Note Sales Are Normal

Posted by Keith(CA) on November 26, 2004 at 19:02:20:

In Reply to: Foreclosure posted by Buck Green on November 24, 2004 at 08:19:38:

Buck,

It is very common for promissory notes (secured by a mortgage or trust deed) to be sold to other parties, both private and commercial. This is how some investors create kind of a "back door" to buy ownership of homes in or nearing foreclosure. In most cases, these defaulted notes can be bought at steep discounts (but the debtors total indebtedness does not change). For instance, if you owe $20K and someone bought the defaulted note for $5K, you still owe $20K on that note and the buyer stands to make $15K if you pay up.

Just a hunch, but this is probably a private investor that bought non-performing paper (the note you weren't paying) from GMAC(DiTech). They now hold the debt you are obligated to pay. If you pay it off then they will make a profit, but will have to go away (satisfaction of mortgage)...this is probably your best course of action.

If you have a lot of equity in your home and you simply sign a Deed to this company, then they gain both your equity plus whatever discount they got from the purchase of the second. On the other hand, if you don't have any equity and cannot pay off the second then you just might want to consider the deal being offered.

The consequence of ignoring the whole thing is that the new holder of the second will file for foreclosure and your property will go to auction. It is a risk for the second note holder because someone may outbid them at the auction and they will not be able to buy the property (although they still make a profit having their note satisfied by the high bidder). This is why they may be reluctant to immediately pursue foreclosure and are trying to strike a bargain with you...even offering cash as an incentive just so they and you can both avoid foreclosure.

With the explanation out of the way comes the obvious question, was the note discharged by the bankruptcy in 2002? If so, these guys may just be blowing smoke trying to get your home.

It sounds like it would be worth some money to sit down with an attorney, all documents in hand, and just find out what your rights and options are. Each state has its own laws governing these types of things, and you bankruptcy may or may not have a bearing on this.

Good luck.

: I filed bankruptcy in 2002. I had a home with a first and second mortgage, the latter being due to a home equity loan from GMAC(DiTech). I continued living in the home and paying the first mortgage. Recently, the second mortgage "transferred" to another company which wants me to sign a Deed in Lieu of Foreclosure. However, when I refused they are now offering me "some money" to move and make a fresh start. Sounds suspicious. Was this "transfer" legal?

Follow Ups:

• Re: Note Sales Are Normal - Nick(Colorado) 15:35:15 11/27/04 (1)
  • Thanks for the followup (I learn too)... n/t - Keith(CA) 17:47:11 11/27/04 (0)

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Comments:
: Buck,

: It is very common for promissory notes (secured by a mortgage or trust deed) to be sold to other parties, both private and commercial.  This is how some investors create kind of a "back door" to buy ownership of homes in or nearing foreclosure.  In most cases, these defaulted notes can be bought at steep discounts (but the debtors total indebtedness does not change).  For instance, if you owe $20K and someone bought the defaulted note for $5K, you still owe $20K on that note and the buyer stands to make $15K if you pay up.

: Just a hunch, but this is probably a private investor that bought non-performing paper (the note you weren't paying) from GMAC(DiTech).  They now hold the debt you are obligated to pay.  If you pay it off then they will make a profit, but will have to go away (satisfaction of mortgage)...this is probably your best course of action.

: If you have a lot of equity in your home and you simply sign a Deed to this company, then they gain both your equity plus whatever discount they got from the purchase of the second.  On the other hand, if you don't have any equity and cannot pay off the second then you just might want to consider the deal being offered.

: The consequence of ignoring the whole thing is that the new holder of the second will file for foreclosure and your property will go to auction.  It is a risk for the second note holder because someone may outbid them at the auction and they will not be able to buy the property (although they still make a profit having their note satisfied by the high bidder).  This is why they may be reluctant to immediately pursue foreclosure and are trying to strike a bargain with you...even offering cash as an incentive just so they and you can both avoid foreclosure.

: With the explanation out of the way comes the obvious question, was the note discharged by the bankruptcy in 2002?  If so, these guys may just be blowing smoke trying to get your home.

: It sounds like it would be worth some money to sit down with an attorney, all documents in hand, and just find out what your rights and options are.  Each state has its own laws governing these types of things, and you bankruptcy may or may not have a bearing on this.

: Good luck.

: 
: : I filed bankruptcy in 2002. I had a home with a first and second mortgage, the latter being due to a home equity loan from GMAC(DiTech). I continued living in the home and paying the first mortgage. Recently, the second mortgage "transferred" to another company which wants me to sign a Deed in Lieu of Foreclosure. However, when I refused they are now offering me "some money" to move and make a fresh start. Sounds suspicious. Was this "transfer" legal?


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