October 22, 2025 • 20 mins
In this episode of The Paper Trail Podcast, Chris breaks down one of the most overlooked mistakes in pricing non-performing loans—underestimating the risk of reinstatement on low-interest loans. He shares how even experienced investors can misprice assets by focusing too heavily on foreclosure-based models without considering what happens if a borrower resumes payments.
Chris also offers a real-world update from 7e Investments’ record-breaking third quarter, previews upcoming educational seminars, and introduces 7e’s new private lending program offering DSCR and fix-and-flip loans. Whether you’re a seasoned note buyer or new to the space, this episode offers practical, experience-based lessons to refine how you analyze loan tapes and avoid common valuation errors.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:43):
Welcome back everybody toanother episode of the Paper Trail
podcast.
I hope you're doing well.
As we mentioned previously, weare doing a multi segment episode
of pricing non performingloans and mistakes that we see people
make and making sure we shareour stories, highlights and mistakes
(01:06):
we made in the past.
So you have the ability tocorrect, you know, or let me say
learn from the mistakes of others.
Which is one of the best waysto learn is by hearing the stories,
hear what people go throughand taking this information and just
putting it in the back of yourmind so again you don't make the
same mistake we did.
(01:27):
We just finished the thirdquarter of 2025.
It was a great quarter for ourcompany overall.
We bought more assets thanwe've ever bought in any quarter,
had some payoffs, someforeclosure sales, took some properties
back.
Extremely busy.
Our portfolio has reached wellover I think 100 assets.
(01:49):
We're nearing a thousand investors.
So great quarter and finishedgetting our information into the
sec.
And now the fun part of nextmonth will be getting close to starting
our financial audit which ifanyone has never been through an
audit.
It's actually a veryeducational process to go through
(02:11):
and understand valuations ofloans, valuations of companies.
It's much more in depth thanjust taking some numbers and plugging
them into a spreadsheet to saythe least.
But I've also got my coffeeripple and ready to go.
Funny story, I was having aconversation with people about like
type of coffee you drink andso forth and you know, do you use
(02:33):
a Keurig or the kind ofespresso one.
I forget the type we have aswell, but I just make drip coffee
every morning, nothing fancy.
Make some, you know, dripcoffee and go from there.
One last thing I want tomention is for those who do follow
(02:55):
and watch a podcast, be on thelookout for for some paper stack
seminars.
Looking at potentially havingsome online seminars in the future
talking about topics such asbookkeeping as we approach the end
of the year, how to properlyput your notes into your books.
That's always a common theme,common question.
(03:17):
Another is reviewing tapes,going through a tape and how to sort
through a tape and lastly duediligence, throwing out some due
diligence files so we can worktogether with people and understand
how to walk through due diligence.
So stay on the lookout for that.
I haven't announced anything.
It's in the back of my mind ofsomething that looking to to do to
(03:40):
again share and grow theeducation programs out there.
I used to have a membershipgroup which was paid membership and
I actually disbanded itbecause a of time and trying to resources
and I didn't feel like I couldfully commit to it and wanted to
(04:01):
try and step back from thingswhich is kind of what I did.
And one of the ways of I stillwant to of course give back coming
from you know, my family andthat education background and one
of the ways I think I can dothis for people is once a month having
a seminar.
People can come on, can learnand continue to grow, can network
(04:22):
and all lead up to you know,future future in person conferences
as well.
So I just want to give someinsight on that and again stay tuned.
Lastly, for those who lookingto Potentially invest with 7e, our
Regulation A offering isclosing in mid November.
(04:44):
So if you're interested in ourRegulation A shares program, check
it out@7e investments.com Onelast note and I apologize for the
5 minutes of abble I amspeaking but one of the things we
launched this past quarter I'mgoing to talk more about in the future
is a private lendingcorrespondent lending program and
we'll talk more about that.
(05:06):
But we now can provide loansto real estate investors and this
isn't hard money loans at 12, 14%.
These are DSCR loans in the 6and 7 percents as well as some fix
and flip loans between 9 and11% depending on credit and amount
of borrowed.
So extremely valuable for realestate investors who especially are
(05:30):
paying those high interest rates.
We've got some partners who wecan work with to get you better rates
on loans.
So just another aspect of ustrying to give back.
And the same token, yes, we domake a few bucks off of it.
And of course it's somethingthat we wouldn't do if it cost us
money.
But it also I think issomething that's a win win for everybody
(05:53):
involved.
Okay, enough of that.
Let's dive in today.
Talk about bidding on loansand understanding you just don't
put the numbers into the spreadsheet.
You can review the property,the predicament and the person and
all of that and everythinglooks good.
(06:15):
But let's talk about the loanitself in a mistake that I made way
back in the day that basicallyhighly recommend people try to avoid.
And what that is are loansthat are not seriously delinquent
(06:37):
and have a low interest rate.
Let me give you an example.
A $100,000 loan at 6% is $600a month.
Let's say a borrower is sixmonths behind on payments, 30 $600
six times 600.
(07:00):
You buy that loan and let'ssay, oh, you buy that loan at a non
judicial state and let's sayyou buy that loan for, you know,
$70,000.
Okay?
Thinking that I'm going tofile for foreclosure, you know, go
(07:25):
through the process andforeclose on this borrower.
Let's say a Property is worth $100,000.
Okay?
Thinking okay, I'll take itback, I'll be able to sell it, sell
it for 90, paid 70.
I'm gonna make $20,000 in sixmonths on this deal.
All is good.
Okay?
(07:45):
Remember, if you've watched myprior episode, we talk about common
sense and what would you do incertain scenarios?
And sometimes what is commonsense is not so common.
Let's say this borrower hasbeen in this property for 20 years
and the kids grew up there.
They may still or may have children.
(08:07):
Rent in the area is $1,200 a month.
Where are they going to go?
Okay, what if the person alsolost a job or just got their job
back, whatever the case may be.
You just looked at all thenumbers based on a foreclosure and
the numbers work.
If it was just based on aforeclosure, what if that borrower
(08:33):
turned around and reinstatedthat loan and you know, you got the
$3,600 and then they startmaking their payments of $600 a month.
Okay.
Now you still, when you netout servicing fees, other costs,
other things involved, everything.
(08:56):
Let's just say it's $550.
Yeah.
Okay.
That is essentially $6,600 ayear that you're getting in and you
got that payment and themoney's coming in the door.
Now in this instance, you'regetting on your, you know, seventy
(09:16):
thousand dollar investmentminus the several thousand you got
in a reinstatement, you'rebasically making 10% on the deal.
Okay.
If the borrower were tocontinue to pay on a consistent basis,
but what happens is theborrower misses a month here, misses
a month there, and you know,continues to back and forth a little
(09:41):
bit, but never gets 90 daysbehind, but does get behind where
your servicer starts chargingyou extra fees, that is going to
dwindle down into your returns.
10% still isn't bad, but whatwe're seeing is loans from 2001,
(10:06):
2002, 2003 that are written at 3%.
Okay.
And on $100,000 loan, 100K at 3%.
I'm actually looking this upright now.
Basically you are at, what isthat magic number?
(10:27):
Four hundred and seventy sevendollars a month.
Okay, so if they're alone at3% on a hundred thousand is 477.
And then after servicingeverything else, we're just going
to round up say 450.
Okay, it's $5,400 a year onbest case.
(10:52):
And then at the 70,000, youknow, you made a little money.
But whatever case may be,you're back in the 6 to 8% yield
on a borrower who may havebeen behind, may have not been performing.
Of course they weren't becausethe loan was behind.
So here's a question I ask,are you better off originating a
(11:17):
loan to somebody with 800credit as a private lender loan at
8 or 9% or buying a six monthbehind non performing loan that's
written at 3% and possiblyforeclosing, but possibly then getting
this borrower to reinstate andthen getting 6 or 7%.
(11:39):
So this is where I know a lotof people talk about IRR and everything
else.
You know, that's where IRRcomes into play when you're valuing
multiple exit strategies.
Multiple strategies.
But I just want people to beaware as this is reality when I look
(12:00):
at loan tapes and if I wantedto buy that loan and target a 12
or 15% return, if it were tobe reperforming, you might be at
like 40 cents on the dollar.
So you'd be at 40, 40,000.
(12:21):
So why the while the numbersdo work on when it's non performing,
it doesn't work if theborrower reinstates.
Now that's somethingdefinitely, especially in non judicial
states, something youdefinitely want to look into.
(12:45):
Because if you plug in to yourcalculators, something in a non judicial
state that you're going to bein and out of that loan and save
in a year and you wanted tomake 20k on $100,000 loan, or you
want to make 20%, you bid 70,65 or 70,000.
(13:06):
The numbers are probably goingto work or be very close.
But if that borrower turnsaround and reinstates that loan and
you're collecting payments on3, 4, 5% loan, it doesn't work.
Think back in the news also,oh, I don't know, a year or so ago,
(13:27):
Silicon Valley bank kind ofwhat happened to them was they held,
which is not.
Companies should do this, thatare that size as a bank.
They're holding a lot of thesebonds that were only like 3% bonds
and then interest rates shotup and people had a run on their
money.
They went to go sell thosebonds at 3%.
(13:48):
But today's rate is 5%.
So I can go get a new bond at 5%.
Why would I pay par or facevalue for a 3% loan?
They had to discount theliving, you know what out of it.
It's no different than these mortgages.
These mortgages are written at3, 4, 5%.
Now the going rate on amortgage now is 7%.
(14:09):
So you could go originategreat credit to somebody at 7, 8.
I mean, if you do privatemoney, you should be at 9 to 12%.
So why would you want to.
Now, again, you still may beable to foreclose in the numbers
do work great if it goes downthat foreclosure path.
Yes, you foreclose, you makeyour 20%.
(14:29):
Foreclosure providessignificantly better economics.
It works, but if you don't.
And again, lesson I learnedthe hard way of this was back, oh,
you know, I learned thisbefore COVID So we weren't touching
(14:51):
anything at 3, 4, 5%.
Oh, there was a loan that backin the day they did these 2% modifications.
I think this was before COVIDor one was thrown in a pool and basically
one was at 2% and Navarro wasa year behind.
But the numbers still don'tmake sense even at a year behind
(15:16):
at a 2% loan.
So we ran it as a foreclosureand basically took the risk, understanding,
yeah, you know, if they reperform, but they're not going to
perform, they're a year behind.
Oh, they borrowed money from afriend, got it reinstated, and then
you're stuck with a performingloan at 2%.
(15:38):
You actually, when looking atthese loans that are lower interest,
you actually want them furtherbehind because then it's going to
be more likely that they can't reinstate.
But then the quandary comes.
The, you know, person and aspouse with two kids, they lost their
(16:02):
job, they got their job backand they want to modify the loan
or they want to give you some money.
They want trial payment plan,you say, no, I'm just going to foreclose
on you because my numbers onlywork if I foreclose on you.
Some people will do that.
That's not something wetypically tend to do as we typically
want to work with the borrowers.
(16:23):
And this is why these types ofloans we also typically shy away
from because a, they're goingto sell based off of more of the
foreclosure number.
So you're not going to be ableto work with them, or you can, but
you're not going to get adesired return, which are, you know,
I Also have a responsibilityto my investors, which that wouldn't
be fulfilling that responsibility.
(16:45):
And you're stuck in thatquandary because if the borrower
wants to get some type oftrial payment plan or has something
and you look and yeah, theycan afford it, what do you do?
And again, you don't find anyof this in any course that anybody
teaches.
So you have to understandthat, you know, kind of dynamics
(17:07):
that go back and forth onthese low interest rate loans.
And if the borrower wants tostart working, paying again or not,
the economics may not work.
So these low rate loans withminimal delinquencies, and I say
minimal, it could be 18 monthsor less, can be a trap, especially
if they reinstate, because ifthey do reinstate, there's nothing
(17:30):
you can do.
Then you're stuck with a lowcoupon loan that's performing.
And what's that going to sell for?
You know, if somebody's buyingit and wants 10 or 12%, that thing's
going to sell.
Now we bid on some loansrecently that are in that price range
and I just told them like thisis going to be the lowest bid you've
ever seen because our numberswere like 25 and 30 cents on the
dollar.
(17:50):
And it's home because I can gooriginate loans in double digits.
Why do I want to deal with aborrower on a 2% loan that if they
miss a payment, Great, it's a2% interest.
The discount has to be soabsurd on those types of loans.
Now where it can bebeneficial, and I'll just throw this
out there is if you don'tforeclose and they do on some of
(18:13):
these, the spread is so wide.
If you get it at such adiscount, sometimes might be worth
going back to the borrower andsaying, hey, I'll knock you out,
refinance, I'll give you$10,000 or something.
We've done that in the past too.
Now on a 2% loan they're notgoing to do it because they want
the 2%.
On a 5% loan, if rates are at6, you might be able to convince
(18:36):
them, who knows.
But I wanted to share thismistake we made in the past and want
to share it with you.
Just again, when you'relooking and evaluating the process
of bidding on non performingloans, look at every exit scenario
because again, like Imentioned on the other episode about
assuming that fastforeclosure, now you're assuming
(18:59):
foreclosure but you're notlooking at some of the other avenues
or options.
And some of those otheravenues or options could put you
at a significantly greater risk.
So that's all I have for today.
We will continue on thisseries in the future and more ways
(19:20):
on non performing loans,looking at them, bidding on them,
understanding what to look forand make sure again we're going to
share our lessons learned,share some of the mistakes we have
made to hopefully make you abetter investor.
Want to thank you forlistening or watching this episode
(19:40):
of the Paper Trail podcast.
As always, leave us a likereview on your favorite listening
station.
Make sure also, if you're onFacebook, join our Facebook group
it's Paper Trail.
You can look it up.
We are on there and if youhave any other questions, reach out
to us and goto7einvestments.com we have information
(20:03):
whether you're a buyer ofloans where you can get sign an NDA,
get on our list.
We're always putting loans outfor sale.
Or if you're interested inmore information about investing
within our fund, you can findthe information there as well.
I want to thank you, hope youenjoyed this episode and as always,
I will catch you on the next one.
Welcome back everybody toanother episode of the Paper Trail
podcast.
I hope you're doing well.
As we mentioned previously, weare doing a multi segment episode
of pricing non performingloans and mistakes that we see people
make and making sure we shareour stories, highlights and mistakes
(01:06):
we made in the past.
So you have the ability tocorrect, you know, or let me say
learn from the mistakes of others.
Which is one of the best waysto learn is by hearing the stories,
hear what people go throughand taking this information and just
putting it in the back of yourmind so again you don't make the
same mistake we did.
(01:27):
We just finished the thirdquarter of 2025.
It was a great quarter for ourcompany overall.
We bought more assets thanwe've ever bought in any quarter,
had some payoffs, someforeclosure sales, took some properties
back.
Extremely busy.
Our portfolio has reached wellover I think 100 assets.
(01:49):
We're nearing a thousand investors.
So great quarter and finishedgetting our information into the
sec.
And now the fun part of nextmonth will be getting close to starting
our financial audit which ifanyone has never been through an
audit.
It's actually a veryeducational process to go through
(02:11):
and understand valuations ofloans, valuations of companies.
It's much more in depth thanjust taking some numbers and plugging
them into a spreadsheet to saythe least.
But I've also got my coffeeripple and ready to go.
Funny story, I was having aconversation with people about like
type of coffee you drink andso forth and you know, do you use
(02:33):
a Keurig or the kind ofespresso one.
I forget the type we have aswell, but I just make drip coffee
every morning, nothing fancy.
Make some, you know, dripcoffee and go from there.
One last thing I want tomention is for those who do follow
(02:55):
and watch a podcast, be on thelookout for for some paper stack
seminars.
Looking at potentially havingsome online seminars in the future
talking about topics such asbookkeeping as we approach the end
of the year, how to properlyput your notes into your books.
That's always a common theme,common question.
(03:17):
Another is reviewing tapes,going through a tape and how to sort
through a tape and lastly duediligence, throwing out some due
diligence files so we can worktogether with people and understand
how to walk through due diligence.
So stay on the lookout for that.
I haven't announced anything.
It's in the back of my mind ofsomething that looking to to do to
(03:40):
again share and grow theeducation programs out there.
I used to have a membershipgroup which was paid membership and
I actually disbanded itbecause a of time and trying to resources
and I didn't feel like I couldfully commit to it and wanted to
(04:01):
try and step back from thingswhich is kind of what I did.
And one of the ways of I stillwant to of course give back coming
from you know, my family andthat education background and one
of the ways I think I can dothis for people is once a month having
a seminar.
People can come on, can learnand continue to grow, can network
(04:22):
and all lead up to you know,future future in person conferences
as well.
So I just want to give someinsight on that and again stay tuned.
Lastly, for those who lookingto Potentially invest with 7e, our
Regulation A offering isclosing in mid November.
(04:44):
So if you're interested in ourRegulation A shares program, check
it out@7e investments.com Onelast note and I apologize for the
5 minutes of abble I amspeaking but one of the things we
launched this past quarter I'mgoing to talk more about in the future
is a private lendingcorrespondent lending program and
we'll talk more about that.
(05:06):
But we now can provide loansto real estate investors and this
isn't hard money loans at 12, 14%.
These are DSCR loans in the 6and 7 percents as well as some fix
and flip loans between 9 and11% depending on credit and amount
of borrowed.
So extremely valuable for realestate investors who especially are
(05:30):
paying those high interest rates.
We've got some partners who wecan work with to get you better rates
on loans.
So just another aspect of ustrying to give back.
And the same token, yes, we domake a few bucks off of it.
And of course it's somethingthat we wouldn't do if it cost us
money.
But it also I think issomething that's a win win for everybody
(05:53):
involved.
Okay, enough of that.
Let's dive in today.
Talk about bidding on loansand understanding you just don't
put the numbers into the spreadsheet.
You can review the property,the predicament and the person and
all of that and everythinglooks good.
(06:15):
But let's talk about the loanitself in a mistake that I made way
back in the day that basicallyhighly recommend people try to avoid.
And what that is are loansthat are not seriously delinquent
(06:37):
and have a low interest rate.
Let me give you an example.
A $100,000 loan at 6% is $600a month.
Let's say a borrower is sixmonths behind on payments, 30 $600
six times 600.
(07:00):
You buy that loan and let'ssay, oh, you buy that loan at a non
judicial state and let's sayyou buy that loan for, you know,
$70,000.
Okay?
Thinking that I'm going tofile for foreclosure, you know, go
(07:25):
through the process andforeclose on this borrower.
Let's say a Property is worth $100,000.
Okay?
Thinking okay, I'll take itback, I'll be able to sell it, sell
it for 90, paid 70.
I'm gonna make $20,000 in sixmonths on this deal.
All is good.
Okay?
(07:45):
Remember, if you've watched myprior episode, we talk about common
sense and what would you do incertain scenarios?
And sometimes what is commonsense is not so common.
Let's say this borrower hasbeen in this property for 20 years
and the kids grew up there.
They may still or may have children.
(08:07):
Rent in the area is $1,200 a month.
Where are they going to go?
Okay, what if the person alsolost a job or just got their job
back, whatever the case may be.
You just looked at all thenumbers based on a foreclosure and
the numbers work.
If it was just based on aforeclosure, what if that borrower
(08:33):
turned around and reinstatedthat loan and you know, you got the
$3,600 and then they startmaking their payments of $600 a month.
Okay.
Now you still, when you netout servicing fees, other costs,
other things involved, everything.
(08:56):
Let's just say it's $550.
Yeah.
Okay.
That is essentially $6,600 ayear that you're getting in and you
got that payment and themoney's coming in the door.
Now in this instance, you'regetting on your, you know, seventy
(09:16):
thousand dollar investmentminus the several thousand you got
in a reinstatement, you'rebasically making 10% on the deal.
Okay.
If the borrower were tocontinue to pay on a consistent basis,
but what happens is theborrower misses a month here, misses
a month there, and you know,continues to back and forth a little
(09:41):
bit, but never gets 90 daysbehind, but does get behind where
your servicer starts chargingyou extra fees, that is going to
dwindle down into your returns.
10% still isn't bad, but whatwe're seeing is loans from 2001,
(10:06):
2002, 2003 that are written at 3%.
Okay.
And on $100,000 loan, 100K at 3%.
I'm actually looking this upright now.
Basically you are at, what isthat magic number?
(10:27):
Four hundred and seventy sevendollars a month.
Okay, so if they're alone at3% on a hundred thousand is 477.
And then after servicingeverything else, we're just going
to round up say 450.
Okay, it's $5,400 a year onbest case.
(10:52):
And then at the 70,000, youknow, you made a little money.
But whatever case may be,you're back in the 6 to 8% yield
on a borrower who may havebeen behind, may have not been performing.
Of course they weren't becausethe loan was behind.
So here's a question I ask,are you better off originating a
(11:17):
loan to somebody with 800credit as a private lender loan at
8 or 9% or buying a six monthbehind non performing loan that's
written at 3% and possiblyforeclosing, but possibly then getting
this borrower to reinstate andthen getting 6 or 7%.
(11:39):
So this is where I know a lotof people talk about IRR and everything
else.
You know, that's where IRRcomes into play when you're valuing
multiple exit strategies.
Multiple strategies.
But I just want people to beaware as this is reality when I look
(12:00):
at loan tapes and if I wantedto buy that loan and target a 12
or 15% return, if it were tobe reperforming, you might be at
like 40 cents on the dollar.
So you'd be at 40, 40,000.
(12:21):
So why the while the numbersdo work on when it's non performing,
it doesn't work if theborrower reinstates.
Now that's somethingdefinitely, especially in non judicial
states, something youdefinitely want to look into.
(12:45):
Because if you plug in to yourcalculators, something in a non judicial
state that you're going to bein and out of that loan and save
in a year and you wanted tomake 20k on $100,000 loan, or you
want to make 20%, you bid 70,65 or 70,000.
(13:06):
The numbers are probably goingto work or be very close.
But if that borrower turnsaround and reinstates that loan and
you're collecting payments on3, 4, 5% loan, it doesn't work.
Think back in the news also,oh, I don't know, a year or so ago,
(13:27):
Silicon Valley bank kind ofwhat happened to them was they held,
which is not.
Companies should do this, thatare that size as a bank.
They're holding a lot of thesebonds that were only like 3% bonds
and then interest rates shotup and people had a run on their
money.
They went to go sell thosebonds at 3%.
(13:48):
But today's rate is 5%.
So I can go get a new bond at 5%.
Why would I pay par or facevalue for a 3% loan?
They had to discount theliving, you know what out of it.
It's no different than these mortgages.
These mortgages are written at3, 4, 5%.
Now the going rate on amortgage now is 7%.
(14:09):
So you could go originategreat credit to somebody at 7, 8.
I mean, if you do privatemoney, you should be at 9 to 12%.
So why would you want to.
Now, again, you still may beable to foreclose in the numbers
do work great if it goes downthat foreclosure path.
Yes, you foreclose, you makeyour 20%.
(14:29):
Foreclosure providessignificantly better economics.
It works, but if you don't.
And again, lesson I learnedthe hard way of this was back, oh,
you know, I learned thisbefore COVID So we weren't touching
(14:51):
anything at 3, 4, 5%.
Oh, there was a loan that backin the day they did these 2% modifications.
I think this was before COVIDor one was thrown in a pool and basically
one was at 2% and Navarro wasa year behind.
But the numbers still don'tmake sense even at a year behind
(15:16):
at a 2% loan.
So we ran it as a foreclosureand basically took the risk, understanding,
yeah, you know, if they reperform, but they're not going to
perform, they're a year behind.
Oh, they borrowed money from afriend, got it reinstated, and then
you're stuck with a performingloan at 2%.
(15:38):
You actually, when looking atthese loans that are lower interest,
you actually want them furtherbehind because then it's going to
be more likely that they can't reinstate.
But then the quandary comes.
The, you know, person and aspouse with two kids, they lost their
(16:02):
job, they got their job backand they want to modify the loan
or they want to give you some money.
They want trial payment plan,you say, no, I'm just going to foreclose
on you because my numbers onlywork if I foreclose on you.
Some people will do that.
That's not something wetypically tend to do as we typically
want to work with the borrowers.
(16:23):
And this is why these types ofloans we also typically shy away
from because a, they're goingto sell based off of more of the
foreclosure number.
So you're not going to be ableto work with them, or you can, but
you're not going to get adesired return, which are, you know,
I Also have a responsibilityto my investors, which that wouldn't
be fulfilling that responsibility.
(16:45):
And you're stuck in thatquandary because if the borrower
wants to get some type oftrial payment plan or has something
and you look and yeah, theycan afford it, what do you do?
And again, you don't find anyof this in any course that anybody
teaches.
So you have to understandthat, you know, kind of dynamics
(17:07):
that go back and forth onthese low interest rate loans.
And if the borrower wants tostart working, paying again or not,
the economics may not work.
So these low rate loans withminimal delinquencies, and I say
minimal, it could be 18 monthsor less, can be a trap, especially
if they reinstate, because ifthey do reinstate, there's nothing
(17:30):
you can do.
Then you're stuck with a lowcoupon loan that's performing.
And what's that going to sell for?
You know, if somebody's buyingit and wants 10 or 12%, that thing's
going to sell.
Now we bid on some loansrecently that are in that price range
and I just told them like thisis going to be the lowest bid you've
ever seen because our numberswere like 25 and 30 cents on the
dollar.
(17:50):
And it's home because I can gooriginate loans in double digits.
Why do I want to deal with aborrower on a 2% loan that if they
miss a payment, Great, it's a2% interest.
The discount has to be soabsurd on those types of loans.
Now where it can bebeneficial, and I'll just throw this
out there is if you don'tforeclose and they do on some of
(18:13):
these, the spread is so wide.
If you get it at such adiscount, sometimes might be worth
going back to the borrower andsaying, hey, I'll knock you out,
refinance, I'll give you$10,000 or something.
We've done that in the past too.
Now on a 2% loan they're notgoing to do it because they want
the 2%.
On a 5% loan, if rates are at6, you might be able to convince
(18:36):
them, who knows.
But I wanted to share thismistake we made in the past and want
to share it with you.
Just again, when you'relooking and evaluating the process
of bidding on non performingloans, look at every exit scenario
because again, like Imentioned on the other episode about
assuming that fastforeclosure, now you're assuming
(18:59):
foreclosure but you're notlooking at some of the other avenues
or options.
And some of those otheravenues or options could put you
at a significantly greater risk.
So that's all I have for today.
We will continue on thisseries in the future and more ways
(19:20):
on non performing loans,looking at them, bidding on them,
understanding what to look forand make sure again we're going to
share our lessons learned,share some of the mistakes we have
made to hopefully make you abetter investor.
Want to thank you forlistening or watching this episode
(19:40):
of the Paper Trail podcast.
As always, leave us a likereview on your favorite listening
station.
Make sure also, if you're onFacebook, join our Facebook group
it's Paper Trail.
You can look it up.
We are on there and if youhave any other questions, reach out
to us and goto7einvestments.com we have information
(20:03):
whether you're a buyer ofloans where you can get sign an NDA,
get on our list.
We're always putting loans outfor sale.
Or if you're interested inmore information about investing
within our fund, you can findthe information there as well.
I want to thank you, hope youenjoyed this episode and as always,
I will catch you on the next one.
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