What Type of Defaulted Second Mortgages Do We Purchase?
Throughout the years, 1 Oak has developed a unique and defined investment model for purchasing defaulted mortgages. Our team carefully examines all relevant factors behind the second mortgage, from collateral loan review to bankruptcy audits.
We have included a detailed chart below that describes our performing and non-performing criteria in greater detail. For any questions regarding our criteria, please contact our team directly.
|Characteristics||Performing (Cash flowing)||Defaulted (Delinquent)|
|ASSET TYPE||Second Mortgage and HELOC's||Second Mortgage and HELOC's|
|ORIGINATOR||Bank, Institution, or Private Investor||Bank, Institution, or Private Investor|
|LOAN SIZE||$20,000.00 - $1mm||$20,000.00 - $1mm|
|FIRST MORTGAGE STATUS||Current or Past Due||Current, Past Due, or In Foreclosure (OK)|
|PAY HISTORY - MODIFIED LOAN||1 Month History (OK)||90 Day's Past Due + (OK)|
|PAY HISTORY - CH 13 BANKRUPTCY||1 Month Pay History (OK)||90 Day's Past Due + (OK)|
|FIRST MORTGAGE LTV||<65% of Value||<65% of Value|
|SECOND MORTGAGE CLTV||<90% of Value||<120% of Value|
|DELINQUENT AMOUNT||No Minimum or Maximum||No Minimum or Maximum|
|FORECLOSURE HISTORY||NOD or NTS Filed in Past (OK)||Actively in Foreclosure (OK)|
|BANKRUPTCY HISTORY||Chapter 7: Discharge (OK) Chapter 13: Active or Discharge (OK)||Chapter 7: Discharge (OK) Chapter 13: Active or Discharge (OK)|
Pricing Factors for Mortgage Notes
Unlike today’s real estate market, the contract price of a portfolio is a confidential matter. Each party is obligated to keep the terms, conditions and pricing of the transaction confidential. The most common question asked of 1 Oak is:
What will the market pay for these mortgage notes?
At our firm, determining risk is key. Therefore, we are honest and upfront when pricing out trust deeds. Below are the top areas to research when compiling due diligence:
Real Estate Value
Home values are based on homes sold prices, public records of assessed values of homes near the address, and area real estate.
Fair Market Value
This is the price at which you could sell your property to a willing buyer. The best method of determining fair market value is to compare the prices others have paid for something comparable.
First Mortgage Status & Details
This Deed of Trust is the primary lien against the real estate, taking precedence to all other mortgages. Understanding the terms, loan balance, modifications (if applicable) and payment status is vital when underwriting the risk of the investment.
Second Mortgage Status & Details
This Deed of Trust is a subordinate claim to another mortgage on the subject property against the real estate. Underwriting the risk of the investment requires an understanding of the terms, loan balance, any applicable modifications and payment status.
The credit report is a summary of the borrower’s financial history and is a great point of reference for investors to assist them in evaluating whether the borrower is a good credit risk.
Collateral Document Audit
Investors will review the original mortgage security documents covering the item(s) pledged as collateral on a loan, i.e., Note, Deed of Trust, Assignment, Lender Policy, Allonge, etc.
Title & Lien Status
Title company will search for any outstanding mortgages, liens, judgments, or unpaid taxes associated with the property, as well as any restrictions, easements, or other issues that might impact ownership.
The PACER Case Locator is a national index for U.S. district, bankruptcy, and appellate courts. The index will determine whether or not a party is involved in any federal litigation.
Borrowers Pay History
This review is an indication for lenders to determine whether the individual is a risk due to a history of late or missed payments.