Posted by John Behle on March 23, 2002 at 18:20:34:
In Reply to: Buying defaulted paper posted by J.T. on February 28, 2002 at 00:16:20:
What you've said is right on. I've had institutions absolutely refuse to sell a note that they would do a short sale on. I've had others make me swear and sign to it that we would not offer any discount back to the owner. Their reluctance may come down to a couple things. One is their accounting procedures. A short sale looks one way where a discounted sale looks another. Second is that they may have concerns about sellers setting up a short sale situation to take advantage. If by going behind in payments and pre-foreclosure led to being able to buy their loan at a discount, many individuals and even companies would jump on that.
It's still an excellent way to go when you work around these challenges. For us an important issue has been to approach them "lender to lender" as a mortgage lender, not some "foreclosure specialist" - yet still some are impossible to deal with. I've seen lenders in an absolutely rotten position who have even made a decision as a junior lien holder not to go to the sale refuse very good offers to purchase their position. At the same time I've seen lenders who have no good reason to sell a note and who are in a good postion sell for huge discounts. It makes little sense at times.