Hi, My name is XXXXX XXXXX I am a Licensed, Practicing Attorney with 25 years experience in real estate and business transactions,
I am sorry you are experiencing this difficulty with the owner,
When a lender, no matter what the size is, forecloses on a mortgage, it has a duty to deal fairly with the property and not do any act which would compromise any possible benefit which would inure to the former owner, or compromise any chances the former owner might have in buying back the property at auction or Sheriff's Sale. While I realize that these possibilities are practically zero, if no on the minus side already, but nevertheless, the manner in which the lender handles the foreclosed property is strictly scrutinized. Any agreement which the lender might enter with you to insure that you purchase the property in a non-competitive setting and to the exclusion of other bidders would be considered "collusion" for which both you and the lender would be severely penalized. If it were discovered at a later date, the entire transaction would be set aside.
I did not understand where you saw an additional risk if you were to purchase the loan and take an Assignment of the Mortgage of Deed of Trust from the lender because I do not see much risk in buying the Note from the lender and taking an Assignment of the Mortgage, or Deed of Trust, as the case may be, then conducting the foreclosure proceedings yourself. While it will take some extra work on your part, it will certainly remove any appearance of collusion. At the sale, you would submit a bid for the amount you paid for the loan. If there are other bidders there who bid an amount higher than your bid, you will be benefiting from the higher bids as the owner of the loan.
I wish there was an easier and simpler way, but there just isn't because you would stand to lose a lot, therefore, just like Caesar's wife was, your transaction also must be "above suspicion and beyond reproach,
I realize that this is not exactly the Answer you were hoping for and it would have given me great pleasure to give you the Answer you wanted to hear, but I have an ethical obligation to you to give you only correct Answers and information, so I am respectfully asking that you not hold the State and Federal Banking Laws and Regulations applicable to your situation against me,
Please be kind enough to rate Excellent Service" so that I receive credit for assisting you,
Bonus and Positive Feedback on survey is very much appreciated,
Risks of buying the note include: borrower declaring bankruptcy, borrower bringing the his payments current, etc. Unlikely, but risks still.
Can the lender simply put the property on the mrket as an REO rather than auction it off? We could then make our offer and still be in a 'competitive' situation, right?
Thanks for your answer so far. I won't hold the outcome against you :)
Hi, Travis, Thank you for your kind thoughts in not holding the Answer against me. I do appreciate it because you would be surprised how many people think that we write the laws and we just do not want to give an Answer favorable to them. I would be a very rich person if I could write the laws as they suited each situation I was in,
Thank you for your follow up question and the opportunity to explain further. You are a very quick thinker, I like that. Unfortunately, it cannot be done immediately because an REO is a class of property held by a lender and placed on its books after an unsuccessful sale at a foreclosure auction. In other words, the lender must go through the normal auction process after foreclosing on the Mortgage, or Deed of Trust, not receive any bids at the auction which at least equal the outstanding mortgage loan balance, place the property on its books as REO, and then it can be offered for sale as an REO,
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