trying to understand a part of an article Im reading in here. could use help

"Cash and a Cash Flow

Here’s a recent example from one of my students who now owns a franchise of National Note.

A property sold for $52,000 with $12,000 down. The $40,000 note was paid on for 7 years and then went into default.

The note was purchased for $10,000, restructured to $44,000 at 10% with a payment of $424.61 for 240 months."

It’s part of an article by John Behle:

http://www.reiclub.com/articles/loanlords-lament

So how does that minus 40k note get restructured into a 44k note? Thanks.

Hi,

It was bought as a non performing note and the buyer went back and calculated what original principle and interest was owed and went back to the original owner and presented an option to make the note performing again versus going and foreclosing on the property.

You don’t say whether the original note was amortized or interest only but the scenario is still the same.

         GR

Thanks. Is that common? Never heard of it. How does it work? Just by extending the length of time on the loan?

That wouldn’t make sense. He’d need to throw in more than 240 month after 7 years to lower the original payment no? Unless the original note was for like 20 rather than 30 years. The article doesn’t give more details in this example unfortunately.

The next part:

"200% of Cost

An investor loaned $20,000 against the note at 12% with a payment of $220.22 per month.

My student put almost $10,000 cash in his pocket and has a cash flow of over $200 per month for the next 20 years.

Most real estate investors take leverage for granted and don’t realize it is just as powerful when applied to other investments. "

The only way this could possibly work is if the original note was for like 10 years. But I have a hard time believing a lender would sell a 40k loan paid down to about 30k (after seven years b4 default) for 10k when some investor could come by and wave his magic wand to keep the borrower paying. I’m confused.