This week we're going to figure out how we fare if the borrower on the note we own doesn't pay!
THE SCENARIO:
Last month I purchased a first mortgage on a house. The house is worth $45,000 and the borrower owes $41,500. The borrower (Bob) still owes 244 payments of $319.35 per month. After that point, he will own the home free and clear. Desiring a 20% yield, I purchased the note for $18,821.50 (we figured this out last week).
There's a problem, however. Namely, the first of the month, when Bob's supposed to pay me, came and went, and no check arrived. In fact, I knew before buying the note that Bob hadn't been paying for quite some time, and that the holder of the note has legal standing to foreclose on Bob and take the house. That holder is now me (the old note holder didn't want to go through the hassle of foreclosing on the house, s... Read more...