• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
NoteInvestor.com Logo with House next to words

Note Investor

How to buy, sell, broker or invest in private mortgage notes for cash flow!

Your #1 Source For
Note Investing Information!

  • Home
  • About
  • Articles
    • Notes 101
    • Note Brokers
    • Note Buyers
    • Real Deals
    • Seller’s Corner
    • Cash Flow Business
  • Learn
    • Sell Your Mortgage Note
    • Note Broker Training
    • How To Buy Notes
    • Note Buyers Directory
    • Creating Notes With Seller Financing
    • Note Investing 101 Series Videos
  • Bookstore
  • Contact

Billions of Non Performing Notes Selling in 2015

June 22, 2015 by Tracy Z 11 Comments

selling non peforming notesWe’re not even half way through the year and sales of non-performing note portfolios are already robust for 2015.

Part of the credit goes to requirements issued by The Federal Housing Finance Agency (FHFA) to reduce the number of delinquent loans in the portfolios of Freddie Mac and Fannie Mae prompting several sales by these GSEs (Government Sponsored Enterprises).

Largest Sale of Delinquent Loans by Freddie Mac

In March Freddie Mac executed its largest sale of delinquent loans to date on 5,389 seriously delinquent loans with an aggregate unpaid principal balance (UPB) of $985 million.

The sale was done via auction in three separate pools:

  • Pool #1: 3,577 loans with an aggregate UPB of $629.6 million
  • Pool #2: 1,331 loans with an aggregate UPB of $235.9 million
  • Pool #3: 490 loans with an aggregate UPB of $120.0 million

The averages on the three pools were:

  • Loan Size $182,562
  • Rate 5.5%
  • Delinquency: Approximately three years
  • Current LTV (to BPO): 76%.

The cover bid prices (second highest bids) were in the low 80’s percent of UPB for Pool #1, in the low 70’s percent of UPB for Pool #2 and in the mid 70’s percent of UPB for Pool #3.

Source: Freddie Mac News Release March 27, 2015

This followed an earlier sale by Freddie Mac of $392 million NPLs in February of this year and $596 million in August of 2014.

First NPL Offering by Fannie Mae

Fannie Mae jumped on the bandwagon by marketing its first ever offering of NPLs in April. The winning bids on approximately 3,000 loans totaling $762 million in UPB were announced on May 15, 2015 with closing anticipated in June.

The loans were offered in two separate pools:

  • Pool #1:  710 loans with an aggregate UPB of $173.8 million.
  • Pool #2:  2,358 loans with an aggregate UPB of $587.9 million.

The averages on the two pools were:

  • Loan Size $248,285
  • Rate 5.93%
  • Delinquency: Approximately five years
  • Current LTV (to BPO): 123%.

The cover bid prices (second highest bids) for Pool #1 is 71.9% of Broker Price Option (BPO) (58.8% UPB) and for Pool #2 is 71.0% of BPO (57.8% UPB).

Source: Fannie Mae News Release Dated May 15, 2015

Smaller Investors Targeted By Freddie Mac For Non Performing Loan Sales

The first Extended Timeline Pool Offering (EXPO) was rolled out in April in Miami-Dade County with bids due on June 2, 2015. EXPOs will be smaller pools with longer marketing times specifically designed to provide smaller investors time to secure funds to participate in the auctions.

All of these developments are in addition to the billions in ongoing sales of non-performing assets by traditional banks, hedge funds, and other entities.

Where Does The Private Note Investor or Broker Fit In?

Buying multi-million dollar portfolios of non-performing notes takes very deep pockets. They are often purchased by private equity hedge funds willing to buy the whole offering. They then carve out the notes they do not want and sell off in smaller pools or individual notes to private investors.

If you are reading all this and wondering, “Where do I fit in?” Here are some helpful tips:

1. Understand the differences between an originated mortgage loan and a seller-financed note by reading this article:

Can You Please Define Private Mortgages?

2. Decide if you are a performing buyer looking for cash flow or a non-performing buyer ready for negotiating a work-out or taking the property back as explained in this article:

What about buying or brokering non-performing and defaulted notes?

3. Learn the ropes from investors actively in the non-performing market. Our Finding Cash Flow Notes Training is on seller financed performing notes. Why? Because that is our primary focus and we like to teach what we do (crazy right?) If you want to learn the non-performing side of the note business a great start is to watch this video from Troy Fullwood, the NPN Pro:

How To Get Your Slice of a 580 Billion Dollar Opportunity!

 

Filed Under: Note Buyers Tagged With: buy delinquent mortgages, defaulted notes, Loan to Value, non performing note buyer, non performing real estate notes, private mortgage notes

About Tracy Z

Tracy combines her knowledge of real estate notes with the power of marketing online to help grow your business! She can be reached at Tracy@NoteInvestor.com or by calling 1-888-999-7905.

Reader Interactions

Comments

  1. Ronald E. Pine says

    March 10, 2018 at 7:57 pm

    Before the sub primp crash I purchased 36 second position Non Performing Mortgages. I Foreclosed on these houses made tens of thousands of dollars on each deal. My best and most profitable deal I made $80,000 at closing and this was done with my own money. So, now I am coming out of retirement and starting over but this time I will use other peoples money and we make millions. Anyone interested? I have closing statements as proof of my profits.

    Reply
    • Rob says

      March 21, 2018 at 12:11 am

      Do you have access to NPN’s?

      Reply
  2. Morad says

    April 21, 2017 at 7:42 pm

    Hi Tracy,
    Where can I find a forum for buying available performing notes and selling same to interested investors? Is there such a thing?

    Reply
    • Tracy Z says

      February 26, 2018 at 2:53 pm

      Hello Morad, There are several out there. NotesDirect has an MLS style listing for note sellers and buyers. You can read my review of them here: https://noteinvestor.com/buy-notes/find-notes-direct/ You can also network with our LinkedIn group at https://www.linkedin.com/groups/Note-Investor-Owner-Financing-Network-2079519

      Reply
  3. B.C. says

    February 11, 2017 at 9:11 pm

    Hi Tracy,

    Do you have a short list of hedge funds that will sell non performing notes to individuals? Most will only sell in bulk to other funds- but i know there are some out there that will at least give tapes to individual investors, and sell to them too.

    Reply
  4. Margaret Konieczny says

    February 26, 2016 at 3:32 pm

    Tracy, I am in the process of buying a second mortgage on rental property. The owner still has the 1st.
    HE has good rental income but the property is in a low income area and needs major repairs. He says the area is zoned commercial and believes in a couple of years he will sell it to some one with commercial interest.
    This note buying intrigues me. I hope I am doing the right thing. I am buying the 55,000 note for 50,000 and a monthly payment of 200.00. When the property sells in two years I will be paid the 55,000.
    Does this sound like a deal you would make?

    Reply
    • Tracy Z says

      February 27, 2016 at 11:55 am

      Hello Margaret and thanks for visiting and commenting on our site. Each investor has a different threshold for risk. Notes that are in 2nd lien position are considered VERY high on the risk scale. That doesn’t meant they can’t be done. It just means there is a higher likelihood of default and an investor should be compensated with a higher return for that risk.

      Here are a couple of links with articles on our site with more information:
      https://noteinvestor.com/real-deals/real-deal-149-%E2%80%93-seller-financing-second-liens-and-80-10-10/
      https://noteinvestor.com/sellers-corner/should-i-carry-back-a-second-mortgage/

      It is important to be sure you can get whole should the note in question default (or if the 1st lien should default). That would depend on 1) The current fair market value of the property 2) the amount of the 1st lien and 3) the ratio of the 1st to the second. Knowing whether the rental income can cover the debt, income, and expenses along with the payer’s credit score and note payment history would also be indicators of future repayment.

      I would also want a higher return. Yield calculations aside, that is a lot of risk for a $5,000 return in two years. For me, there are better returns in the note business without that amount of risk. It is also good to know the general “going rate” for a note. This provides liquidity should an investor need to resell later and it makes sure you are not drastically overpaying for the note. In my experience second liens often go for 50 cents on the dollar. In the case you described (where the owner still has the 1st) I would prefer to buy a partial on that 1st (rather than the second). This is going to lower the risk and lower the discount the seller would need to take.

      Ultimately the decision is up to each individual investor but in short… No this does not sound like a deal I would make.

      None of this is meant to be discouraging rather I encourage you to outline your parameters and keep finding deals that meet your note investing goals.

      Tracy Z

      These comments and this website are designed for informative purposes only and are provided with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or investing advice. If legal, tax, and investment advice or other expert assistance are required, the services of a competent professional person should be sought.

      Reply
  5. Chuck says

    October 3, 2015 at 11:45 pm

    Tracy Z,

    I am enjoying this forum and the information/tips I’m gleaning about things note related!

    I need you to go back in time and refresh my memory on hypothecating a note I want to use as collateral for the loan I’m going to get. Sound familiar?? Please reconstruct the verbiage I would use to accompoliish this. Or if you have a made up template that you can email to me I would deeply appreciate it.

    What other papers would the closer/attorney need to see or have, ( new note ect.) to fund the deal. I am using investors to fund it.

    In the Northeast, I haven’t found an attorney yet who is even knowledgable about Hypothecation!

    Well thanks in advance for your help. If I hear back by October 5, I may see you in Dallas!!!

    Chuck

    Reply
    • Tracy Z says

      October 7, 2015 at 2:24 pm

      Hello Chuck, The majority of institutional investors structure the note as a full or partial purchase rather than a hypothecation. There can be pros and cons to a hypothecation, with one pro being the note holder can still be liable for repayment. Other issues can come into play including lending laws. We have samples of standard note purchasing documentation in the Finding Cash Flow Notes Training but we always encourage getting all documents reviewed by the title company and an attorney as we are not able to give legal or financial advice.

      Reply
  6. Josiah Rich says

    August 19, 2015 at 4:14 pm

    I would like to know how to get started as an investor. Are there mortgage notes for as low as 10 k ?

    Reply
    • Tracy Z says

      August 20, 2015 at 3:09 pm

      Hello Josiah, Here is a good place to start for information on investing in notes: https://noteinvestor.com/how-to-buy-mortgage-notes/ There are some notes for 10K but most are larger. The smaller notes are often in second position. However, a partial purchase on a larger note could also be an option.

      Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Learn Real Estate Notes

Click the reports below to download your FREE copy of 5 Ways to Cash in on Notes AND a BONUS!

Search This Site

More to See

Investing Notes Risk

21 Tips To Read Before You Get Started Investing in Notes

Note Buyers Directory 2018 by NoteInvestor.com

Selling Mortgage Notes? Find the Right Note Buyer!

Learn Note Business

Learn the Note Business in 60 Seconds?

Cash Flow Notes Business Truth

5 Myths About the Cash Flow Notes Business

Most Read Note Buying Info

How To Buy Mortgage Notes
Creating Notes With Seller Financing
Note Broker Training
Get Direct With Note Buyers Directory
How Can I Find Cash Flow Notes?
Buying and Selling Notes For Residual Income
How Dodd Frank Mortgage Laws Apply to Seller Financing
How To Calculate Cash Flow Notes
Note Investing 101 Series Videos
Best of Notes 2022

Connect With Us

  • Facebook
  • Instagram
  • LinkedIn
  • Twitter
  • YouTube

Footer

Places to Visit

  • Creating Notes
  • How To Buy Notes
  • Note Broker Training
  • Note Buyers Directory
  • Sell Your Note
  • Bookstore

We Are Here to Help

Photo of Fred Rewey and Tracy Z of NoteInvestor.com
Fred Rewey & Tracy Z NoteInvestor.com

Receive the Note Investor Newsletter

COPYRIGHT © 2008-2023 NOTE INVESTOR | PRIVACY POLICY | CONTACT US
This website is for informational purposes. This is not an offer to sell or purchase any security. Nothing is intended as legal, financial or investment advice. Any historical data represents past performance and does not guarantee future results. NoteInvestor.com is owned by Diversified Investment Services, Inc.