2nd Mortgage Note Carryback
I am very new to understanding notes. New to the point I don't understand them.
I have L/O'ed a house with a 2nd of $14,500 on it. The owner is paying 23% on this second. Is it possible or impossible for me to get someone to buy this note and accomplish 2 things: 1. Lower the homeowners payments 2. Get the second off the house that I am L/O'ing.
Thanks in advance.
rfulky
wow, that is a high rate, most likely usurious. If it is usurious, no legit note buyer would touch it, and it would not lower your tenant buyers payment because when someone buys a note, they collect just like you were collecting, ,but they give you cash now for your purposes for the right to buy your note and collect the payments.
Even if this were a normal second, the best you can do is up to 35% of the face value. Seconds are highly undesirable to note buyers, but there are a few who buy them. Hope this helps, dave
Quote:
On 2004-04-04 21:16, davehays wrote:
wow, that is a high rate, most likely usurious. If it is usurious, no legit note buyer would touch it, and it would not lower your tenant buyers payment because when someone buys a note, they collect just like you were collecting, ,but they give you cash now for your purposes for the right to buy your note and collect the payments.
Even if this were a normal second, the best you can do is up to 35% of the face value. Seconds are highly undesirable to note buyers, but there are a few who buy them. Hope this helps, dave
Dave,
Thanks for your help. What does usurious mean?
It means that you could be committing usury, which is unlawful rate hiking essenteially. Every state has a max rate, in Massachusetts it is 20%, which is high compared to a lot of states.
Usury laws are in effect to keep people from taking advantage of others.
When I worked in equipment leasing, I sold a lease with a face rate of 38% one time. Can you tell why I left there? Totally unethical biz, I couldn't sleep at night.
But somehow these bottom of the barrel leasing companies get away with it. Legalize usury I guess...but I digress..
Ignoring the issue that the rate being charged might be illegal...
You could approach the note holder and offer to buy it. If you can get it at a discount that would reduce the amount you need to pay when it comes time to exercise the option. The present owner would need to pay you the monthly payments in the mean time.
If the note is illegal then you might scare the note holder into selling it rather than face a legal action to have the note changed (made void?).
BTW - If it is legal to collect 23% I doubt the note owner will want to sell.
John