Buy Notes - Hitting a Put Shot With a 9-Iron | Mortgage

Buy Notes - Hitting a Put Shot With a 9-Iron

Buy Notes - Who is Your Borrower?

by DeanEngle

Buy Notes - Who is Your Borrower?

A friend of mine who is a note broker, set up a call for me with the Senior Vice President of a CA bank. He was in charge of the banks note sales.

The SVP has 3 non-performing loans, commerical loans in the LA area. Ignore the fact that they're commercial right now.

Communication with Your Borrower, a Lesson on Buying Notes

Stay with me here...

So the SVP told me that one of the loans has a foreclosure sale scheduled 2 weeks from now.

And that she hasn't spoken to the borrower (a builder/developer) in several months.

I asked her if she was concerned about the loans or not, and if she was worried about whether she would have any problems taking over the properties through the foreclosure.

She told me she wasnt concerned because the property values would allow them to pay off their loan.

My Concerns With Buy Notes Situation

The main thing that I've learned while I've been in the note buying business is that your relationship with your borrower is key and you need to manage it properly.

By not working with your borrower, you can really mess up your chances of getting out of your note deals.

Let me explain...

For all loans, there are 5 Note Buying Exit Strategies:

refinance, short sales or deed-in-lieu, reperformance, note sale, and foreclosure.

Only 2 of those plays, foreclosure and note sale, can succeed without any communication at all with the borrower.

The bank has chosen foreclosure as their exit in this example. But there are risks with foreclosures, the main one being the high possibility that the borrower will file for bankruptcy. If this occurs, you will not be able to recover the property.

Buying Notes - My Advice

Buying notes can bring you high returns without have to foreclose or to sell the note to someone else.

So if you lose contact with your borrower, you are essentially killing about 60% of your note buying exits. (3 of the 5)

Would a professional golfer get onto a course with only 5 of 12 clubs?

Would that be somewhat limiting to their game?

Most likely.

But boy would it look funny hitting a putt with a 9-iron.

Working with your borrower is essential when you are buying notes. It can be painful, but it is what has to be done.

This is the advice that I gave to the SVP at the LA bank today.

Will they take my advice? I am going to be tracking her discounted notes to see if any of them end up in bankruptcy court.

If those notes do end up in bankruptcy, it's for certain that she will be wishing that she kept communication with her borrowers.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Interested in learning more about the Note Buying Business? Watch Hours of FREE Training Videos here: Buy Notes Real-life, Up-to-Date Information for You. Visit NoteBuyingProfits.com or Call 718-783-7605 Or Click Here: Buy Discounted Mortgages From Dean Engle & NoteBuyingProfits.com - This time on Buy Notes.