Deal of the Week
The Holiday Gift
The subject of this deal is a property whose borrower had not paid their mortgage for nearly a decade (that is not a typo).
🎁 Originally a $95,000 loan, the balance escalated to over $200,000 due to this prolonged period of non-payment. Previous lenders hesitated to foreclose as the property was initially valued below the owed amount. However, recent market trends have turned the tables, resulting in the property now boasting an equity of approximately $50,000.
📈 A significant twist in this scenario is the impact of rental market dynamics in the area, which have seen a sharp increase. This shift has led the borrowers to recognize their property as an asset rather than a liability, despite their challenging financial situation.
🙌🏼 Addressing the central issue – the decade-long backlog of payments – we found an innovative solution. The state offers a program where up to $50,000 can be allocated towards defaulted payments for borrowers affected by COVID-19 (yes, they claimed they were impacted by COVID). This provision presented a unique opportunity for both the borrower and us as the lender.
💸 To access these funds, we needed to renegotiate the loan terms with the borrower, who could afford a monthly payment of $750. Leveraging our investment in the loan, which stood at around $65,000, we successfully negotiated a loan modification, securing the $50,000 assistance.
This deal has been noteworthy for two reasons, as highlighted by the mediator:
- Our willingness to engage with the borrower and devise a mutually beneficial solution was unprecedented. The mediator noted they had never seen this and expressed a desire for more lenders to adopt such a pragmatic and cooperative approach. 🤝🏼
- An unexpected yet amusing aspect of this deal was a conversation about goats, involving the borrower, the mediator, and a representative from the State Assistance program. Unfortunately we lacked experience in this field so we were not as active in the discussion, but it certainly added a unique and entertaining element to the proceedings. 🐐
🌟 This deal exemplifies our commitment to finding creative and effective solutions, even in the most challenging situations. We look forward to continuing to explore such opportunities and delivering value to our investors.