Very cool stuff that you can combo together into a massive yield! I have not yet tried this, however I’ve heard of investor using this exit successfully.
What you will need is 1. cooperative borrower 2. that qualifies for HHF 3. and is willing and able to resume paying.
– Talk to the borrower and try to prequalify them for HHF
-Mod the loan with or with or without help from HHF
-Collect 3 on time payments from the borrower after a loan mod
– Now the borrower is qualified for FHA 10-23 refinance, which will pay YOU off at anything under 97.75% of FMV
Here is some basic math behind it (i like round numbers):
Note UPB- $70,000
Note BPO- $50,000
Note cost- $20,000
Area rents- $750
HHF help- $30,000
You paid 20k for a 50k asset that is under water by 20k. HHF (is successful) will pay you 30k for a loan mod which brings the UPB down to FMV (while refunding your note price).
Now you have a re-performing note for 50k and you are already 5k in profit from HHF.
After collecting first 3 payments on the note, borrower can re-fi for a much lower rate with FHA, which will cash you out for 97.5% and leave you with a total profit of :
