Sometimes Foreclosure Can Be A Valuable Tool For The Borrower In Default!
When the facts are lined up, foreclosure can be a wonderful strategy that occasionally works well for us. The purpose can be manyfold. Sometimes, we need to get rid of a difficult or uncooperative subordinate mortgage or lien holder, thus we work with the bank in this position to foreclose and wipe out the subordinate debt, then we work a deal with the first mortgage holder to resolve their issues favorably for both the bank and the borrower at the cost of the subordinate debt. This works well. Sometimes we may even force the foreclosure ourselves and stage the event for the purpose of reducing even the first lien holder or mortgagor. This works also.
Sometimes we have a difficult bank who believes that “exhausting legal remedies” is still the mandate from the SBA; it isn’t any longer, but not everyone read that memo. So we accept the bank’s position, cooperating with their foreclosure and then buying out the assets from the foreclosing bank for the price we want to pay, leaving the bank to collect from the SBA after they demonstrate to them what a good job they did. Occasionally we will even bid at the auction and purchase assets directly from the auction. It all depends on the level of cooperation between us and the first lien holder. In difficult, complicated situations, with many lenders all fighting for payoffs and unwilling to recognize their sorry plight, foreclosure may be the best answer as it wipes out everyone south of the first lien holder and frees the first lien holder to do the deal they–and we–want to do. Is there risk involved? Absolutely. It’s a calculated risk, as someone unexpected may bid in and win. It has never happened to us or our clients but it is a possibility.
Workout strategy is like a high stakes poker game but one where we know everyone’s cards and play ours face up. It works for us. We always have a Plan B and Plan B is frequently better than plan A, just a little more risky. This plan B is a very useful tool and is sometimes just what we need. The bottom line is that we always succeed at bringing in the results our clients need to emerge successfully. We know the many ways to get there and we use most of them.
