How To Approach This Note
My client holds a second mortgage in a form of a note. It is a second mortgage and it is in default.
The note is for 15k and the first mortgagee is not paying anything on it since 1997. The value of the note is right now around 24k. My client has gone through a bankruptcy and wants to sell the note at 50%
What are my options as a potential buyer of this note.
Since I cannot verify the current value of the first mortgage what else can be done?
Vlodek
I am not sure what your statement means by you stating, "he first mortgagee is not paying anything on it since 1997." There is only one party responsible for paying the note and that is who the note was made out to.
You are basically buying a defaulted note and you should be dealing with the remaining balance of the note (if that is $15K) then that is what you should be using to determine what you will pay for it.
The extra interest, late fees, ect that got it up to $24K is just bonus.
If the seller is trying to cash out of a BK then I would offer no more than $5K as you have not guarantees of if you will be able to collect or not. I would also ask for 20 days to fund the purchase.
During that 20 days I would find out who holds the first mortgage and contact them for balance information and to ensure that it is current. I would also make sure the property hasn't gone through a foreclosure in which makes this note pretty much worthless.
I would then contact the property owner and find out why they haven't paid.
Then I would formulate my plan to either back out of my purchase agreement for the note due to a contingency I wrote into the contract, or I would formulate a plan to get the property owner to pay or maybe start foreclosure proceeding depending on the properties equity.
Thanks for your response!
As I found out the first mortgage holder paid only 3k out of original 15k and then he has not paid a penny.
Right now the value of this note is ~24k.
To answer your questions:
- I know the names, address, phone, employment of the first morgtgage holders, have checked the title in land registry, have last year assessed tax value and know that the first mortgage was created in 1997 @ 114k. If paid on time it could be valued at around 105k by now. The same type of a house was sold last year close by for ~160k.
- Due to privacy act (in Canada) I don't have an access to any information like: if they have declared BK, how much is their mortgage paid up...anything. I would have to have their consent.
Can I get the note assigned to me as an "option" ?
I understand that I should value the note by the the original balance (15k - 3k = 12k) not by the curent balance and interest (24k).
What document would I have to sign to have a control of the note?
Vlodek