Need advice on carrying paper


#1

For any experts out there who has done it before…What are the steps I should take to finance a MH for a buyer? It’s not a Lonnie deal because I don’t own it. I am just acting as the bank. I assume we need an application and ask for all the standard relevant information. I would forget the credit check in this case because they already told me that their credit was shot to heck the last few years due to some legal problems. They supposedly have one steady fixed retirement check from the husband approximately $1700/mo and the wife works and nets another $1700-$1800/mo. If I could confirm that, would you hesitate loaning the money out? They are buying a 2004’ MH at $93,000 and planning to put down $10,000 as deposit. (Yes, they cost that much in Calif.) Lot rent is $375, so I figure if I could work their payment to around $1,000/mo, it should be comfortable enough for them being that will approximately be 1/3 of their take home. Please let me know if this thinking is on track.

Other than if I should do this deal. What I need help with are the forms I need to do this transaction. What else do I need besides an application and perhaps make sure the MH is physically there for purchase. Do I need to do title search? Where do I go for that? Where could I go to get the right form to do the loan part of this deal. (The Truth in Lending equivalence) that shows the specifics of the loan, ie, interest rate, term etc.

Also, what do you recommend is a good rate to charge so that I won’t violate any usury law. The borrower and the MH are both located in California. Do I need to have some special license? permit? to do this deal?

Any help you could provide would be greatly appreciated.

Thank you in advance.

Helen G.


#2

Let me first say I am not an expert and someone else may give you much better advice, however, in my experience it seems as though most investors or those with capital to lend would technically purchase the home, and hold the title (something like a lease to purchase). I believe that is the least complicated, most secure way to deal with that type of transaction. So in fact it would be structured similarly to a Lonnie deal.

Again, I am not truly sure that is the best way, however, I hold a note on a 2001 DW and I have the title until the payments are complete. If they default, it will be much easier to get the property back this way.

Hope you find an answer.


#3

What?

So, how are you carrying paper if you dont own it? Wrap? And how are you making any money on this?

I would seriously rethink this - lots of risk and no control for a 12% or less return.

Have you already decided that you’re going to do this? It sounds like it. If so (sounds nuts to me), screening is just for your benefit, so do whatever you feel comfortable with.

You need to check with DMV for liens on title, and you need to apply to place a secondary (?) lien - ask the DMV for how to do this -

Please give more info on this situation . . . who owns it, what is owed, what are you investing, are these people relatives, how exactly are you “just the bank” if you’re not buying the thing - you have to get the title!?? or you’re buying trouble


#4

I am going to $ave you 83k by telling you NOT to do this deal, especially w/out reading (& understanding a credit report). Checking credit is an absolute essential, even if you have been told “credit was shot to heck the last few years due to some legal problems.” What legal problems? Because they weren’t responsible? All of my tenants & buyers have gawdawful credit, but I turn down 2/3 of my applicants–however, never because of FICO score. I can accept someone w/a 540 score, yet turn down the next one w/exactly the same score. There’s a big difference between a couple who had a medical emergency & a resultant BK, & a pair who have made every payment late for the past 5 years. Examining a report carefully w/disclose PATTERNS of behavior, & key tip-offs like unpaid utility bills or unreturned videos. Each payment is a sampling of BEHAVIOR, & past patterns are very indicative of future behavior. I tend to ignore medical collections, but very small & diverse collection accounts connote bad checks.

Steve was (uncharacteristically) gentle w/you, kid, but I’m telling you straight out that you aren’t ready for this big venture. Yes, I know MHs are expensive in Calif., but there is nothing to stop you from buying a well-seasoned partial (say 5-10k) note. You’ll have less risk, make more $$$, & be able to put your eggs in more than one basket.

Check your own state laws, but usury should not be an issue on a chattel mortgage (I charge 13.75-16.75 in my own mhp, MUCH more elsewhere). You can also charge points or “doc” fees (my minimum is $35 for something tiny up to several hundred for bigger deals) for the time & trouble of doing the papers.

Helen, I highly recommend that you do very small deals in the beginning, while you are still climbing the learning curve, & maybe forever. There’s more fussiness in a bunch of small loans, but the diversity gives much greater protection. Good luck!

Tye