loaning money to people in foreclosure

I’m looking to loan money to people who are facing foreclosure. These owners may need to come up with the last 3 payments or so and penalty fees in order to reinstate the loan. I’m thinking I could be there last chance to keep the house.

I would tell the person facing foreclosure that I would loan them the money. The terms are as follows. Payment is due once they receive their tax return, no later then 4/15/06. The fee is 25% of what they borrow plus any additional fees (title search etc). Once caught up, they cannot fall behind on payments while still owing me money. If they miss a payment or don’t pay me by 4/15/06 they then sign the house over to me.

Is there anyway I can put myself on the title and be in charge for a temporary period of time? Can I have them sign the house over to me once they borrow the money and when they pay me back I will then sign the house back over to them.

I look at it as giving them a second or maybe third chance to save their house. If they succeed, I helped someone out and made a little money off of it. If they fail, I at least attempted to help them out and hopefully saved what ever credit they have. Fortunately for me, I able to take over the house and flip it

Is this a feasible idea? What am I doing wrong? What am I missing?

(1) You may need to be licensed

(2) Your interest rate may be in violation of the state usuary laws (it probably is at 25%…)

(3) What if the government has already attached their tax return or they have no tax return due?

(4) What if they file their tax return on time (April 15th) and the Federal/state government doesn’t process their return the instant they get it? The Fed usually processes in 8-10 weeks…are you saying that you will force them to file earlier than the Federal government requires so that you can have your money?

I think this is a half-baked idea with a lot of holes…it needs to go “back in the oven” for a while…in the meatime, I would get some legal guidance on the feasibility.

My two cents…


I’m not sure if that would be considered legal.

Someone please correct me if I am wrong!

If you would be loaning money to someone that already can’t pay the mortgage, what makes you think they will pay you? Unless their situation improves. Plus not everyone gets money back from their returns.

Ultimately your hoping (from what it sounds like) that they don’t pay you back so you’ll get their house. So lets say someone is behind 3 months with a $1000 mort. you’ll get there house for $3-4k?
I’m sure that would definetly be considered taking advantage of their bad situation.

Just look at how bad the media is making Investors seem and they are only buying around 30% discount (in most cases).

Im sure you have good intentions, but it sounds like a scam that I have heard of before. I’m sorry I can’t recall exact details of it.
Just be careful!

Everyone feel free to correct me if I’m wrong!

Yeah, it sounds like bringing the mortgage current so that they don’t foreclose and you’ll be able to “pull the trigger” before the lenders that are in superior positions (first and second mortgages, etc.) can…

It sounds kinda predatory to me, too…


I agree that this is a half baked idea and needs to go back in the oven. That’s why I have posted it here. I’m looking for suggestions and advice. I used the date of 4/15/06 as an example.

I have no intentions on scamming anyone or putting someone in a situation that benefits me alone. I come across many homeowners who have lost their jobs and now have new ones. During that transition they were unable to pay their monthly mortgage. With the new job, they can pay the mortgage but can’t afford to pay the back payments.

Im not forcing anyone to borrow my money. They call me up and ask what my program is about. I tell them I buy houses etc and they become disappointed and tell me they are a few payments behind and looking to borrow money to catch up. After turning so many people away, I figured there’s got to be a way to help these people out and make money out of the deal as well.

As this being a predatory move, I totally disagree. If anything it’s an attempt to be creative in generating cash flow and finding deals. Are you telling me that I’m better off sitting by the phone with my fingers crossed hoping to get calls from people who are currently in foreclosure, begging me to buy their house before it gets taken away next week. I’m going assume that’s the last thing on their mind. Or should I surf the web and paper looking for foreclosures that are listed and compete with other investors.

I would think this approach is a win-win situation. If I don’t help, their probable going to lose the house anyway. If I do get involved, I help them get in a situation where they keep their house and continue on with their life, that’s a win-win situation to me, or if they cant afford to pay me back, I have given them time to figure what they need to do and possible have saved what ever credit they have left and maybe even give them some money depending how much equity is in the house. Lets say they can now afford the payments but cant afford to comeup with the backpayments right away, the bank will still take the house. Now that the homeowner has foreclosed they can forget about getting financing for another house. That sucks

Ultimately, aren’t all investors looking for people to fall behind so they can pickup a house below fair market value and turn around and make a profit. I don’t know any investor looking to pay top dollar for a house and then flip or rent it.

I’m not looking for people to help put together an illegal/scam plan. I’m just trying to find out if this idea has potential to be a legal legitimate idea and looking to see if anyone has done this before.

<<<I’m not looking for people to help put together an illegal/scam plan. I’m just trying to find out if this idea has potential to be a legal legitimate idea and looking to see if anyone has done this before.>>>

I wasn’t trying to say you were, you asked for advice/comments, I gave you mine. That doesn’t mean you have to take it. It’s MY opinion, it doesn’t really matter what anyone thinks, in the end you will do what you want whether 1 or 100 people disagree.

Sorry for showing you a different perspective and pointing out that it may not be legal!

I would need to know more specifics. If the owners fell behind, why? If you gave them money to catch up on their payments, would they be able to stay current with what they have coming in at this time? Would they also be able to pay you over say a year or two period (or through a tax return). Some of us pay the government money rather on April 15th rather than receiving money on or around that time. I would also consider a more reasonable rate, such as 12% per annum with an incentive to the owners to pay back early.

I just want to say a couple of things in regards to this post.

I may not be savvy when it comes to the Investors World, in fact I’m one of those people who are in desperate need of trustworthy individuals to help save my financial life. I am shamed enough by being “debt stressed”, the slap in the face comes from those who offer to “save” people by smacking a 25% ontop of the potential loan.

Talk about being even more “shamed” & “slapped” by those “select” investors/lenders who come riding in on their white horse to save the day, yet ONLY thinking about their own advantage. I know your’re not a charitable origanization, but I think you can still make a profit without gouging people who are in need.

For goodness sakes, these people are desperate! Not all people who dig a debt hole for themselves are losers to the point of getting slammed with an “impossible” interest rate. I just don’t get it.

Those with money get little or no interest charged to their credit dealings, yet those who have made mistakes, or been struck by terrible tradegy, ie: illness, hospital bills, LIFE…well they are the ones who make the rich get richer, by crawling on their knees to those who are in a situation to help. I understand it can sometimes be about poor credit decisions, foolish spending etc…therefore their credit rating sucks. But when people reach out for help, whether it’s financial or otherwise, being taken further into debt by having to pay an outrageous interest rate just victimizes them even more.

It sure is just like the animal kingdom, the strong survive, the weak perish.

I think there are alot of integrirty-minded, honest, non-predatory investors/lenders in the world & on this forum, “they” deserve to make money…but not at 25%.


Execelent post Jackson2.

Altough I’m sure the 25% was “just an example”.

Thanks Aznewbie,

You are right though, I’m sure the 25% was being used just as an example. It’s just when I saw that number it reminded me how desperate people become even deeper in debt.

Jackson2, just curious what you thought of my post a few above. Would my questioning and interest rate seem logical?

I’m coming from the road where I used to make $50K and am now making $32K in my current job. Outflow is more than incoming each and every month. That is why I decided to get into REI even as I was unemployed just over a month ago.

Regardless of how long they have to repay, what the interest rate is, or what their credit score is, is this possible? If so, whats the best approach. I dont want to approach the situation where Im acting as a 2nd mortgage and if they dont pay I have to wait in line and hope I get my money back when they foreclose. If they fail to meet the terms of the contract, I need to make sure I get what belongs to me. Should I put the property in a land trust and have them sign a document that they are no longer involved with the house. Once they repay, we sign another document voiding the existing and removing me from the property and remove the land trust??

Do you guys disagree about them turning the house over to me if they fail to pay back the borrowed money?

I’m not going to respond to this post anymore, maybe someone with financial/legal experience can answer your questions. If not you should really ask lawyer.

It doesn’t matter if I disagree with you or not. All I was trying to say is I don’t know if its legal/ethical. If you took someones house because they couldn’t pay you back say $3-4k for a loan, could you sleep well at night? (Really think about it before you answer)

I wouldn’t, but thats just me.

Put yourself in the shoes of your clients and then decide how you want to do/run your business.

If it is legal and that is what you want to do, then go for it.
You would probably need a lending license or something like that.

Good Luck, I wish you well.

Hey Pauly99,

I think the qyuestions you posted were viable, reasonable things to consider. Needing to know more specifics like if the owners fall behind in their payments & finding out why…is keeping the “human” or “humane” element to the business of lending. Considering a more reasonable interest rate is one way investors could attract & “keep” their business alive. Treating those in more desperate situations with dignity & respect, but at the same time making money in the business is very possible & I for one think it can still be lucrative…for all. Incentives, like you suggested, are what makes anyone, desperate or not “sign up” for the deal & keep their committment.

Let’s face it, credit card companies, lending institutions, brokers, are really no different from potential loan sharks. They all have to rely on debtors incurring & causing interest charges, late payments, fees etc. That’s their biggest business.

VFLG is just trying to find the most profitable way to make his business succeed, I understand that part.

The part that gets me the most, is when I sit back at the end of the day, assess how many of these creditors/investors are racking in the dough at the financial & moral expense of those less fortunate or educated in the world of finance.

Like AZ advised to VFLG, “put yourself in the shoes of your clients”,
…what great advice! ANYONE with that thought process will succeed in business & at the same time, truly assist in someone’s need to get relieved by debt stress.

Who knows, those loyal clients may end up becoming an investors “life-line” themselves…in so many ways.

Best wishes…

Just a quick apology to “vfig”.

In my previous posts I addressed you as VFLG. It wasn’t a typo, just my stupid glasses, I need to renew my prescriition!

Again, sorry to vfig…



The only way one should ever consider doing it, is when the loan is a new first /TD and the equity available to lend against is below 70% and the new loan is in the borrowers best interest, Therefore not predatory.

Ex: $300K Fmv/ Mortgage debt + fees =$120k fund $165k
which includes the caveat that some of the cash-out after closing costs and fees then money would be retained in a secured automatic checking account (lock-box) designated towards at least 6months piti this can be set up at almost any financial institution.therefore the borrowers best interest has been acheived and respected
and not preditory.

“And” if the money is there in some states you may be able to earn upto and limited to 5%.

A few observations

1.) Anything above 18% - 21% is USARY

2.) APRs more than 12.7% (at this time) are Sec 32 loans

3.) You must be licensed to lend on Owner occupied homes in most states

4.) RESPA and other Govt. acronyms

5.) Predadory lending (loan sharking) is illegal

6.) No way for you to get in front of 1st lien (The current mortgage)

Put this idea back in the oven…or better yet the dumpster

I have no Idea where you got the usury issue.

I have no Idea why you wouldn’t stop to think “is” this person in the slightest way experienced enough to know that his loan has to be the superior lien , and he would pay-off any threatening outstanding debt.
and finally we are licenced . and I admit that I didn’t speak to the 25%rate because that’s just ridiculous no one should even think of that unless, they are with IBM.

I can’t see were this is any different then a HML. Another note, Credit card companies charge 25% sometimes more on cash loans all the time and they do it over long periods of time. Yours seems to be short term.

My advice is ask a lawyer in your state.

When our group does these loans we consolidate all debts, and never charge 25% and we usually have permanent financing at a non-conforming rate or plans to broker it out for permanent financing in the package.

We must remember that these people did not pay their original obligation and there is not many people whom would even consider loaning to these home owners , the residential o/o HML’s are shrinking and will only take these people on if:
A.) there is enough profit in it to realize that its worth the risk.
B.) short term with a guaranteed work-out plan.
or at worst
B.) they dont mind owning the property