Module 10 Note Investment Mentoring [7/10]

Module 7 and 8 talked about foreclosure and the junior lien we had. My company came on Trustee Corp. And we did a general review and commentary on foreclosure today and the junior liens, the specifics of that and advanced junior lien concepts and strategy. The subject to stuff due on sale, the Garn St Germain act, short sale negotiations. We had Rand Johnson from Crusty Corpse come on in a great interview. They did the whole module in module 7 and Matt Kelly who I work with on a weekly basis, they do the foreclosure in five states and referrals to the rest. Foreclosure right now is a tricky business, testy business. And as I said, there is a pro borrower kind of a victim thing going out there and you get pushed in that same bucket. And you need to know about this stuff. You need to know about the pre notice of default guidelines, how to do a demand for payment procedures, timelines, cost compliance. We talked about the 50 states overview. It takes one month to several years plus to foreclose. Now when you're in second position, that's a whole different thing. Sometimes you think, wow, I'd like to go buy states that foreclose really quickly. But wait a minute here. If your biggest exposure from a junior lien position is the fact that the first can wipe you out by foreclosing, maybe it's better to have a several year kind of state where the first can't foreclose for several years. Gives you a lot of time. So those type of considerations. But timeline and flowchart examples of a foreclosure, National Legal Aid networks How do you find an attorney in a different state? How do you do that? Interviewing and directing legal assistance. You know, we make it real clear to these attorneys that our goal is not to foreclose and just to get it started because 60% of the time that'll get people moving forward. They need to understand that ahead of time. You need to find the right attorney, interview them the right way. Pre filing for foreclosure, a trustee sale guarantee. We went through that. That's kind of the title policy in doing a trustee sale, notice of default sale, moving it through the foreclosure process, talking about when you're at the foreclosure sale doing the notice of sale. I always like it better because I look at myself as I'm not the guy out there standing the trustee sale in the snow and the cold and the rain. I'm the guy sitting at home waiting for whatever happened at the sale. So here's some myths versus realities. We talked a lot about this, but the national lender, I've heard a lot of them say it's $25,000 to foreclose. That's not the case. It's a fraction of that and then two years plus to foreclose. True in some states, but if you know the game, if you know the different states, overview of different bills that are out there. For example, in California, the California Homeowners Bill of rights, State Bill 1137, that have come up recently in the last couple years to protect these homeowners, you need to know these things. But be the lender, be the man behind the curtain, as they call it, like in the wizard of Oz. Don't be there at the trustee sale. Be the man behind the curtain. And I told a story about when I went to the trustee sale and put up $103,000. I bought something and I called the mystery house because I owned it sight unseen, right there. I made a profit, I netted $7,000. But frankly, I've done much better with these notes. And I really like being the lender. But there's an unprecedented crazy anti lender market out there. Have your ducks in a row, dot your I's, cross your T's, follow procedure, but don't let it stop you. Move forward aggressively. Don't get stopped by what if a friend of mine puts an analogy to a bumper car, it's not going to be a smooth process, but don't let that stop you. You're going to trying to get from A to B. You're going to bump this and this along the way. It's not smooth. There's delays. But keep in mind that even though there are delays or you get stalled or you might do something wrong or miss something, they still owe you the money. That's the beauty of these notes. They still owe you the money. Interest and fees are accruing. So a story of foreclosure in two states, both can be good and bad. Long time to foreclose in Florida, the Northeast, short time to foreclose, say in Texas, could be 45 days. And if 60% take the threat of foreclosure to wake them up, don't wait, do everything at once. And a veteran perspective, only 8% of these actually foreclose. It takes threatening it to get it started, but only 8% actually do it. So listen to the experience of the pros. I talked about the current trustee sale market. How for example, in Las Vegas, it's an artificially Tight the market is, the prices are going up. The seller's market, there should be 14,000 available houses. In Las Vegas, there's only 4,000 with 10,000 sitting there with people not paying for two or three years. But there's also a trustee sale fever and the hedge funds are buying things and paying too much. That might be good if you're a lien holder at a trustee sale and people get this fever and start bidding up your note. As I showed you, one example of it can be good for the lender. I don't think it's good for the people of trustee sale. It's good for the lender, but the buyers in general, excuse me, the lenders are not foreclosing. And you know, you need to think it's a whole different little niche here, this junior lien niche. Subject to due on sale, the Garnes St. Germain Act. You're going to have to sometimes if you do foreclose from second position, take over the property, you now own it from the foreclosure sale subject to the first. We talked about a complete definition of that act and what the first rights are against you. So this whole smoking gun theory, do you finish foreclosure from junior bleeding position or not? Partners in payment relief always does. Other hedge funds never do. You'll develop your own style, short sale negotiations. Once in a while, the borrower is going to say, you know what? I can't own this house, I can't afford it. Now you're the bank. Now you're going to have to work out a short sale. And I tell people, I say, jump into the process, hire the realtor, get on top of it. A lot of these underwater deals where you think, wow, the house isn't even worth what the first is worth. How am I going to make any money from second position? And I've got the short sale negotiator calling me back and saying, hey, you're only getting $3,000. You pay 10,000 for that note. The fact is this, they can't close that short sale without you. So we went through this in detail, but you need to train these people. A lot of times that you're really not that motivated. You're a don't wanter and you're fair but firm. And we gave several examples, which I'll talk about in a minute, but post sale strategies, subject to acquisition strategies, assignment of rents. Some of these properties are rental properties and you can actually have the rents assigned to you.