Posted by Michael Morrongiello on July 20, 2001 at 12:51:16:
Do you wish to continue leaving the wrap around “CFD” Contract for deed type loans in place? If so, then as you have indicated, you will be collecting the payments on the RECEIVABLE wrap CFD and then having to MAKE the payment out on the other CFD. Given the fact that these are CFD’s and that the payors that would be paying you are slow each month, and that you will ultimately have to obtain legal title so you can deliver legal title in the future to the buyers, and that your state Oklahoma has opressive title insurance premiums, etc., this all may be a bit of an administration issue to handle.
Another option is to simply “broker” the CFD that your seller wishes to sell you. A funder (we would have interst in purchasing this type of instrument) will purchase the wrap around CFD, and put out a lump sum of cash. From that cash you would pay off the existing underlying CFD, and then keep a “fee” for yourselves, the rest of the cash would go to your seller. Now only one lien would exist against the property and it would be far easier to manage.
As for how to deterime your “ITV” and what should be invested? - This is a matter of the risk involved in evaluating and grading the quality of this paper. Some question or issues to consider:
What do the payors do for a living?
How long on their jobs?
What is their credit background like?
Their credit scores?
Their past payment history (evidently slow)?
How thorough was the wording and language in the actual CFD documents put together?, etc.
What is the value of the home today?
How does it appear?
Is there pride of ownership?
The interplay of all of these issues against one another will determine your appeptite for the risk associated with this type of paper investment and whether you wish to tie up your funds in this investment for the next 15 years +/- that still have yet to run on the CFD you would be collecting on…
To your success,