Chapter 8
Brad started the car and Brad noticed that she was staring at him with a strange look on his face.
"What's wrong?" he asked.
"Don't you ever stop? How many people can you help in one lifetime?"
Brad shut off the engine, "Well let's analyze this. First off, I have just made two good friends. One of these days I just might need a favor from them. Second, this is good business. Under the terms of the sale of my company, I get five percent of the net profits of the company for the next ten years. So I am really helping myself by getting a good employee who will help generate more profits. Third, I am making sure that they don't lose everything and wind up on welfare. So I just might be keeping my taxes down."
Amy continued staring at him, "That's convoluted logic."
Brad laughed until tears came to his eyes, "Well it works for me."
Brad drove to the bank and told Amy to come inside with him and watch how he works. They sat down with the manager and he asked if the bank would consider selling the mortgage on John's house. The manager pulled up the mortgage on his computer and studied it for a minute.
"It looks like we are ready to foreclose on this mortgage, they are three months behind on payments, and so I think that we would be amenable to an offer to buy the mortgage. There is ninety thousand dollars left on the principle and the mortgage has a life of eleven more years."
Brad studied the figures on the screen, "How much of a discount would the bank give on the mortgage. I will take over all servicing of the loan. It will be a straight buy-out."
The manager left to consult with the loan department and returned about twenty minutes later. He reviewed the computer printout in his hand and wrote down several notes. He made two more phone calls before turning to Brad.
"We can sell you this mortgage at a discount. This would save us from going through the foreclosure process. The discounted mortgage would sell for seventy thousand dollars."
"Fine, I will transfer the funds right now from my account. Your know Carl Samples, my lawyer. Get in touch with him about the paperwork. He has my power-of-attorney in business matters, so he can sign any papers in my name. "
Brad completed the transfer of funds and then shook hands with the manager and left the bank with Amy. She was silent as they walked to the car. Amy sat with a troubled look on her face.
"Ok, what's troubling you?"
"I don't understand what I just saw in there. I don't know if you just conned them or they just conned you."
Brad smiled. This girl was precious, "This was a straight business deal. This mortgage is what is known as a non-performing asset. The bank is only allowed to have just so many of these in their loan portfolio or the feds get after them. I saved them the expense of going through the lengthy foreclosure process, which would have cost them several thousand dollars in legal fees, ten percent to the auctioneer, and much paperwork in the bank. When a home is foreclosed, the buyer at the auction has to put down about fifteen thousand dollars on a home like this and has to settle within thirty days. Now most people cannot settle on a home that quick so the only bidders are investors. Naturally, an investor is trying to buy it as cheap as possible, so the bank might take a loss on the mortgage. In the end, I think they made out better selling me the mortgage at a discount than if they foreclosed."
"But I still don't see what's in it for you. Why is this good for you?"
Brad pulled out a Hewlett-Packard business calculator out of his glove box and started punching numbers into it. He got a note pad from the back seat and started writing numbers on the pad. He reviewed his figures and turned to her.
"I now own a mortgage with eleven years on it. I am going to refinance the mortgage at the current mortgage rate of six and a half percent. This will make the payments that John and Evelyn have to make about $944.54 a month. That payment over eleven years comes to $124,679.28. I paid seventy thousand dollars for the mortgage. That gives me a profit of $54,679.28. That's good business."
"I still don't understand how the bank could sell you a mortgage that someone still owed ninety thousand dollars on for only seventy thousand dollars."
"If you look at mortgage amortization tables, you'll find that very little is paid on the principle the first half of the mortgage's life. The bank has made a hefty profit on the mortgage up to this time; they have pocketed the lion's share of the interest that the mortgage will generate. By selling me the mortgage at a discount they are saving themselves some problems and they are still making a hefty profit, just not as much as they thought they going to make."
Amy shook her head hard, "You've got my head spinning. I don't know yet if you conned them or they conned you."
Brad looked at her seriously, "I just taught you a lesson that will be valuable for the rest of your life. Whenever you go into any negotiation, make it a win-win situation and you'll never lose. I could have bought the mortgage at a discount and kept the high mortgage rate that John and Evelyn have now, but the result would be that I transferred the bank's problems to me because John and Evelyn would still default on the mortgage and I would have to foreclose and would probably lose money instead of make money."
Amy was quiet for the ride home and went into the house without saying a word. She went up to her room. Brad walked into his office and called John.
"John, this is Brad Pittson. Can you get Evelyn on the phone with us; I have a little business to talk over with both of you.
Brad heard him call Evelyn and tell her to pick up the phone. When he heard Evelyn come on the line, he resumed their conversation.
"I just bought your mortgage from the bank. I want to renegotiate the mortgage to the current rates, which is six and a half percent. I want you to resume your payments starting one year from today. That should give you a chance to get back on your feet."
Brad heard the phone drop and heard loud sobbing. He heard Evelyn talking to John in the background.
Evelyn came back on the phone, "Brad you don't have to do this. I'm sure that we can make it some way."
"Nonsense, besides this is strictly a business deal. I'm still connected with Pittson in a minor way and I know John's work. Getting a good employee will put money in my pocket. Besides, I'm going to make a lot of money off of the mortgage. Now get with John and talk this over. If you both agree, I'll have my lawyer draw up the papers and get them over to you. There is no rush on that, since your next payment is not due for a year."
"God bless you Mr. Pittson."
"My name is Brad and I'm just glad that I can steal John away from his old company. I think we got the better part of the deal. By the way, the company is going to be delivering a computer and the rest of the equipment that John will need either today or tomorrow, so you'd better clean out a room that he could use as an office. If you need any phone lines put in or rearranged let me know."
After talking to John again Brad hung up the phone and called the computer consultant that he had used when he ran the company. He ordered the computer and a 21-inch monitor and a plotter. He explained that this was for a CAD operation in a home and told the manager to provide everything that he felt would be necessary to set the operation up. He explained how John's legs were in a cast and that he would need a desk that he could roll a wheelchair under and keep his legs out straight. The young man told him that he had everything in stock and would be able to deliver it in the morning.
While he was talking on the phone with John and Evelyn and the computer consultant, Brad had his chair turned around with his back to the door. When he hung up the phone and turned his chair around he saw Amy standing in the doorway with a sly grin on her face.
"Explain to me again how you're going to make so much money off of this."
Brad just gave her an exaggerated shrug and they both laughed.
"Mr. Pittson. You are something else. Maybe one of these days I'll
figure you out."