Posted by dave on May 27, 2004 at 23:59:03:
you’re kidding right?
if you loan them the money, do you have the funds to pay off the first to protect your lien when they go back into foreclosure??
Reinstatement Loan - Help Me Structure This - Posted by mark
Posted by mark on May 27, 2004 at 11:55:56:
A couple is in foreclosure…House is worth $169,000. They owe 100,000 plus 15K to reinstate. The sale is in 6 days. Couple has been screwed around by an investor and mortgage guy who said they’d help them ‘save’ the house. Now at the last minute they can only ‘help’ if the couple deeds them the house and hits the road with zero in their pockets.
The couple is asking me to help with reinstatement, but have worked so hard and want to keep the house…but if there is a way they will give me back ‘double’ my reinstatement in one year even if they have to sell the house.
How would I structure this to make sure it works and I get my 30K in one year. Second Mortgage? Put it in a Trust with me as 25% Beneficiary??? I’ll take all suggestions. And if it is a 2nd Mortgage how do I word it. Double in one year almost sounds like loansharking doesn’t it? I’d hate to be labeled a loanshark.
Re: Reinstatement Loan - Help Me Structure This - Posted by bill gatten
Posted by bill gatten on May 28, 2004 at 15:17:44:
I don’t normally post on boards other than my own, but someone has alerted me to you problem (challenge) and thought I might have a solution for you.
The answer may be a ‘foreclosure bail-out’ via a NARS PACTrust™ transfer.
How it works:
Simply stated, you first get a reinstatement quote from the lender,
Then have the owner place the property into his/her own land trust with a third party corporate trustee of your choice, and with the owner remaining the only beneficiary (for now).
Then have the owner of record (the debtor) lease the property from his/her trustee (triple net lease).
The debtor then executes an Assignment of Beneficiary Interest and Beneficiary Agreement with you for, say, a 50:50 ownership (i.e., ownership of beneficiary interest in the trust).
Before recording the deed to the trust, make sure you have all documents excecuted and in your control.
You then bring the lender current with a cashier’s check (after discussing a possible forbearance agreement with the loss mitigation department).
With this program you can set up any percentage of ownership and share in future profits you want to.
The primary issues that you MUST avoid (to prevent later charges of unconscionable advantage, usury and opportunism) are:
Leave no less than 80-90% of the debtor’s existing equity in tact; always deal at no less than Fair Market Value (minus monies to be spent by you for arrearages, repairs, closing costs and/or remarketing expense); never increase the debtor’s monthly payments beyond what they were before you got involved; and never set the debtor up for a forfeiture in the event of a subsequent default (arrange for a full FMV buy-out of his/her interest at Fair Market Value with an unsecured promissory note in the event of a subsequent default).
In California we have the most stringent civil code regulations in the country re. foreclosure consulting…therefore, when I do these I always make sure that–although I might not have to-- I lower the debtor’s monthly payments by $100 per-month for the first year of our agreement…by merely adding $1,200 to whatever my investment is).
How do you make money?
Double the amount of your investment and subtract that amount from the FMV going in, along with any other anticipate costs. You can also increase the monthly payments incrementally for each year of the contract (after the first year) to build a postive cash flow); you will also (depending upon your split of ownership) be profiting from appreciation and equity build-up from principal reduction.
The beauty of this arrangement is that you can save the owner’s equity, restore their credit with their lender, leave them in the property with their ego in tact and profit from future income and ROI.
Caveat…before doing any of this make sure the debtor is going to be able to handle their responsibilities from now on.
Bill Gatten
Re: Reinstatement Loan - Help Me Structure This - Posted by Randy (SD)
Posted by Randy (SD) on May 27, 2004 at 12:28:44:
My first question is “are you sure you want to be added to his list of nonpaying accounts”? I would be highly reluctant to do so, unless you can be assured there are no other debts or liens which is highly unlikely. A second mortgage would secure your $15,000 loan to reinstate the mortgage I strongly encourage you to use an attorney or escrow company with a title search to secure your note.
Even with that security it’s a highly speculative deal because with a $100,000 underlying first lien and your $30,000 second you’re at 79% LTV, if you have to foreclose, make payments on the first to protect your second-six months waiting while you foreclose, cleanup and resale costs… you’re losing money. One ironclad rule is a homeowner in default/foreclosure must go. If you want to be a nice guy, give them several hundred dollars to move out, reinstate the loan (taking over subject to) or finance with a new loan and then they can move back in on a lease option agreement.