your face.

“Who is there?” you ask.

“They are,” she answers. “The ones you are looking for.”

You look out to where her arm is pointing, but her arm is moving in a gentle arc all the way from your far left to your far right. Now, you’re really clueless. You’re about ready to ask her to explain what she means, but she cuts you off.

“I can sense your doubts.” she tells me.

“I have a story for you”.

She shares a story with you about her master and the time he taught her where to look for the Fountains of Perpetual Notes. She tells me the four words that he spoke to her…”Look for the suffering”.

“So now,” she whispers to you, her arm still pointing over the buildings lighting up New York’s night sky, “I tell you.

“Look for the suffering and there you will find the Fountains of Perpetual Notes.”

She leads you back into the building.

Find the Fountain of perpetual notes. Look for the suffering.

All I’m looking for is a list of banks that sell notes!

How are Suffering and Buying Notes Related?

There is suffering everywhere.

There will be a few lender that don’t have non performing assets to sell.

But there are a lot of lenders that are selling notes right now. To both investors they know and investors they dont know.

Lenders are even being forces to sell notes to investors that they don’t know.

There are many investors that are calling up those lenders asking to be put on the “list” of approved investors. If I were to give you the list of banks that I know sell, it would be like telling you to go pick a number and to stand in line at Katz’s deli at lunch rush-hour on a weekday.

So just go and “Look for the suffering”.

Approach everything with the thought that every lender sells. Don’t ask if the sell…but rather ask to whom they sell.

Tags: bank notes, buying notes, Foreclosures, homes, how to buy notes, learn how to buy notes, mortgage notes, Mortgages, note buying, profit from notes, Real Estate Properties

How to Buy REOs - Non-Performing Notes Versus REOs

Mar 20, 2009 Real Estate Properties

I would like to share something on how to buy REOs vs. Non-Performing Notes with You.

A hard choice, I know.

Many people probably would ask themselves…”If I can buy real estate so cheap, why would I want to own bad paper and buy non performing notes?”

Well, yes. REOs can be cheap.

And yes, you would be acquiring real property as opposed to a debt.

And, yes. You can get rid of it pretty quickly if you price it right. So why shouldn’t everyone drop everything they’re doing and buy REOs?

Buying REOs: 4 Risks Involved

1. Valuation

You must be precise with the value of the home, as well as the interior condition. When you have a non-performing note, you have several options in ways to turn your note investment into positive cash flow. (example: getting your borrower to make payments).

It is a necessity to be certain of your REOs value and the condition of your property. In order to squeeze profit from your vacant property, these values are key. When you are buying notes, this information is not as important.

2. Purchase Risks

If your sources aren’t nailed down, they can waste your time. In most cases you are dealing with brokers who are 2-5 people deep in a chain, and a fradulent attorney that claims they have mandate for someone else.

3. Deal Risks

After 2 months of chasing a deal that consisted of REOs, a friend of mine only closed on 1 of them. Why? All the others were listed for sale and as the agents got the properties into contract, the seller pulled them from the deal.

Or they were lost to a competitor since there were 3 brokers in between him and the seller. The one REO not pulled was the one that wasn’t already listed. The “loss ratio” on non-performing note pools - in other words the rate at which notes are pulled from a specific pool - aren’t as high by any means. (One day, ask me about the west coast pool that we lost!)

4. Discount Risks

The discounts that you typically hear about when buying REOs may not be quite as juicy as you’ve been made to believe.

You can close on a note buying deal at a 30% discount and you will hear about pricing this low on a regular basis. REOs priced at this range are typically unheard of.

I don’t mean to be negative about REOs. All I am saying is know what you are getting into. Don’t listen to everything that you are hearing about REOs being the deals to invest in.

Tags: Buying Reos, Foreclosures, how to buy reos, invest in non performing notes, learn how to buy reos, non performing note buying, Non Performing Notes, note buying, note investments, Real Estate, real estate investing, Real Estate Properties, reo business, REOs

Loan Modificatons-A Solution For Your Non Performing Mortgage?

Mar 16, 2009 Real Estate Properties

Loan modifications, specifically principal write-downs will be the answer to many people’s mortgage needs.

An interesting solution.

The Solution For Negative Equity - Loan Modifications

The FHA insurance package which will insure $300B of new mortgages for borrowers that are in “negative equity” positions is part of the Hope for Homeowners initiative which was passed by Congress in July.

Negative equity, meaning that most of these properties are worth less than the balance of the loans.

Well, the borrower has to qualify for the loan modification with a 31% or lower DTI ratio, at least 6 payments made and none of them late.

What happens if the borrowers meet all the guidelines? (And keep in my mind, that most of these are non-performing mortgages. And if I had to guess what the debt to income ratio on average in 2007 was, it would most likely be around 40-45%).

Loan Modifications - Who Qualifies?

The answer is: Very few people.

When the program became available, out of 49 people applying, zero applications were approved.

NonPerforming Mortgages Included In FHA Secure Program

The FHA Secure program had a total of 203 applicants. Out of that number on 49 applications were approved.

In California around the same time, a Notice of Default was filed on about 1,300 homes.

If the H4H program needs more time, can’t we just wait?

Yes.

Just keep in mind that if lenders are going to participate in these 90% principle reduction loan modifications, they will be looking for federal backing. H4H included.

So, while everyone’s waiting for the good news on H4H to come out, why not get your wallets out and make an offer on those 49 notes that were just turned down?

There will be a whole lot more non-performing mortgages (to buy) where those come from.

Tags: banking, buying non performing notes, buying notes, home, home loans, how to buy non performing notes, Investments, learn how to buy notes, load modifications, Mortgages, Non Performing Notes, note buying, notes, Real Estate Properties, where to find notes