The house had been sitting forlornly vacant on a full acre of suburban land when it was spotted by an entrepreneur. A cursory search of the title records revealed that it was owned in the name of a couple. A search of the telephone records of a three country area revealed that each of the partners had a telephone in a different area code.
At this point, it was obvious that some sort of personal situation had caused the house to be abandoned. Thus, there was no issue of contacting a pre-foreclosed resident prior to a foreclosure. Each party was called and freely explained that the couple had divorced. Each worked in a town about thirty miles in opposite directions from the house, and neither wanted to continue to make payments on the house. One spouse wanted to file for bankruptcy to discharge their debt, but the other spouse didn’t. They were at a stalemate, and the house was much more an obstacle than an asset to them.
From the conversations it was gleaned that they would both be willing to sign a deed if the back payments on the debt could be made up and the debt disposed of within a year. With the deed in hand, and with all the pertinent house and loan records in her possession, the entrepreneur contacted both the first and second mortgage lenders. Both mortgages were in default, and foreclosure proceeds had been instituted by the first mortgage lender. That made the second mortgage lender vulnerable to losing everything at a foreclosure sale, so it was the first target to be approached.
After a few starts and stops, the entrepreneur got through to the Loss Mitigation Department of the lender and got the FAX number. (It always pays to write down an offer rather than to talk to someone on the other hand about it, because that person may not have the power or experience to make a decision. A FAX generally reaches the right party.) The holder of the $33,000, 16% second mortgage was informed in writing that the house had been abandoned for 9 months, and needed about $14,000 in repairs to make it saleable. He was asked whether or not he intended to defend his secondary position by paying the $87,000 defaulted first mortgage off and adding $14,000 in repairs. In the event he chose not to, the entrepreneur offered to pay $3000 for an assignment of the defaulted second mortgage. After a few counteroffers, he paid $5500 for it.
Buying an assignment of a loan from a lender is often quite different from borrowing money from that same lender. You wire them the funds, and they send you an Assignment of the Note and Mortgage (or Deed of Trust) together with the original loan documents. This is usually done on good faith, because there is little time for a formal closing.
