Correspondent Loan Follow Up Part 5

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

I haven’t posted on this subject in a while but I thought I would give an update on the New Century loan that we were stuck with after they stopped buying loans. As you know from my previous posts we have been looking at a loss of between $60,000 and $120,000 on this loan as the "scratch and dent" loan market is currently saturated with bad loans. This excess supply drives down the prices of loans anywhere from 90-60 cents on the dollar.

Yesterday I received a letter from our warehouse bank saying that they were going to suspend our line if we were not able to forward them a copy of the closed loan file and 5% of the loan balance (approximately $25,000). Needless to say I was not too happy. While we will scrape together $60,000 to get rid of this loan, coming up with $85,000 out of our pocket all at once is not an option.

The letter they sent said they sympathized with all those who were adversely affected by New Century’s closing but that they had to follow their credit policy. I didn’t take to kindly to those words as my warehouse bank has done exactly ZERO to help me move this loan since it became clear that New Century would not buy it.

Our account rep was more than understanding and actually was surprised that their company sent such a stern letter to its customers who are in spots just like us (or much, much worse). We were able to get an extension – they’ve given us an additional week to get the new loan funded and close this loan off of our books.

Luckily, we’ve found an investor who will buy the loan from us and we only have to bring about $60,000 to the table to finish the deal. The last offer we received would have required us to bring more than $100,000 to the table. This should be done hopefully by the end of next week. I just want to get it done and off of our books at this point.

If all goes according to plan we’ll be refinancing this woman in to a new loan with a loan balance $60,000 less than her current mortgage. Not a bad deal for the woman if you ask me.