Woodcliff, NJ - Non-Performing 2nd Mortgage Note (Small Payoff Case Study)

This non-performing second mortgage was purchased back in December of 2023 on a property in Woodcliff, NJ. At the time the property was valued at $850,000. Shortly after the mortgage was purchased, we hired a law firm that manages foreclosure cases. The law firm sent out a legal demand letter. Since we didn't hear from the borrower when the legal demand letter expired, we moved forward with the foreclosure process. After the foreclosure complaint was filed (we also had to file an amended complaint), the borrower's Attorney reached out to our Attorney to resolve the delinquent 2nd mortgage.

We weren't positive what the borrower's 1st mortgage balance was at the time of purchase, it was Unknown. The Borrower's also had a $130k Judgment against the property (Title Report stated - State Tax Lien or Warrant). The 2nd mortgage unpaid principal balance was $4,496.68, plus they owed another $223.27 in past due interest & late fees. We spent $4,813.90 in foreclosure legal fees & some other expenses, that were lender recoverable legal expenses. With a total payoff number of $9,623.85.

We agreed to a payoff on the loan of $8,623.35, we gave the borrowers a $1k credit on the payoff amount. The Borrowers also paid the fees to Release the Mortgage in the county records. It wasn't the best deal, but we got all of our money out of the deal in 10 months, and made a small profit. This was purchased with a handful of other loans, so it just made sense to get this deal done. It always comes down to what's best for the portfolio. As I always say, this is why I love note investing, both parties of the transaction come out ahead, creating a win-win for both parties.

Here are the Deal Numbers: