Buying DEFAULTED Notes
How does one go about finding and buying a defaulted note? Also, I hear there's big competition in buying good notes..just wondering what the competition is like buying the bad notes. I'd appreciate any input from anyone who has experience in this area. Thanks in advance.
Amy
Find a mortgage company that is a correspondent lender. This means that they fund the loan out of their own warehouse line and then deliver a committed loan package to a lender for funding. A lot of times these loans become "broken" especially FHA ARMS. This just means that they made a mistake on the TIL or something and the borrower refuses to redo or refi the loan. Also they cannot deliver a non-performing loan to a lender so if there is a quick default they want yto get rid of them ASAP.
Try some of the major builders (like Pulte Mortgage). Ask for Portfolio Management.
These companies sell them to "scratch and dent" note buyers individually or in a pool. As a matter of fact HUD just a few days ago sold a ton of non performing notes that were not Loss Mit eligible to CitiGroup Global RE Marketing to restructure or sell. Here's the full text of the article:
HUD Sells Stake in $411M of Loans to Citi
The Department of Housing and Urban Development has sold a 60% interest in a $411 million pool of nonperforming single-family loans to Citigroup Global Markets Realty. Citigroup is now responsible for servicing, restructuring, or disposing of the loans that were formerly insured by the Federal Housing Administration. This represents the third asset sale by HUD in which defaulted loans that are not good candidates for loss mitigation are placed on the auction block. HUD retains a 40% interest in the joint venture with Citigroup, and it shares in any recoveries. HUD estimates that this demonstration program could save the federal government $50 million.
That's one strategy.