Episode 42: Resolution Strategies Overview

Most note investors know they need a resolution — but knowing which one fits the situation in front of you is what separates a smooth exit from a drawn-out loss. In this episode, we walk through every path available to resolve a non-performing loan and when to use each one.

🔍 What you'll learn:

✅ Why three questions — what happened, where are you now, and what do you want to do — anchor every resolution conversation

✅ How a loan modification turns a non-performing loan into a cash flowing asset both sides can live with

✅ When a discounted payoff or short sale gets you to the finish line faster than any other option

✅ What a deed in lieu of foreclosure is and why title review is essential before you accept one

✅ Why foreclosure is the last resort — and why having it ready often means you never have to use it

This program is for informational purposes only and should be independently verified before taking action.

Transcript

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Welcome to the show, where you'll learn how to invest in mortgage notes, the savvy real estate investor's secret weapon to create cash flow without tenants and property acquisitions for pennies on the dollar. My name is Robert Haitha, founder of Fix Notes, and my mission is to make note investing ethical, profitable, and accessible for you. In every episode, we're democratizing the industry to put these powerful Wall Street assets into the hands of main street investors like you. So without further ado, let's get into the show where you're in good hands with my AI clone. Let's go. This program is for informational purposes only and should be independently verified before taking action. When you buy a non-performing mortgage note, you are buying a problem that needs a solution. The resolution is how you turn that problem into a return. There is not one path to resolution. There are several. And the right one for any given loan depends on the borrower's situation, the property's equity position, occupancy, and what the borrower ultimately wants to do. Understanding the full menu of options before you buy a loan is what allows you to underwrite it correctly and manage it effectively once you own it. Every good resolution conversation starts the same way. Three questions. What happened? Where are you now? And what do you want to do? These are not negotiating tactics. They are genuinely how you figure out what a borrower's situation looks like and where the path forward might be. A borrower who lost their job two years ago but is now employed again is in a very different position than a borrower who has decided they no longer want the property and has already moved out. The conversation you have with each of them is completely different, and so is the resolution you are working toward. The first and most preferred resolution for an owner-occupied property is a loan modification. A modification restructures the terms of the loan so the borrower can afford a monthly payment and get back on track. As the note investor and lender, you have enormous flexibility here that an institutional bank does not. You can adjust the interest rate, extend the term, capitalize past due amounts into the new balance, and structure a plan that works for the borrower's current income. If the borrower can make even a modest down payment to get the modification started, that demonstrates commitment and gives you confidence in the agreement. A loan modification is a win for the borrower because they get to stay in their home. It is a win for you because you are creating a reperforming cash-flowing asset that you can hold for income or sell at a premium. When a modification is not feasible because the borrower cannot make consistent payments, a discounted payoff may be an option. This is where the borrower pays a lump sum that is less than the full amount owed to satisfy the debt and walk away clean. The investor accepts less than face value in exchange for a quick resolution and no further management costs. This works particularly well when the borrower has access to savings, a family member willing to help, or equity in the property they can tap through a refinance. Always ask for documentation of where the funds are coming from before accepting a discounted payoff. Knowing the source of funds tells you how real the offer is. A short sale is a resolution path for borrowers who want to sell the property but owe more than it is worth, or where the combined debt load makes a conventional sale impractical. The borrower works with a real estate agent to list and sell the property, and you as the noteholder agree to accept the proceeds as settlement of the debt, waiving your right to pursue any remaining deficiency balance. The borrower gets out from under a loan they cannot sustain. You get a faster and cleaner resolution than foreclosure. The property goes to a new owner who can maintain it. A deed in lieu of foreclosure is similar in outcome but skips the open market sale. The borrower signs the deed to the property directly over to the lender in exchange for release of the debt. This works when the borrower is cooperative, wants to move on, and the investor is willing to take on the property. Before accepting a deed in lieu, you need to review title carefully to make sure you are not inheriting other liens or encumbrances that would complicate ownership. Foreclosure is the legal process by which a lender enforces their security interest in the property when a borrower is unresponsive and no immaculable resolution is possible. It is not the first choice. It is the most time-consuming, most expensive, and most adversarial path. But it is a necessary option to have available. And the availability of it is part of what motivates borrowers to work with you on the alternatives. Having a foreclosure attorney identified and ready to move is a useful tool, even if you rarely need to use it, because sending a demand letter and initiating the legal process often gets a borrower's attention in a way that phone calls do not. Finally, selling the note is always an option. If you have acquired a loan, worked toward a resolution, and concluded that the situation is better suited for another investor, perhaps someone with better local knowledge or better capacity to manage that specific asset. You can sell the non-performing or partially reperforming loan to a buyer in the secondary market. Reducing uncertainty about the loan's status and documentation before you sell will maximize what you receive for it. The resolution playbook is not complicated, but it requires patience, empathy, and a genuine willingness to work with borrowers to find a path that serves both sides of the table. Next time, we are going to go deeper on loan modifications, how to structure them, what terms to consider, and how to think about the right payment for the borrower situation. Thanks for sticking around to the end, and thank you to my trusty Robot and the Fixed Notes team for putting together another episode. If you want to learn more and hang out with the real not AI version of me, join our free school community at school.com slash fixed notes. That's s k-o-l.com slash f I X N O T E S. In the meantime, we'll see you in the next episode.