advice on handling late payment from mortgagee

General Real Estate Investing
1

I am six months into a deal where I sold a mobile home and lot in California and carried back the mortgage. My buyer still hasn’t paid the November mortgage. Now, some of you may shrug, but I expect him to pay on time.

I can’t reach him on his mobile phone, which is not a good sign; on the other hand, it’s out in the country and he may not get reception.

I know what to do if I need to foreclose, and I know what to do if a renter is past due with the rent. I am not sure how to send the equivalent of a pay or quit notice for a purchase agreement, as opposed to a rental agreement.

Any advice is welcome. Thanks!

2

Did you transfer titles to the land and/or the mobile?

3

both land and mobile

4

Did you put yourself on the mobile title as a lien holder?

Did you secure the mobile against the note, or just the land, or neither one?

What does the Promissory Note say is your remedy in the event of a default?

If you just have a Promissory Note, not secured by the mobile and/or the land, then you’ll have to sue for payment of the note, and get a judgment.

I would explain in the worst terms possible what will happen, and what you plan to do to the deadbeat, if he guy doesn’t move and deliver the titles, the coach and the land back to you immediately.

Then I would offer him an alternative of some moving money, and a promise to tear up the notes, if he’s out by “x” date.

Give the deadbeat a way out, without becoming personal.

If you’ve kept your word up to now, there’s no reason for him to believe that you won’t do terrible and painful things to him if he doesn’t cooperate.

In other words, don’t put him in a dignity-robbing corner, with no way out, and then add insult to injury by making it personal.

Everything’s a potential negotiation, even a repossession.

Good luck! :beer

BTW, the really great thing for buyers and sellers using private financing, is that defaults can be negotiated to mutually agreeable solutions and aren’t held up by government regulations.

Institutional lenders/loan servicers are unable to tailor quick, unique solutions in a default, as they are regulated six ways from Sunday; making the solutions often “all or nothing” options.

5

Thanks for this good advice; you definitely know a lot – I wish I had found this forum before I entered into this deal. I reviewed the paperwork, which was created by an escrow company. The deed of trust is written for the land, and there’s a provision in it that says “the note secured by this deed is also secured by a security agreement.” That security agreement is for the actual mobile home. Seems odd and needlessly complicated but … that’s what I got.

The security agreement doesn’t provide for a late fee, only for foreclosure for non-payment. I’m kicking myself, because over the years I have developed an extremely detailed rental agreement, but I just let the escrow company do their thing.

I was told that I would be able to foreclose on the loan. I’m in California, and we have all sorts of extra rules here.

My take on my mortgagee is that he intends to pay but hasn’t gotten around to it. I will send him a threatening letter.

The idea of offering him moving money and a promise to tear up the note is interesting. This is commonly done in the Bay Area with rental deadbeats. With a sale, it seems like I would have to do a lot of paperwork to get the property transferred back to me, wouldn’t I? And he might not cooperate …

Would it not make more sense to go the foreclosure route?

thank you for the advice.

6

No, it’s NOT better to foreclose…!

First it’s likely to cost you between five and ten thousand dollars, IF the borrower just lays down. And you can’t do this yourself competently.

Let’s say you could foreclose for $3,000…

First you spend the $3,000. Then, it will take you at least six months from the date of a notice of default, which you haven’t recorded yet in the first place, to get possession.

That’s six months of lost interest; six months more opportunity for the deadbeat to tear up the coach; six more months to Google every foreclosure delay tactic known to man; and at least six more months of headaches and time lost.

Or…

You could offer the borrower $3,000, if he signs the deed back to you and moves out (starting somewhere around $1,000, and moving up).

You explain, to the deadbeat, at least seven of the consequences he’ll suffer, if he doesn’t accept your offer.

  1. Foreclosure on this credit.
  2. Eviction on his credit.
  3. Won’t qualify to rent a decent place.
  4. Won’t qualify for financing on another house for the foreseeable future.
  5. Incur a Deficiency judgment for the balance of what he owes, that you can’t get at “auction.”
  6. Collection activity on his deficiency judgment.
  7. You’ll renew any unpaid judgment, and continue to repeatedly screw his credit, until his great grandchildren are dead, or he is forced to file for bankruptcy, whichever comes first, of which bankruptcy will then stay on his credit for the next ten years.

Or, he can take the cash and run.

7

Very helpful! I’m gonna do some cut-and-pasting from your post. : ) :smile