flip nerd master class - exit strategies of notes

Exit Strategies of NotesFlip Nerd Master Class

Exit Strategies

What Do I Do With These?1. Wholesale The Note2. Reinstate the Loan3. Modify The Loan4. Loan Assumption5. Short Sale6. Deed In Lieu/Cash For Keys7. Cash Payoff8. Foreclosure9. Resell the Loan

#1 Wholesaling Notes•Wholesale Pools•Wholesale Individual Assets•Flat Fee•Percentage•What the Deal Can Hold

#2 Reinstate the Loan•Borrower Starts Paying Existing Payment•Deferred Back Payments•Usually Works Best When Rent is Higher•Some Down Payment

#3 Modifying the LoanReduce PrincipleReduce Interest RateForgive Past Due PaymentsLoan DefermentSome Down PaymentAdjust RateState/Federal Programs

Hardest Hit Funds• 18 States + DC• State Incentivized Loan Mods• 24 Months of Payments• Some Past & Future Payments• $1,000 Avg Monthly Payments•Home Owner Must Qualify• Lender Must Forgive

HHF Example•Borrower Owes $125K•Home Now Worth $60K• Investor Buys NPN For $20K•Borrower Signs Up for HHF•State Gives Investor (Bank) $24K •Bank Now Has Modified Loan + $24K

FHA 10-23 Loan•After Loan Mod, FHA Refinance Program•Borrower Must have 520 Fico•Borrower Must Make 3 Payments• FHA will Refinance 97.5% of FMV of Property• Investor/Bank Gets Refinanced Out After 90 Days•Can Combine it With HHF

HHF + FHA 10-23• HHF Pays Bank $24K• Bank Has Modified Loan on $60K Property• Borrower Makes 3 Payments ($450 month)• FHA 10-23 Refinances Investor Out After 3 Months at 97.5% FMV• How Much Did Investor Make?•$24,000 + $1,350 + $58,500= •$83,850 = 419% ROI

#4 Loan Assumptions• Swapping One Borrower For Another

#5 Short Sale (Short Papering)

•You Buy Note And Become Bank•Borrower Lists Or Has Listed Home •You Determine the “Short”•House Is Sold Below UPB•But Above What You Paid For Note•Make Sure You Hire The Realtor•List at 85% of FMV

Short Sale ExampleAustin Home Case StudyBank Was Owed $195K UPBHome Worth $150KPurchased NPN at $75KBank Approved Sale at $150KBank Netted on Hud-1 $135K$60K Profits In 30 Days

#6 Deed In Lieu/Cash For Keys

• Borrower Gives Home Back To Bank• Bank Gives Borrower Cash To Walk Away•Debt is Forgiven•Home Becomes REO• Consent To Judgment if 2nd Lien In Place• Bank (Investor) can Sell, Rent, or Owner Finance • Borrower Walks “Scott” Free to Start Over•No Judgment/Late Pays/Credit Flaws

#7 Cash Payoff•Borrower Pays Off Loan•Structured Payments Or Lump Sum•Borrower Refinances Out•Lower Balance Loans Have Higher Hit Rates

#8 Resell the Note•Non Performing•Performing•Semi Performing•Bought Cheap Enough•Added Value By Servicing/Workout

#9 Foreclosure• Last Option for Investor• Can Ruin Credit for 7 Yrs vs 2 Yrs • Judicial vs Non Judicial States• 21 Days to 36 Months• Occupied Vs Vacant Property• $750 - $5000 to Foreclose• Can Still Sell Property at Auction• START THIS WITHIN 30 DAYS

Bankruptcy• Chapter 7 & 13• I LOVE BK’s…• I Have An Attorney To Talk To! • It Will Either Be Payments Plan or The Asset•Mortgage Can Be Removed From BK• Becomes Loan Modification Or Foreclosure

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1ScottCarson

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