individuals buying NPLs
hi all,
Is the above possible? Of course, I'm not gonna try to be like Lone Star & manage to do it on an industrial scale, but where would someone try to buy them? Any opportunity to buy in the UK, where I'm based?
Thank you!
Www.paperstac.com Only US, but a good way to get started. Commercial loans are there from time to time. Fair warning: easy to lose your ass with second-hand NPLs.
thank you very much mate!
Have you ever bought from paperstac?
I haven't but it seems like the amount of time and effort required to do DD on these is on a par with what you'd do for a property acquisition. Curious if others have experience.
Yes, I have bought through Paperstac. Any particular questions?
could you tell us a bit about your deal? No names required, but numbers would be really helpful & how successful your endeavour was. Would you do it again? Do you think that you were particularly lucky? Unlucky?
Cheers mate!
Sure, this one is fairly typical:
Purchased a note that had not paid in 10 years . It was modified in 2010 (restarting the statute of limitations). Borrower made one payment and defaulted again. Borrower works for Dollar General.
Property Value: $90-105k Unpaid Balance: $55k Accrued Interest: $50k Monthly Payment: $400 Unpaid Property Taxes: $11k (also not paid for 10 years) IRS Liens: $100k Purchase Price: $25k
Steps to where we are today:
**Month 2: **Contacted borrower. Single lady with a restraining order from husband and child. Divorced, and claims her husband caused the IRS liens. Screamed for probably 10 minutes. Told her to contact county and set up a payment plan on the property taxes so we can talk about a loan mod.
Month 3-4: Ignoring all servicer calls. I contacted the county and they will start their own foreclosure asap (lesson: don't remind the county property taxes are that delinquent). I want to control the foreclosure, so I send demand and begin the process.
Month 5: Offer borrower $10,000 to list for short sale. She has realtor license and can also collect commission. Refuses. Wants to pay, but payment would be too high as county will only allow delinquent to be paid over 12 months (extra $1,000/month). Consider cash - proceeding with FC.
Month 6: Borrower enters chapter 7 BK
Month 7: We obtain relief from BK
Month 9: Day before foreclosure confirmed, borrower responds and says we do not have a valid claim, along with various other items.
Month 10: We respond asserting valid claim and disputing.
Month 11: Judge confirms our positions.
Month 12: Borrower responds again, claiming bad-act in filing.
Month 13: We respond asserting valid claim and disputing.
Month 14: Judge confirms our positions.
**Month 15: ** Foreclosure confirmed. Property heading to auction in 45 days.
Current basis after legal and paying delinquent taxes: $42,000 Amount owed, including all legal etc.: ~$115,000 Anticipated auction price: $50-60k.
Month 17:Borrower files Chapter 13 day of auction (cancels sale). Proposes C13 plan that does not include anything it should and is unfeasible.
Months 18 - 24 (current): Borrower has paid $6,000 total through plan. Proposed payments of $1,400+/month. Has supplemental income via second job (was working 20 hours week at dollar general).
Current stats:
If Chapter 13 payments made: Cash-on-cash yield: 37% Month of zero basis: 42 - at which point I will still receive $1,500/month until month 60, then down to regular $400 payment.
Expectation: Collect 3-6 months of payments through C13. Default. Given strong payments through BK13, reduce BK claim to more affordable payment by forgiving balance. Borrower has demonstrated they actually will make payments.
Notes: - Could not offer mod initially because county would not allow payments greater than 12 months. BK forces them to accept 60 month plan.
What's your background in? I'm assuming a combination of law and finance?
It is much safer to buy these small balance loans in portfolio's to diversify the risk (but you have to have the relationships or use a broker like Mission Cap/Debt X to find portfolios)
Buy it thru Fannie & Freddie auctions, you only need $250k to enter if you qualify as minorities and women
Why do you want to buy an NPL? I think this is an extremely worthwhile question to ask yourself (really in anything, but especially here).
Are you equipped to be a landlord when the tenant hands back the keys? Remember, rates have been low for a long time, so there isn't a real refinance play on these properties, and trying to sell them is going to be time consuming and expensive, all while you're responsible for any additional carry. Who is going to want to buy an asset that couldn't pay it's debt service to begin with? Don't you think the people living in that single family home would have sold if they could? You're buying assets right at what could be the start of a major recession, or at least price correction in the real estate industry. If you're not equipped to operate these properties, or at least carry them, for a good while... maybe not the right industry
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