Profiting by keeping her loan current

Foreclosures, Short Sales, Tax Foreclosures
1

Good evening all,

I am a newbie foreclosure investor and was hoping to get some input on a potential deal that just came my way. …

This school teacher called me and says the bank is going to start the foreclosure process on this coming Monday if she can not come up with $1300 by this Friday. (I assume this is only a portion of what she owes as she told me her monthly payments are about $900).

She, of course, wants to remain in the house and feels she can make her payments in the future with better budgeting .

Something that came to my mind was refinancing her in somebody elses name with their good credit and taking some cash out to pay myself for professional fees. Later, I would do a quit claim to remove said somebody off of title. Investors do this all of the time, right? Is this the best way to make money on this? I want the deal to be win/win–I dont want to buy the house from her, if she can afford to stay.

Of course if this falls through, this seems like a good candidate for a short sale…

Particulars are:

House is worth: 165 k
owes : 119 k

Is my approach of getting her current then refinancing wrong? Am I missing something? All help and criticism is welcome.

Gregg

2

I’d find out more info first. Seems strange that the lender is only wanting $1300 to stop the foreclosure. If the monthly is $900, and it’s usually 3 months or so before lenders even begin talking about foreclosure, then the numbers do not add up.

Before you can help, you need to know all the facts. Simply put, you either don’t have them yet, or you didn’t post them here.

This is not a SS candidate either, IMO. If the property is valued at $165K and the note is only $119K, then there is plenty of equity spread to protect the lender, unless there happens to be some major repairs needed.

First problem that you have with your refi scenerio is finding someone with good credit willing to use that good credit to allow a person that isn’t currently paying their bills to refi their home.

Second problem, even if you quit claim the property back to the original homeowner, the good credit person is still responsible for the loan. I’d hardly want to risk my good credit AND not have any recourse (like title in my name) against the party if they chose not to pay.

Third problem, it’s great that she MAY be able to make the $900/month with better budgeting. However, you’re suggesting a refinance, which not only will have closings costs, but also a higher monthly payment. Hardly the solution, I’d imagine.

Suggestion: Much better to find out all of the info, then try to negotiate with the current lender to work out a solution to the situation, such as adding the current balance owed to the back of the loan. Other options may include finding a lender to borrow the $1300 from with a payback schedule.

As far as win-win, unless you can find a way for her to get money without any further hardship against her (than necessary), your best “win” may be the good word of mouth that she gives if you succeed.

One more comment on this. If she only needs $1300, you may want to suggest that she find things to sell that she owns. Offer to help. Ever watch the HGTV shows on cleaning out? Some of those people earn $1500 or more in one day selling their unwanteds/unneededs.

Raj

3

Raj,

I appreciate the response- seems like great advice.

Just a follow up on this deal if anyone is curious. Add your own criticism if you’d like.

I now have most of the details on this womans FHA loan. I got her to send over a loss mitigation letter which says She owes $1300 for deferred late charges and corporate advances or recording fees. This payment and signed promissory note will stop the bank from foreclosing.

The bank(Irwin Mortgage) is lending her $5000 which I assume is the amount of her back payments plus late fees. This is a a subordinate loan and to be payed within 36 months.

I do not intend to lend her the $1300, but will wait and offer to buy the house as the auction date approaches(end of november).

Thanks in advance,

Gregg

4

Just curious…

If the home owner has been given a loan which will make her current with her payments, doesn’t that mean she solved her foreclosure problem?

Please fill me, I would like to know what I am missing here.

Thanks!

5

well just my take on how he has it written sounds like the bank wants 1300 down to get the 5000 loan to bring her current so problem is not solved unless she can come up with the down payment…now greg maybe a solution to you not sure how your financial situation is but if you were able to setup a contract with her on a 5000 note to bring her current at say 12% intrest and to be paid back with monthly payments of so much in 12 months with a baloon payment due at that time should be plenty of time if she keeps up on her mortgage to refi and get you your money …now also in the contract you would have if at anytime she defaulted that you would have the right to purchase the home for say 130,000 that leaves you plenty of room in the deal to set something up later

6

Hi Whitewater!

What a great idea!

I have thought helping people in forclosure in the exact same way you explained, but in my two short days of looking into foreclosures, I hadn’t come across this idea. I read some very negative articles today on the subject, so I really needed to hear some positive solutions for the home owner and the investor.

Is their a reasonable way you calculate the balloon payment? And when set up the default contract, how do you come to your calculated price on the home?

Thanks for your time!