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When It's Time To Foreclose At The Courthouse Steps

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When It's Time To Foreclose At The Courthouse Steps

It’s a big bad foreclosure world out there.  But as note investors, we need to be prepared to brave the elements. You've taken all the right steps, but the time has come to take it to auction.

You own a non-performing note and your basic due diligence is done.  All the requisite borrower outreach has occurred.  Still, you have no money in your pocket.  To make an even stronger argument for pressing ahead, you have full equity coverage for your lien/note over the value of the property.   It’s time to engage with an attorney.   

How is an Asset Manager to navigate the quagmire?

One step at a time is the simple answer.   

Picking an attorney is a bit like choosing a doctor.  You want them to be smart and qualified in the state you are thinking about foreclosing.  Just as important, you want them to have a good bedside manner.  A good communication channel between you and your attorney is crucial. At the end of the day, you will be paying the fees and costs so you better be on your toes.   You will have questions about the fee structure, the process and the time frame associated with various phases of the foreclosure. Your attorney needs to be able to address all your questions in a manner that treats you with respect.  After all, you are the client in this relationship.  

It is important that you start with a general understanding of the foreclosure process.  In working a note through the foreclosure process – up to the point of Sale or Auction – knowledge of the process is important in allowing you to be able to discuss matters with your legal team.  It will be difficult to manage getting there if you don’t know the basic path.  And that is exactly what you need to do, manage the process.  You will need to know where your file is in the foreclosure process.  It helps you to budget for costs connected with the process.   Also, if you answer to investors, it arms you with information for reporting.

 Here’s a pattern to avoid with attorneys.  Try and stay away from large retainers, thinking that everything is occurring as it should.  It probably isn’t.   Like all communication, those between you and your attorney should occur on a two way street.  Try and set up milestone billings.  It helps to keep the attorney accountable for the file progressing as it should, allowing them the opportunity to get feedback from you as needed.

In the note world, we often hear how every note is different and its path to a work-out or sale is unique.   It is true.  However, the greater the number of notes in your portfolio, the more you start to see patterns emerging with the legal process.   Pretty soon, the language spoken will be part of your lexicon.

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Note Investor, Asset Manager for Main Street Asset Solutions