Due Diligence Through Dispositions with Bill Bymel

From Due Diligence to Disposition: A Real-World NPL Case Study

Most conversations about due diligence in note investing stop at the checklist: order a BPO, pull a title report, check for bankruptcy filings. But professional-grade due diligence is a continuous process that begins before you submit an offer and does not end until the asset is resolved. Bill Bymel, founder of First Lien Capital and a 12-year veteran of the non-performing loan business, demonstrates exactly what that looks like by walking through the full lifecycle of a real 23-loan trade purchased from the Carrington servicing platform.

This session covers the four pillars of asset-level due diligence, the cost and timeline of professional-grade research, how to use due diligence findings to reprice loans before closing, and how rapid dispositions can generate outsized returns within 60 days of funding.

The Four Pillars of NPL Due Diligence

Every asset in a non-performing loan trade needs to be evaluated across four dimensions before closing. Skipping any one of these creates blind spots that can turn a good deal into an expensive lesson.

Bymel's approach to the Carrington trade illustrates how these four pillars work together. The trade was heavily weighted toward New York — a judicial foreclosure state with long timelines and active moratoriums at the time of purchase. That state-level risk profile made every dollar spent on due diligence worth the investment.

Cost and Timeline of Professional Due Diligence

One of the most practical takeaways from Bymel's walkthrough is the actual cost and timeline of institutional-quality due diligence. For this trade, the budget ran approximately $800 to $1,000 per asset, with the process taking four to six weeks from start to finish.

For the New York loans in this trade, Bymel spent an additional $3,000 to $5,000 on attorney reviews focused on statute of limitations concerns and complex foreclosure case histories. That extra spend is not standard on every trade, but in states with long-running judicial cases and potential standing challenges, it paid for itself multiple times over.

Running Multiple BPO Layers

A single broker price opinion is a starting point, not a conclusion. Bymel ran four separate BPO layers on the Carrington trade to triangulate property values:

1. Seller BPOs -- the valuations provided by Carrington in their marketing materials
2. Boots-on-the-ground BPOs -- local agents who physically visited or drove by the properties
3. Third-party vendor BPOs -- national vendors like Accurate Group that provide standardized commercial-grade reports
4. Internal analysis -- Bymel's own team comparing all three sources and reconciling discrepancies

The gap between these layers can be dramatic. On one Westchester County, New York property, Carrington's BPO showed a value of approximately $1.1 million. Bymel's local agent valued it closer to $2.5 to $3 million. His third-party commercial BPO came in at $1.5 million. That range -- from $1.1 million to $3 million on the same property -- demonstrates exactly why a single valuation source is never sufficient for pricing decisions.

Using Compliance Reports as a Repricing Tool

Regulatory compliance reviews serve two purposes. First, they verify whether the origination file is complete enough to support a future sale of the loan as a re-performing loan to institutional buyers. Second, they provide legitimate grounds for repricing.

Compliance vendors like Infiniti score each loan file and flag deficiencies. Scores of one or two are generally acceptable. Higher scores indicate missing or deficient documents -- the final 1003 application, executed title policies, HUD-1 settlement statements, or other origination records.

For pre-2004 origination loans, compliance is generally less of a concern because older origination standards were less stringent. But Bymel still runs the reports for two reasons:

• Secondary market pricing: Institutional buyers of re-performing loans will run their own compliance checks. Deficiencies result in price reductions of several points. Knowing the compliance status upfront lets you price accordingly.
• Repricing leverage: If a compliance report reveals deficiencies, you have a documented, objective basis for going back to the seller and requesting a price reduction before closing. Even on loans you intend to keep, the compliance report gives you an "out" if you decide the economics no longer work.

Title Reports: Finding What Others Miss

Bymel used ProTitle for title and tax reports across the entire trade. One critical lesson: even professional title vendors miss things. In this case, ProTitle failed to identify certain assignments that existed in the public record. Meanwhile, the seller's own collateral records showed gaps that could be partially filled by cross-referencing the title report.

The takeaway is that title due diligence is not a passive exercise. You cannot simply order a report and accept the results at face value. Your team needs to actively reconcile the title report against the seller's collateral list, the assignment chain documents, and any foreclosure case records. Large servicers like Carrington manage thousands of loans, and documents inevitably fall through the cracks. That is both a risk and an opportunity -- if you can identify and cure title deficiencies that the seller overlooked, you add value before you even begin the workout process.

Four assets in this trade lacked an original title policy or a copy. For loans headed toward foreclosure, this is a manageable issue. For loans intended for loan modification and resale as re-performing paper, a missing title policy can reduce the resale price.

Repricing and Final Population

Due diligence is not just about confirming your original assumptions. It is about using new information to adjust your price and decide which loans to keep and which to kick back to the seller.

Bymel entered due diligence on 23 loans at an original purchase price of $8.9 million (31% of total debt, 53% of BPO value). After completing due diligence, he kicked four loans and repriced several others:

• Simi Valley, CA -- Kicked. The borrower had a history of successfully getting foreclosure sales canceled and cases dismissed, and was counter-suing the prior servicer. The legal risk was too high.
• New York loan with standing concerns -- Kicked. Despite the property being at final judgment, an active appeal created risk of the case being overturned. The extra attorney review caught this.
• Sanford, FL -- Kicked due to file deficiencies.
• Seller-initiated kick -- One loan was removed by the seller before closing.

On the loans that survived, Bymel negotiated targeted reprices based on documented findings:

The Harrison loan repricing deserves special attention. Bymel discovered a $181,000 past-due property tax bill that Carrington had not identified. Because property taxes create a senior lien that must be satisfied, this represented a real cost that the seller had failed to account for in their pricing. That single finding saved $181,000 on one loan.

Collateral Review and Closing

Before funding, Bymel had the physical collateral files shipped via bailee letter so his team could verify that original documents -- the promissory note, mortgage, allonge, and assignments -- were present and authentic. Files for kicked loans were returned to the seller. This final collateral review is the last checkpoint before wiring funds.

The 19 loans that closed had a reconciled BPO of $13 million. The final purchase price was approximately 50% of BPO value. Bymel's team built a projection model incorporating expected resolution timelines (720-730 days for the longer New York foreclosure assets), negative carry costs, and multiple exit scenarios. The deal was partially leveraged, requiring approximately $2 million in equity capital with the remainder funded through a leverage partner.

Rapid Dispositions: Turning NPLs in 60 Days

Owning the loans for less than six months at the time of this session, Bymel had already resolved multiple assets and sold two loans as non-performing paper to other investors, with a third sale pending.

The Harrison, NY Disposition

The Harrison loan -- purchased for $672,000 after the $181,000 property tax repricing -- was the standout. Here is the sequence:

1. Within 30 days of purchase, Bymel negotiated a trial payment plan with the borrower: two lump-sum payments of $50,000 each before year-end, followed by a six-month trial modification, with the remaining debt wrapped into a modified loan.
2. Marketed the loan as a near-performing asset, presenting the signed trial plan and two independent BPOs ($1.5 million and $2.5 million) to prospective buyers.
3. Received an offer of $1 million from a buyer who saw the loan as nearly performing with strong equity coverage.
4. Closed the sale at $922,000 after the buyer's own due diligence adjustment.

The result: a $250,000 profit on a single loan in approximately 60 days. The critical insight is that the $181,000 property tax bill that justified the repricing from Carrington was not a concern for the new buyer, because the new buyer was purchasing $1.29 million in total debt on a property worth $1.5 to $2.5 million. The taxes simply became part of the total debt balance -- a borrower responsibility backed by ample equity coverage.

The lesson: reducing uncertainty maximizes value. Bymel bought the loan at a discount driven by an unknown tax liability. He then resolved that uncertainty by documenting it, negotiating a borrower plan, and obtaining independent valuations, and sold the loan to a buyer who could see the full picture.

The Pensacola, FL Disposition

A smaller loan purchased for $25,000 (against $52,000 of total debt on a $90,000 property) reached final judgment two months after closing. Rather than take the property through the foreclosure sale, Bymel sold the note to a third-party investor for $45,000. The buyer wanted the real estate and was willing to complete the foreclosure process. Bymel exited with a $20,000 profit in under four months.

The Three-Loan Oakhill Trade

Bymel also shared a separate three-loan trade purchased from Oakhill Advisors -- the last three assets from a five- to six-year-old fund. The trade included two Florida loans and one Las Vegas loan, purchased for $455,000 total (40-50 cents on the dollar of UPB).

The Lakeland, Florida loan was set for foreclosure sale days after the cutoff date. Bymel's due diligence uncovered a pending short sale listing at $300,000, confirming the property value. He instructed the servicer to set the foreclosure bid at $269,900 rather than the full $311,000 total debt that Oakhill had originally instructed. The property went to a third-party bidder at $278,700 -- generating approximately $100,000 in profit on that single loan before the trade even funded.

The Las Vegas loan carried a complex litigation history involving an HOA lien strip that had cost the prior owner over $100,000 in legal fees. Bymel hired Oakhill's existing attorney to maintain continuity. Weeks after closing, a pending appellate motion that had been languishing for a year was granted, resulting in a $255,000 judgment recovery.

Combined, two of the three loans returned $533,700 against a total trade price of $455,000. The third loan was effectively acquired for free with additional profit already realized.

Key Takeaways for NPL Investors

Spend the money on due diligence. At $800 to $1,000 per asset for standard research, and more for complex judicial states, the cost is a fraction of the potential savings. A single property tax discovery saved $181,000 on one loan.

Layer your BPOs. Never rely on a single valuation source. Seller BPOs, local boots-on-the-ground agents, and third-party commercial vendors often produce materially different numbers. The truth is usually somewhere in the reconciliation.

Use compliance findings strategically. Compliance reports are not just about checking a box. They are a documented, objective basis for repricing negotiations and a predictor of your resale economics.

Do not fear late-stage foreclosures. Loans deep in the foreclosure pipeline often carry large arrears balances and accumulated servicer advances in total debt. Those inflated debt figures can create buying opportunities where you acquire loans at pennies on the dollar relative to property value.

Hire attorneys in complex states. The extra $3,000 to $5,000 that Bymel spent on attorney reviews for New York statute of limitations issues prevented him from buying into at least two loans with serious legal defects.

Reduce uncertainty to maximize resale value. The gap between what you pay and what you sell for is often a function of information asymmetry. Document everything, resolve open questions, and present a clean package to the next buyer.