Bill Gatten's great idea - feed back wanted - Posted by Dan Simpson

Posted by Bill Gatten on November 10, 2000 at 12:24:20:

Nope! I agree completely. But I also just spent over $15,000 patenting and marketing a goofy invention, which it appears won’t be picked up by manufacturers anytime soon…but it sure seemed like a good idea at the time (a small electronic pocket alarm that prevents losing expensive fountain pens…called the “Pen Pal”…'sounds a musical tone or buzzer when the pen is missing beyond a pre-set time). Had I not given it a shot, I would always have wondered what might have been.

As a matter-of-fact, that?s how the PACTrust came about…I had an idea that virtually everyone said would never work. After 15 years and ignoring thousands of attorneys, accountants, brokers, relatives, friends and other nay-sayers, and doing it anyway (my way), its value and benefits are finally now being declared as “self-evident” by most of those same detractors.

Jim, I regret many of my roads not taken, but in retrospect I realize that had I not taken the ones I did…well…I’d have taken the other one…I s’pose.

My credo: When along life’s highways and by-ways, we are confronted with two diverging pathways, trying to travel both will soon become quite painful and probably split your pants.


Bill Gatten’s great idea - feed back wanted - Posted by Dan Simpson

Posted by Dan Simpson on November 07, 2000 at 23:41:39:

I read over on Bill’s site an idea that he had. His idea was to go research title records for properties that were purchased or re-financed during the high-interest 80’s. The idea was to look for properties with sizable private lender long-term second mortgages on them by out of state or far distant lenders. Then go to the recorder of deeds office (or whereever they have this info in your area) and research and come up with a list of lenders and their addresses and phone numbers that are still holding a second mortgage on a property financed in the 80’s. You should be able to determine whether or not the loan has been paid off (released) or not. Alot of them will have been paid off, but there are plenty that havent been.
With this info, you would then call or write the lenders and offer to buy these notes for 50, 60 or 70 cents on the dollar. You would offer them a 100 bucks for a 60 day option to buy these notes. if they agree, then go call the homeowner paying on the note and offer to pay for a full refinance on their home, presumably at a much lower rate than what they are paying on the note now. Show these homeowners that refinancing will save “x” dollars a month and no cost to them. They would simply fill out the paperwork with you and submitted to a lender that you know, ideally one that will pay you a finders fee, a point on the loan or something. When this happens, you immediately exercise your option to buy the note.
When the loan escrow closes and/or the funding takes place, you will be paid the full face value of the note, and not what you bought it for. All the monies due to the original note holder and the lender will be paid out of the closing with the rest coming to you. The only risk is the 100 dollar option and the research time.
This sounds like a great way to make money, as I work across the street from the courthouse where I can find this information. I have already learned my way around the recorder of deeds office and can find these deals! however, I have the following questions…

  1. Why does the loan have to be a second mortgage? Cant it be a first mortgage?

  2. Is there a certain way to determine which mortgages may be a better candidate for this idea than the others? I just know that a 20,000 loan on a property in an expensive area is very likely a second. (which goes back to the original question - why seconds only?)

  3. Isnt it possible that the lending institution listed may not have that mortgage anymore? It is possible (and maybe likely) that the lending institution has sold off to a private investor or mortgage broker. And if this is the case, how do we go about locating these people?

  4. How do we determine how much the mortgage is worth today? If it was a 20,000 loan in 85 for 30 yrs then it will probably be around 6-8 grand today. But how do we determine this? if we call a lending institution we surely have to give them specific information about the mortgage, like the account number, which we wont have, in order for them to want to tell us how much more is owed.

  5. Why havent these people refinanced themselves during this long recent period of low interest rates? are they just ignorant? lazy? dont they know that they can re-fi without having to pay much if any at all?

  6. Would it be in my best interests to offer these people a grand or 500 bucks to have them re-fi with the lender that I choose? Would that entice them to do what they havent been able to do on their own? Would it be safe to tell them that I have an option to buy their mortgage, and want them to share in the profit that I will make when they re-fi?

  7. Before I offer the lenders a 100 dollar option, wouldnt it be important to find out the face value of the mortgage (or note) before giving them this option? And also to call the payees of the mortgage to find out if they will accept my offer to refinance for them? I dont have too many "$100"s to lose in options!

There is a potential GOLD MINE sitting across the street from my work, and I wont be able to sit there and concentrate on my “JOB” wondering about this idea of Bill Gatten’s! I have already jotted down two prospects - the lender, the property owner, the book and page of the deed, the date of the mortgage, and the amount, and I also know that these two have not be released yet. There were about 10 others I researched that have already been paid off.
I know that there cannot be many - if anyone - in my area (300,000 in the metro area) doing these deals.
Thanks in advance for any responses to this…

Dan Simpson

Re: Bill Gatten’s great idea - feed back wanted - Posted by Bill Gatten

Posted by Bill Gatten on November 09, 2000 at 17:43:37:

Oh thanks for spreading my great idea across the boards for all to ridicule and snicker at! Now everyone will be shouting and waving it about and wanting one! :o)

First of all, the idea was to contact only out of state, private lenders whose loan amounts and terms you were certain of.

The concept was originally promoted (if not created) by a highly esteemed attorney for the California Association of Realtors, one Mr. Noel Seaman of San Francisco Ca.(I believe) and his partner, Terry Eihler of Eihler/Seaman Productions (a RE Guru company). I have never done such a deal and know of no one who has (other than Eihler and Seaman…who reportedly did them all the time): but I think about the idea every time I run into someone whom, through neglect or oversight (or “doofusness”), has not re-financed their early high interest rate loans by now. Moreover, contrary to popular belief, there are in-fact still quite a few out there (they’re not worth hand picking, but with modern computerization the title co. can give you a very complete farm report…if nothing shows up, you order another zip code or two).

However, with your level of interest, I would certainly caution you to make the effort before abandoning the idea (since you’re right there anyway). I can’t see that you have anything to lose. And contrary to another popular belief, needles in haystack are quite often found by those willing to take the time to look for them…and usually at the most inopportune times… Let me tell you about this gingham-clad girlfriend I had that lived on a farm in Montana. Once day after bringing in the hay, well we started smooching and… (oh never mind?makes me perspire to think bout it).

Just remember: The road not taken will never lead you anywhere. If it “sounds” reasonable to you…then maybe it is. If it sounds unreasonable to you, then it definitely is. But when it turns out to be the greatest idea since ear-hair clippers, all your detractors will suddenly swear they created it (as a matter-of-fact, I think Al Gore may already have).

Think about it. If, as Mr. Garcia suggests, lenders are out there in force in a gnats heartbeat looking for those high interest rate re-fi ops…wouldn’t they be remiss when they found one not to attempt to buy the second at a discount before approaching the borrower? If you got the same farm report, would it be any more difficult for you?

Clearly and officially and irrevocably excepting Mssrs. Piper, Garcia and Branstetter from the following quotation for ALL TIME…let me remind you of an old Chinese proverb that helped me greatly in creating the PACTrust:

?When one points a finger toward the stars, it is the slow of wit who looks at the finger.?*


*Over dramatization. Do not try this at home.

Re: Bill Gatten’s great idea - feed back wanted - Posted by Bud Branstetter

Posted by Bud Branstetter on November 08, 2000 at 17:55:45:

Bill is an afficianado of Paul Simon. Simon suggested a similar approach in the early 80’s. That was to look at houses in MLS that had a private second lien. You got an option on that note at whatever discount you could get. The likelyhood is that many of those properties would sell and that you would then exercise the option.

Re: Like finding a needle in a haystack… - Posted by Ed Garcia

Posted by Ed Garcia on November 08, 2000 at 09:43:58:


Jim Piper is right and has given you a good answer. To ad to his answer, let me say that in the event the borrower didn’t figure out on their own. That they were paying high interest and when rates were down it was a good time to refinance. Or, in the event the originator of the second didn’t want the second paid off in a given time, giving the borrower an incentive to refinance when rates were down. Then let me tell you that the Mortgage Companies TARGET those loans for re-fi.

In California, we don’t even have to go down and spend hours and hours trying to get these records and then go through them and decipher them. All we do is contact our title company, and they provide us the information and we immediately solicit them for refinancing, rate reduction, cash out, consolidations, etc. First mortgage lenders are constantly soliciting for refinancing, offering special costing and easy just fill out this form for refinancing. You haven’t even factored in the sales and exchanges that have taken place during that period of time as well. I’m sure you know the National average for homeowner relocations is every 6 years.

So yes, it can happen. But doing it, is like finding a needle in a haystack.

Ed Garcia

Re: Bill Gatten’s great idea - feed back wanted - Posted by JPiper

Posted by JPiper on November 08, 2000 at 24:37:00:


In my opinion this is an idea that won?t prove to be particularly productive. But maybe Mr. Gatten will come along and show me the error of my ways?.or maybe something has been lost in the translation.

First, many of these high interest rate loans have disappeared in recent years with either refinancing or the outright sale of the property. That means that those that are left are obviously a small percentage.

Next, if the loan is an institutional loan there will be little to no motivation to sell this note if it?s current. The money is earning a higher rate, the LTV has decreased due to appreciation in the underlying collateral and due to principal paydown. So unless the note is in default, there would be little incentive on the part of an institution to sell this at a discount. Further, if the institution DOES want to sell, I suspect they can sell a current note to other institutions at face value or higher?.done all the time.

That leaves privately held mortgages. This group is one of the more widely solicited groups known to man, by every budding note broker/buyer in the country. Every one of them would be interested in acquiring a current high interest rate note at a discount.

Assuming you find one, my guess is that the reason it has not have been refinanced is that there is some type of credit situation precluding this?such that the new refi may well need to be at a high rate as well (if possible at all). However, refinancing a note you bought at a discount is a fine idea?the problem is locating a note that someone wants to discount to begin with.

Prove me wrong Dan and go find plenty of these?make your fortune?and I mean that in all sincerity. I don?t think it will happen?.I think there are other easier and more profitable ways to spend your time in this business. But prove me wrong?the fact that I think this is a low profit idea could easily mean that it?s an untapped area. I just don?t happen to think it is.

By the way, I read your story the other day?.you have my utmost in respect…


Re: Bill Gatten’s great idea - feed back wanted - Posted by JPiper

Posted by JPiper on November 09, 2000 at 21:53:05:


I would agree that “the road not taken will never lead anywhere”.

Just thought I’d mention that “anywhere” could be a good thing…or, it could be a place of considerable frustration and/or disappointment. And if a particular road is not taken, that doesn’t mean that an alternative road that leads “somewhere” couldn’t be taken as well.

Personally, if I were giving advice and the two roads happened to be searching for these high interest rate notes that would be bought at a discount, or searching for PacTrust deals…I’d take the latter.

I think the latter would be time better spent. But perhaps you would disagree.