The State of the Note Business

Owner Financed Note Business Increases 56% since 2008!

Why the big jump? More importantly, where is the opportunity for note brokers and note buyers?

Call it a mini “State of the Note Industry” if you Read more

Note Business Success in Five Words

We are often asked,

“How can I make it in the note business?”

That usually prompts us to ask a couple of questions to understand what, specifically, they mean by the question.

Some people want to Read more

Selling Mortgage Notes – Mortgage Donation Or Write Off?

Someone wants to sell their mortgage note but they haven’t received payments for a year, are in second position, or facing foreclosure. They need help but what can be done?

Here is an option for non performing mortgage notes you might not have heard about…donating to charity.  Our guest author works with a non profit organization with a unique solution to defaulted notes.

(Editor’s Note: This article is not intended as legal or tax advice.  Please seek the assistance of a competent attorney and/or accountant for legal or tax advice.)

Selling Mortgage Notes – Is a Mortgage Donation Better Than a Write Off?

By Dr. Ken Rich

What do you do with a mortgage, promissory note or deed of trust when the debtor stops paying?

After the probabilities of payment in full and resell at a discount are exhausted – is it worthless? What if the property is worth less than the 1st mortgage? What if you’ve heard that the bank is foreclosing on their 1st? What’s going to happen to you?

There are still three options available to debt instrument holders: Read more

Should I Use a Full or Partial When Selling Mortgage Notes?

There are many options when selling owner-financed mortgage notes. How many options will be largely dictated by a note buyer’s underwriting components, such as seasoning on the note, down payment, equity, and the payer’s credit.

You can usually sell the entire note, but perhaps just selling a specific number of payments is your best option.

Deciding on whether to sell the full balance of the mortgage note or to consider a partial really comes down to three things.

3 Questions When Selling Mortgage Notes

1. How much do you need?

If you have a $50,000 note balance (amount owed to you) and you only need $10,000 – don’t sell the whole note. The “discount” will be disproportionate to the amount of money that you need.

If the amount of money you need is close to the overall balance of the note you are selling, consider the full option.

2. Can you invest at a better return than the amount of the note discount?

Many people sell a note to pay off a bill or take care of a financial emergency. In other cases, people sell because they want to start a business or invest elsewhere.

If you are selling your note at 12% than you just need to invest the lump sum money in something that earns better than 12%. This may sound harder than it is, but if you are using some of the money to pay off a credit card or other high-interest debt, you will most likely come out way ahead.

3. Do you just “want out” of the Mortgage Note?

Some people just want to be done with the hassles of collecting payments on mortgage notes. You may not need all of the money, but you may not want to deal with holding a remainder interest in a note (ie: waiting for more money later). Sometimes peace of mind comes with a price. You may take a bigger discount selling the whole note, but you wont ever have to worry about if the buyers pays on time, keeps the property insured, and keeps the real estate taxes current.

This is certainly separate from a “financial decision.” Those are easy. They fit into a calculator and the numbers don’t lie. But humans are not built like machines (thankfully). So sometimes you just have to let your gut intuition be your guide.

The choice is yours…

The nice part is that, you typically have options when selling a note. Sometimes you may sell a partial only because, due to the underwriting, you would be just giving away the (full) note for the same price.

If you are selling a mortgage note always ask the Note Buyer or Consultant for more than one option. If you are a Funder or Note Broker – always present more than one option when offering to buy mortgage notes.

More Information on Selling Mortgage Notes

Top 5 Way to Buy Mortgage Notes

How Falling Home Prices Hurt When Selling Mortgages

Full or Partial Mortgage Sale? It’s All Dollars and “Sense”

Note Buyer Directory and 21 Insider Secrets You Must Know Before Selling Notes

 

 

Seller Financing – What The Real Estate World Needs Now!

Need a new car? Get one free with your next home purchase!

Desperate homeowners are offering all sorts of incentives to buyers in the wake of some staggering new data.

But forget granite counter tops, hardwood floors, and shiny new cars.  What the real estate world needs is financing.

So first the harsh reality…and then the owner financing solution! Read more

How Note Buyers Can Accelerate Return

Holding or buying mortgage notes and want a quick way to accelerate your return?

Sure, you can’t go back to your payer/buyer and tell them to mail more money or even increase their interest rate.

Matter of fact, you purchased the note “subject to” all the terms and conditions already in place and can’t change a thing…unless the payer wants to change them!

Try this…

Offer the payer to cut the interest rate in half (face rate of the note)

if they double their payment!

Let’s say the original note is: Read more

The Owner Financing Solution – Radio Interview

Last Sunday I was honored to be featured on KDOW 1220am radio during their Going Beyond Real Estate segment! Geraldine Berry, President of SJREI, was the knowledgeable host and we discussed how seller financing is providing a solution for buyers, sellers and investors in today’s market.

Geraldine was gracious enough to provide a recording of the interview for our readers here at Note Investor. Just click the link below to listen to the full Radio Interview or keep reading for the highlights!

Click the Microphone to Listen!

 

Highlights from Interview with Tracy Z. Rewey on The Owner Financing Solution! Read more

The BIGGEST Mistake Investors Make When Buying Cash Flows

In 1996 I was in the room with some of the brightest investors of our time.

They batted around terms and strategies that left my head spinning and my hand sore from writing down as many notes as possible.

I distinctly remember, just before ending the day, someone (not me) made a comment that brought everything to an abrupt halt.

“If I buy a note that pays for 10 years at 12%, I don’t have to worry about investing again for another 10 years.”

What got me was the number of people that agreed. Read more

Buying and Selling Notes – What is the Current Property Value?

One of the considerations when buying and selling mortgage notes is knowing the current value of the home. After all, the property is the collateral and knowing its true value will greatly affect how much an investor will pay for a note.

Historically this process was a bit easier, when everything was in an “up” market.  But with property values still on the downside or just recovering, it is often difficult to put a (safe) number on it. At least one that everyone agrees on.

Although there are excellent programs on the Internet that help the average consumer to get an idea of value, they are not always accurate. The actual value of a property can be determined in a couple of credible ways.

Often, note investors get what they call a “drive by” appraisal or valuation.

Usually performed by a licensed appraiser, the report will  include other sales or comps in the area. The main difference is a “drive- by” evaluation does not require the appraiser to have access to the interior of the property. The appraiser actually drives by and takes pictures from the street for the report.

Some investors are using what is called a Broker Price Opinion (BPO) – an evaluation based on the advice of a real estate agent or broker. They are often very similar comparable to a “drive by” and at a lower cost but do not follow the strict guidelines of a certified appraiser.

The note buyer may even require a full interior appraisal to get comfortable with the value. This might be the case when there are substantial improvements to verify or there’s concern over the property condition.

The actual approved or preferred method will be up to the individual investor.  While they are buying the mortgage note and not the property itself, the value is still important in deciding risk, investment to value (ITV), and the price they will pay to purchase the remaining payments.

Note Buyers Demand Original Promissory Note

In an effort to hang on to homes in foreclosure many owners are telling banks to, “Show Me the Note!”

It looks like Wall Street lenders are learning something private note buyers have known for years…

When buying and selling mortgages or trust deeds you need to get the original promissory note!

Put it in a safe place where it won’t get lost and make sure it comes with endorsements and assignments that follow the chain of ownership. You know, something that proves you own what you say you own.

It’s one of those things you don’t think about until you need it. One of those times happens to be when the buyer or borrower stops making payments.

In order to foreclose a Note Buyer must prove:

• the existence of the note
• the party being sued for foreclosure signed the note
• they are the owner or holder of the note in due course; and
• a certain balance is due and owing.

What does that mean in plain English?

Well, the promissory note is an obligation to pay, kind of like a check. If you want to cash the check you have to present it to the bank. If you want somebody else to get payment then you have to endorse and sign it on the back.

As banks bought and sold mortgages during the securitization craze many notes were lost or transferred without accurate paperwork. Lenders would then rectify the problem by substituting an affidavit of lost note. For many years the courts would routinely overlook missing paperwork or accept the affidavits when granting foreclosures.

But then the bubble burst, the real estate market came crashing down, and foreclosures skyrocketed. Disgruntled homeowners and consumer advocates started demanding lenders produce the note in an effort to stop foreclosure.

This movement scored its first big success in Ohio back in 2007 when a federal judge denied 14 foreclosures by Deutsche Bank National Trust Co. because the bank didn’t produce the original notes.

Since that time homeowners and attorneys have used this delay tactic at an alarming rate. They’ve also extended claims to other mishandled paperwork, contributing to the temporary foreclosure freeze announced by Bank of America, GMAC, and Chase in October 2010.

So what does this all mean to the cash flow business?

If you are a Seller that accepts owner financing be sure to protect yourself by keeping the original note in a safe place. If you are a Note Broker, verify the seller or a third party servicing agent is in possession of the document so it can be produced at closing. Note Investors will continue to be diligent in requiring the original in order to buy mortgage notes.

Click Here for a list of Note Buyers and Owner Financing Specialists!

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