Purchasing notes or mortgages (asset) on property with the underlying collateral being the property (asset) itself has been a very popular investment over the last 8 years, just about since the fall of the market around that time. However, the process itself has been around longer with far fewer people involved in it until recently. They can be complex investments as each state has foreclosure and redemption rights for property owners that the mortgage (note issuer) has to abide by. However, if you take the time to understand those rules, they may play in your favor. There are also plenty of homeowners that are underwater and have not gotten the attention of banks to renegotiate the terms for many reasons which we won't go into here, but can discuss on the phone.
There are several strategies to consider including reworking the loan with the current occupant at a higher or lower rate and modified principal, foreclosure, or, deed in lieu of foreclosures. They all come with a separate analysis. To explain further, you purchase a loan with a UPB (Unpaid balance) of $250,000 including principal, interest, and fees which have been accumulating to the homeowner. You pay $50,000 for the loan which includes all the rights to collect the debt in the terms that were written in the original mortgage. The current market value is $125,000. If the homeowner is still there and working, but has just not paid on their mortgage for the last year or 2 because the bank was threatening foreclosure, why not offer the owner a new loan at the new price of $125,000 at x interest rate for y years? What just happened is you gave the homeowner $125,000 that you never had, but had a right to collect because of the terms of the mortgage. You will collect the principal of $125,000 over time which is $50,000 profit for you. It is collecting interest on $125,000 not $50,000. How can you lose? The worst case scenario is that you have to take the house back from the person you gave the new mortgage to and sell it to someone else. There are other examples of win-win situations we can discuss.
I am going to include a firm here that I have a fee agreement with for referring you to them to purchase direct Single Family Residential non performing mortgages. These are nationwide. I suggest you learn as much as you can about any process like this and understand it fully before purchasing these loans and having them assigned to you for collections. The general process for this is to review the asset in place at your own expense as well as pull title and any public records. You may request the other lender documentation also with proof of funds/cash so that you can purchase what you are looking at. You would then make your offer, execute a wire transfer, review documents and obtain the assignment of mortgages. Your knowledge of that state law regarding mortgages will be critical in making money there. Do your research.
You can repeat the process over and over. Some homes will be easy, big, fast money! Others will be long and time consuming. You may not make as much or anything on some because of poor calculations on your part. Remember, the more advance study you do, the less likely you will lose money and time.