Frequently Asked Questions
A note is the piece of paper that is the promise to repay a loan such as a 1st or 2nd mortgage. It is backed by real estate meaning the promise is secured by knowing you’ll own the property in the event the promise is unavoidably broken.
Notes that are held by individuals, not banks, are seller financed, or owner financed, notes. These notes are desired as investment instruments for people who prefer to diversify their holdings.
When a borrower pays on time then it is considered a performing note. When the borrower stops paying then it is called a non-performing note. While this is not the preferred path, we know plenty of ways to make the best of this situation.
Non-performing notes (NPN) occur when borrowers have stopped paying their mortgage to their bank. When you purchase a note from a bank or hedge fund, you become the bank and there are many strategies to employ to make the note profitable again.
NON-PERFORMING LOAN STRATEGIES TO KEEP THE BORROWER IN THEIR HOME
• Reinstate the Loan – The borrower starts making payments against the existing loan amount. This strategy works best when rent in the area is higher than the original mortgage payment.
• Modify the Terms of the Loan – You change the rate, term or amount due, or arrearages on the loan to a lower amount that the borrower can afford.
STRATEGIES WHEN THE BORROWER DOES NOT WISH TO STAY IN THE HOME, OR HAS ALREADY VACATED THE HOME
• Deed in Lieu/Cash for Keys – The borrower gives the home back to the bank (note investor). The bank may offer cash for keys to entice the borrower to give the home back in good condition before vacating the property. Once the house is returned, the debt is forgiven and it becomes a Real Estate Owned (REO) property. The bank (investor) can sell, rent, or offer owner financing to a new borrower for the property.
• Short Sale – The house may be sold below the unpaid balance (UPB). This amount is still above what was paid for the note. In this instance a realtor would be engaged to list the property at around 85% of Fair Market Value (FMV). By listing the property below Fair Market Value, the property will probably sell much faster. Also, because the note investor is the bank, the process is completed faster than a real estate short sale with a traditional bank.
• Loan Assumption – You swap one borrower for another. For example, in a divorce situation one spouse wants the home, but the other spouse desires to leave. You may release one borrower and the other person stays on the loan. The remaining party completes a loan application to make sure they can afford the home on their own.
• Cash payoff – With this strategy, the borrower pays off the loan and remains in the home. The bank may offer a structured payoff over a set number of months months or determine a lump sum payoff.
• Resell the Note – Since the note was purchased at a discount, you could resell the note and make a profit. You can add value to the note by starting the servicing, working out payment plans with the borrower, or even starting foreclosure if necessary.
• Foreclose on the Note – Once the non-performing note is purchased, the foreclosure process is started within 30 days. It puts pressure on the homeowner to act. By starting the foreclosure process, the borrower knows you are serious about getting a resolution.
Notes are recession proof – Note investors have opportunities to purchase performing and non-performing notes and get higher rates of return on investments than with traditional CDs, stocks or mutual funds. Adding note investments to your portfolio increases your portfolio’s diversification while decreasing its exposure to volatile markets.
Buying NPN (non-performing notes) Notes is Our Specialty!
We are happy with your visit to our Website. We are experienced Nationwide Real Estate Mortgage Note Buyers specializing in buying NPN (non-performing notes) purchases, foreclosures, buying, fixing, and selling houses, as well as bulk REO and enables us to close even the toughest deals that are often declined by other investors.
If you are a private note holder and interested in selling your mortgage note for cash now, we need to talk! Complete a Quote Request form to get started, or Call us at 254-300-6867.
Our payout percentages have been historically one of the highest in the Note buying industry.