Notes & Note Investing

What Is A Note?

A note also known as a promissory note is a promise to repay a loan. The mortgage is the documentation that records a lien against real property that secures the note. The note is the contract between the borrower and note holder in which the borrower agrees to repay the loan to the noteholder under specified conditions, e.g. interest rate, late fees and loan term.

Notes available for investment break down into a variety of groups: 

Secured or Unsecured -  A note which is guarnteed by a tangible asset, like real esate, is secured. A student debt loan is unsecured since the note holder can not foreclose on the borrower's education. 

First Position or Second Position - If a single asset, like a house, is securing multiple notes, each note will be assigned a prioity, usually based on when each note was recorded. First position notes are considered top priority. 

Performing or Non-Performing -  When a borrower maintains regular, on-time payments the note is performing. If the borrower stops making the contractual payments for any reason the note will become non-performing. 

Resenditial or Commercial - Notes which are secured by residential property are considred residential notes, whereas commerical notes are secured by commercial property.

Investing In NonPerforming Notes

Banks unload non-performing notes to get cash, write off losses and mitigate risk. We establish relationships with banks so we can purchase their notes at deep discounts when they are looking to unload. The note purchases are funded by our joint venture partners who are interested in investing funds from personal accounts, or self directed IRAs. We work with our joint venture partners to understand their investment goals and expectations and to purchase notes that are best suited for each individual's needs. Once the notes is purchased we work with servicers and loss mitigation experts to contact the borrower and work out the note. The wide variety of exit strategies provides ample opportunity to meet investor expectations and maximize returns. The work out process can take as little as 3 months or as many as 18 months depending on a variety of circumstances. 

Exit Strategies

Reperforming Note - We work closely with the borrower to set up a mutually beneficial agreement and the borrower resumes monthly payments.

Refinance - The borrower takes out another loan in order to pay off our note. Government assistance may be available to assist the borrower find a new loan.

Short Sale - The borrower finds a buyer for the real estate and pays off the note through the sale, usually at a discount on the full balance.

Deed In Lieu - The borrower decides to walk away from the property and signs the title to us.

Foreclosure - When no other solution can be reached a forclosure must be performed.

Note Content

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