The borrower paid in full on day 47 and I did not see it coming.
Take a note bought at 38 cents on a $94,000 UPB, so roughly $35,700 in. The collateral was a single-family in a judicial state with an 18-to-24 month foreclosure timeline, borrower three years out of contact, property occupied but tax records showed the occupant was a relative, not the borrower. The thesis going in was foreclosure or a deeply discounted deed-in-lieu. Modification was not on the table because there was no borrower to modify with. The servicer sends a demand letter as standard procedure and on day 47 the borrower wires the full reinstatement amount, $94,000 unpaid principal plus $11,200 in accrued interest and fees, because a family member had died and left the estate enough to clear it. Total hold time was 47 days. Return on the $35,700 in was roughly 196 percent annualized, and the only thing that produced it was a servicer letter the borrower never responded to for three years before that. The lesson that sticks is that reinstatement risk cuts both ways. Everyone prices it as the thing that kills your foreclosure play, but an absentee borrower with undisclosed equity or a pending inheritance can hand you the best exit you will ever see, on a timeline you cannot model. The probate or estate connection almost never shows in the file you buy. Has anyone else had a reinstatement come through on paper that looked purely like a foreclosure, and did you price that outcome into your bid at all or did it just happen?
