If you go to foreclosure sales, the sale of many of the houses scheduled for sale is postponed at “beneficiaries’ request”. This means that something has happened to make the lender think it is going to be paid off in full. Usually, when a loan is in default for a few months, the loan file is handed off to the “Loss Mitigation Department”. When I hear of a lender staffing such a department, it sends a message to me loud and clear that the lender expects to take a loss, and the only question on the table is how much of a loss. I like to negotiate with lenders who have these departments.
The person you contact in the Loss Mitigation Department is paid to resolve defaulted loans at the lowest cost to the lender. One way to do this is to take the house to foreclosure sale, but, in recent months, lenders have been taking back far more houses than have been sold. That puts more pressure on the Loss Mitigation Department to try to get payments back on track rather than to buy the houses back.
Of course, many hopeful neophytes contact the Loss Mitigation Department seeking a Short Sale, but few of them are actually able to produce the cash necessary to pay off the lender. Thus lenders are skeptical that people who need to borrow money to buy loans at discount are worth dealing with. One way to get around this antipathy is to offer to discount the loan for cash, and to take over any impending foreclosure procedures.
With this in mind, we’ll go on with a continuation of our last Friday Lesson to see how we dealt with the foreclosing lender who was in first position:
Following the purchase of the defaulted second mortgage, the entrepreneur tried to get the attorneys for the foreclosing lender to allow back payments to be made up, but to no avail. (They get paid for foreclosing, not negotiating back payments.)
Then he wrote them, but this time his letter head (if you’ve got a font, you’ve got a letterhead) announced that he was National Capital Corporation (obviously a financial corporation) the holder of the second mortgage loan that would be wiped out by the foreclosure.
He asked the attorneys for the first lender for the courtesy of allowing a fellow lender to make up the back payments and to continue to pay all mortgage payments in a timely manner until he could sell the property and pay off the first mortgage lien in full. In the spirit of cooperating lenders, they accepted the arrangement, and $9900 was sent to pay all costs and to bring all payments current.
Three months later, the house had been fixed up and sold for $140,000. The entrepreneur had invested $5500 in the second loan, $9900 plus $2700 in additional payments on the $87,000 first loan, and $15,000 in repairs, marketing, and closing costs over a period of 90 days. His gross profit was $19,900.
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