Working With Elderly Borrowers - Creating Win, Win Exit Strategies

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This is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property. For panties on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now here's your host CEO of We Close Nodes, Scott Carson.

Good morning, good afternoon, good evening everybody. Welcome to this episode of the Note Closures. As always, Scott Carson. Excited to be here with you today. I want to share with you a case study that we're working on right now, a deal that one of my students brought me. He's working on a, he's bought a mortgage from a hedge fund and he's got an elderly borrower in there and the borrower is on a fixed income, you know, can barely make by, barely getting by in Social Security, hasn't paid in two years, it's 72. And my student bought the note at a discount. The unpaid balance is roughly and payoff is around 60,000. The house is worth about 100 in good shape. I mean it's a little outdated but it's still in good shape and has a, you know, market value roughly about 100. But the bar hadn't paid in two years and she doesn't have any money to bring to the table to get caught up on anything. She's also got some other medical bills that are outstanding, about 5,000. And our student, he bought it at a great price of 25,000. He's willing to work to modify that loan or do a trial payment plan with a bar. But like I said, the bar can't pay anything extra. She could start by paying her existing mortgage payment but can't bring anything extra to the table. And it's going to be kind of hard pressed if there's any type of hiccup. And, and he was asking me about what should I do with this borrower. I'm like, well, if she could pay, that's great. What kind of return is it going to be if she starts paying on time? He said it's going to be okay but not great. I'm like, okay. And she's got this equity and hadn't paid. You could foreclose and you get paid probably in full at the foreclosure auction. He's like, yeah, but I don't want to do that. She's one of these ladies that responded immediately to a phone call. And you know, he doesn't have a negative bone in his body, doesn't want to be the bad person, especially around the holidays, to start foreclosing on. An elderly person really doesn't have any family around to help out. And I feel for him. I've been there. Especially if you've ever been in a spot where you've been behind your mortgage in the past, like I was back years ago, 20, 20 years ago. I empathize with people that are behind and it's not always their fault. Especially our elderly folks that are on fixed incomes. They have a hard time getting by, especially with inflation and things going up like this. Their Social Security and retirement's not necessarily going up to match the same pace that cost of goods and things are going up with, especially taxes and stuff like that. So I brought up the idea of this strategy, which is something you guys out there as note investors, you may want to look at your portfolio, you may want to look at your borrowers a little closely, especially on the assets that have equity, where the bars may be behind and they've got some equity above what's owed. Okay, it's a primary residence. This is a strategy that only works with their primary residence. And the property is in decent shape. I mean, not like a shanty or shack. It's got to be have a good solid market value, not an arv, but a solid market value with some equity. Now I told him, I said, well, hey, what do you think about getting the borrower to qualify for a reverse mortgage? And he's like, she says, what are you talking about? I hadn't thought about that. And he's like, tell me about a reverse mortgage. So a reverse mortgage is not FICO based, it's not credit based. It's based on the value of the property and the age of the borrower. Now there's some other things when it comes to, you know, what is a reverse mortgage, you know, what are those things out there? Basically, the borrower has to be at least 62 and if there's a Cobar, both have to be 62 and above. So this checked off the list because his bar was setting two there's gotta be some equity. And there's a sizable amount of equity. You know, roughly 40% of equity in this deal. I don't think it always has to be that much, but there's a sizable amount of equity. Houses as being decent shape. And like I said, you know, the fact that there's some equity that the properties in decent shape, the borrower city to reverse mortgages don't care about the credit score, they don't care about the payment history of the borrower because they're going to evaluate the equity, look at the property, the taxes, and they may very well do a full refinance on this borrower, pay off my student and his $60,000 balance that he's owed at being the lender may even be able to give the borrower some equity or pay the borrower a monthly payment in cash flow coming to them on a monthly basis. Now, it would be great if this borrower had family that was willing to help out, to step in, take over the property or assume the mortgage payments or help the borrower out. That would be great. But we all know that doesn't always exist these days. Okay? But with a reverse mortgage, the biggest thing is that this is her primary residence and she's above, she's older than 62. And the equity side, you got to have properties that have some equity. So this is something to take a look at. It could be a very big possibility for you to get fully refinanced out and do some good by keeping people in their house. Okay? Now, the way a reverse mortgage works is that the. Like I said, it's like a annuity. They pull the equity out, they pay off the mortgage, they paid monthly payments to the borrower until the borrower is deceased till they pass away. And then what happens? That point is the estate or the borrower's heirs have the opportunity to then either pay off the mortgage, which is usually the full value at that time, whatever was given out over the annuity base plus the payoff, or if they don't, then the bank, the lender at the time will then foreclose. It becomes an reo. Now, we've bought some reverse mortgage deals where they were REO plays All right, we, we picked up the, and we picked, we paid 50, 60 cents of what was owed, which was roughly about 50, 60 cents of value, knowing that we were going to have to rehab the property and sell it as an area. You're not going to get a borrows passed away to start paying on time. Okay. Unless it's the ghost of Jacob Marley. And that's probably not going to happen either. You know what I mean? But anyway, this is a great strategy for this borrower because he, my student, he gets to do some good by keeping the bar on the property. He doesn't want to evict. He doesn't want to foreclose on this lady. You know, some of the things that we've done in the past, we've had an elderly person. It wasn't you know, the biggest of properties and they didn't have much equity. We didn't want to be the bad guy foreclosing. And sometimes we've done a deed balloon escrow. Hey, let's go and have the bar sign a deed balloon escrow. So, you know, they can stay in the house. I've even done it where they weren't making payments for a period of time. You know, just pay the taxes, forget about the monthly mortgage payment because I know that we'll take the asset back when you pass away. And they were wheelchair bound and they were 85 at this point and they didn't have an estate, they didn't have any kids that want to help out. So this is a great way for them to stay in their house. They were happy, they could make the payments. They were in a fixed income. And you know, when we'd have to go through the foreclosure process, at the end they just basically had a deed only that was signed that once they passed, we just enforced that. If this, if any heirs showed up, we gave them the opportunity to buy the property to pay it off like we would anything. But this helped clean it up a little bit. We just kept the deed in the loose, sitting in my attorney's office. But with my students deal here, this is a great opportunity. She qualifies if the deal. The house qualifies for the property. Now they have to look at what the taxes are, what the expected taxes are and figure out life expectancy to kind of run, you know, tables on that when people are going to pass the life expectancy of people to figure out what things like that. But this bar could realistically live in her house for the next 10, 20 years without making a mortgage payment. And talk about the, you know, this stress of that being taken off somebody's back that they can live in their house for free, maybe even get some cash out of the equity now they don't have to jump through the hoops of trying to qualify with a bank, which a bank isn't going to qualify. Somebody who's missed payments or, you know, can't afford to make the payments and can't qualify. So a reverse mortgage is something that you should look at if you've got, like I said, you've got an elderly borrower, they got some equity, you want to do some good, give them the opportunity. Many times, guys and gals, you could literally get with a, a reverse mortgage expert, give them the details, the age of the borrower or the co borrowers, the what's owed on the property, the property address, taxes, that kind of stuff. And they could come up with a plan to see if this borrower would qualify. And then that's something that you want to present to your borrower. Say, listen, I've got an opportunity for you to do this. You don't have to make a mortgage payment. I'm taking care of that, you're taking care of. You can stay in the house for, you know, extended period of time. Your family has a right to pay off the mortgage at the end. But these are strategies that not everybody thinks about. I mean, a lot of times we are dealt with the idea of either, hey, we've got to either modify, reinstate or go some sort of liquidation. And not everybody, especially if somebody's grown up in a house, they've raised kids in the house, they've got some equity, they may not have a place to go. All right? And this is a great way. It's a win win. It truly is a win win for the note investor to get paid off in full. It's a great win for the borrower because they get keeping the house and you're doing some good and maybe putting some cash in their pockets. You know, when I was a mortgage broker back in the day, we had folks that wouldn't qualify for a refinance because they had, you know, late payments. They didn't make enough money to qualify for traditional bank or conventional bank financing. And reverse mortgage was a great strategy to help them stay in the house and do some good. Now when I was doing a mortgage, when I was a mortgage broker, I didn't do reverse mortgage. So it was a referral for somebody. But it was a great way to help people out. And so if you've got a borrower who's over 62 or CO borrowers, both people have the over 62, they've got some equity above what's owed. It's gotta be primary residence. Okay, got some equity in there. Numbers will vary, but it may be worth as an exit strategy to talk with a reverse mortgage expert and see that will qualify. And of course, if your borrower won't do that, then you've got to be the guy, the gal, the business owner. You don't, you don't run a charity, you run a business. Then you got to make the decision either do I foreclose, do I offer cash or keys in a, you know, some people, you know, they're not going to do anything. They want us to live there for free. And sometimes it comes down, you got to have a tough, you know, come to Jesus conversation. Hey, you know, pay, you know, stay. We got to figure something out here. And of course if you can help somebody out, that's a great thing, you know, but it's your decision on what you do. But this is a great strategy for you. Hey, get paid in full. Because if my student were to take the, you know, the property foreclosure auction, the fact that it's worth 100, he's probably gonna get paid in full at the foreclosure auction and then the borrower is going to be evicted. So this is a great way for him to still achieve getting a full payoff and doing some good. Now, is he missing out in 40k in equity? Possibly if the property didn't sell at the auction? Yeah, he could take the property back in and sell it. I would not do a lease back. Some investors have talked about doing that in the past. All foreclose and I'll just lease the property back to the homeowner. That's not a good sign because rent is always higher than a mortgage payment. So the bar can't make a mortgage payment to you. They sure as hell are not going to be able to pay a rent payment, especially a market rent payment. So keep that in mind. So talk with your borrower, especially your elderly 62 and above, and see if this is something that might be a true win win and just an opportunity for you to do some good and still make a great return and some money on your deal. So go out, take some action. If you have any questions, feel free to reach out to me. I've got a great third party referral who's a reverse mortgage expert who can do this all across the country for you and give you a kind of a scenario what the bar would qualify for or what the the loan would look like. The payments, any equity or payouts or stuff like that. So go out, take some action, buddy, and we'll see you at the top. Bye, Sam. It.