BiggerPockets

Mastermind Groups

Wednesday, February 02

 

"Top 5 income producing strategies for 2011"

This was the topic for last nights real estate investors mastermind group. www.meetup.com/losangelesrealestate.  I co-founded this group over 3 years ago with my friend Jeremy Roll.    We both got tired of going to meetings that were low on substance & high on sales pitch aka the latest “get rich quick” scheme in real estate.  We really just wanted to meet other investors to share ideas.  We; instead of complaining about it we started our own groups.  When we added Mathew Owens to our team, who leads FIBI-Long Beach  we really started to take off ( he is younger than Jeremy & I, single & no kids so he has plenty of energy)

Well,  the organization tops over 9 groups that meet in California, Arizona, Texas & re-opening soon in the greater Chicago area (sorry to the Chicago Bear fans they lost a tough game this past Sunday)  If you would like to find out more, come & check us out  www.meetup.com/losangelesrealestate (That’s my group but I also co-host one in Westlake Village in Ventura County with Heidi Toso & Kim S. Mills (Ventura County Investors Mastermind).  We have a great group of friendly & knowledgeable people.

Well 2 of the top 5 strategies involved note investing ( buying discounted notes & private money lending).  Although, The Note Guys buys notes nationwide, we have been able to uncover plenty of opportunities in note investing in our own backyard in Southern California. In fact, we drove a by few properties last week.

Many people ask, “Hey will you teach me how to buy notes & get great returns?”.  Well, although Gerald  (my fellow obsessed note investor & business partner ) & I really love sharing & teaching ( we may do another intro course in Orange County) we don’t make our living selling books, tapes, DVD’s, bootcamps or workshops.   We are really focused on acquiring more & more notes to jont venture with our investors & clients.  We know that this opportunity is so good right now we have to make the most of it.

There have also been many requests to also put together a note fund. Gerald & I were discussing that today while eating some delicious sushi ( he knows some really great places in Orange County) Although we may consider it in the future, for now we really like working one on one with a exclusive client list  & joint venture partners.  We don’t want to grow too fast.

The note business is a very specialized niche & we are even more specialized in what we look for.   We are a bit unusual because we are focused on buying & keeping notes, not just note brokers.  We also like buying non-performing notes….even 2nd trust deeds, which many people won’t touch (which is fine with us because that means  less competition).  We think of ourselves as “note rehabbers”  because we improve the value of notes (We also prefer it to painting & rehabbing houses).

Note buying is a great way to create a long-term income stream without the hassle & expense of owning & managing rental property.

If we can help you diversify some of your capital, perhaps show you some alternatives, please give us a call or email us.  The Note Guys 310-414-9757

info@thenoteguys.com, www.thenoteguys.com

Wealth Lesson from Charlie Munger

Wednesday, February 02

I am currently reading a great book recommended by Tim Ferriss, author of “The Four Hour Work Week” & more recently “The Four Hour Body”. The book is called “Poor Charlie’s Almanack- The Wit and Wisdom of Charles T. Munger by Charles T. Munger. Charlie Munger is the lesser know genius behind Berkshire Hathaway. Warren Buffet get’s the lions share of notoriety as a brilliant investor. However, this partnership which has lasted since 1959, exhibits some of the brilliance of decision making skills that have taken place through economic cycles & turbulence.

There are a few great quotes from the book that I intend to have mounted on the wall on my office at The Note Guys, here is one of my personal favorites…
“It takes character to sit there with all that cash and do nothing, I didn’t get to where I am by going after mediocre opportunities”. –Munger

“Accordingly, Charlie is willing to commit uncommonly high percentages of his investment capital to individual “focused” opportunities. Find a Wall Street organization, financial advisor, or mutual fund manager willing to make that statement.”– Michael Broggie

Did you know that Berkshire Hathaway’s annual compounded return since 1965 to 2009 was 20.3%?

The term “Compounding Machine” is borrowed from a money manager Chuck Akre (FBR Focus Fund). Two major components of his definition of a compounding machine were
1) A business that earns an above average rate of return on owner’s capital (equity).
2) A business that also has the ability to reinvest excess cash at above average rates of return.

We just may integrate this definition into the mission statement & identity of The Note Guys.

“We are an investment company that focuses our capital in exceptional opportunistic investments to earn above average returns on our capital & also reinvests excess cash at above average rates of return.”

Happy investing!   www.thenoteguys.com

Bad News is Good News for Smart Note Investors

Friday, December 17

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Brian Collins from National Mortgage News wrote an article detailing the weakness of the business model at the loan servicer level.

Wednesday Nov. 24th, 2010 http://www.nationalmortgagenews.com/nmn_features/hard-for-servicers-1022271-1.html

Residential servicers are under siege from regulators, state attorneys general and legislators for messing up the foreclosure process. But instead of focusing strictly on fixing that problem, these officials are taking aim at servicers’ business models and their disappointing efforts to modify loans.

Iowa AG Tom Miller told a Senate panel recently that “robo-signing is only a symptom of a much larger problem with the mortgage servicing system.”

He noted the robo-signing investigation by the 50 AGs also is looking at various servicing fees, force-placed insurance as well as well as the problems servicers and investors are having showing a proper chain of title and ownership of securitized mortgages. “However, the biggest issue is fixing the loan modification system,” Miller said.

Critics are quick to acknowledge that the mortgage servicing system was designed to be a lean money collection machine and is presently not equipped to take on the time-consuming process of loan modifications.

However, they have also run out of patience with the servicers.

“Servicers have been publicly pledging for several years to increase their servicer capacity, and many have,” Federal Reserve Board governor Sarah Bloom Raskin told a National Consumer Law Center conference. “Unfortunately, there is plenty of evidence to suggest that many servicers’ workforce lack the knowledge and capacity to deal with immensity of the mortgage crisis.”

She also noted a common complaint that servicers and investors aren’t doing enough to modify loans.

The Amherst Securities Group recently released figures showing that 80% of all nonperforming private-label mortgages have not been modified after 12 months.

As of Sept. 30, the Fannie Mae servicers had completed 321,800 modifications including 158,800 restructurings that meet Home Affordable Modification Program specifications. (Fannie has 60,500 borrowers in HAMP trials, which represents 6% of its seriously delinquent loans.)

A Federal Housing Administration review of the loss mitigation operations of its five largest servicers was an eye-opener for FHA commissioner David Stevens. The FHA initiated a review in May and is still analyzing its findings. “The field analyst reviews suggest that some servicers may lack knowledge of the FHA loss mitigation process,” Stevens told a congressional panel.

The review also discovered that some servicers did not have the technology to expedite the processing of loan modifications or experienced staff necessary to deal with the backlog of requests.

The FHA is now working with its top servicers to address the problems and improve their loss mitigation performance. (Its top five servicers include Wells Fargo Home Mortgage, Bank of America, JPMorgan Chase, CitiMortgage and GMAC Mortgage.)

The federal mortgage insurer plans to conduct reviews of the next five largest FHA servicers in the winter and early spring.

In her speech, Raskin said servicers have little incentive to support large-scale loan workout activity.

The new Fed governor and former Maryland financial services regulator expressed hope that the efforts by the 50 state AGs to fix robo-signing problems will lead to structural reforms in the servicing industry.

“Until a better business model is developed that eliminates the business incentives that can potentially harm consumers, there will be a need for close scrutiny of these issues and for appropriate enforcement action that addresses them,” Raskin said.

The Mortgage Bankers Association is starting to yield to this pressure to change. At a REO property preservation conference, MBA senior vice president Steve O’Connor responded to the Fed governor’s remarks, saying the crisis presents an “opportunity to take stock of lessons learned and figure out how we can do it better. At MBA, we welcome that challenge.”

Meanwhile, the state AGs are trying to reach a broad agreement with the nation’s megaservicers to fix the foreclosure mess and improve the loan modification process.

“Our goal is to change the paradigm” to make the current servicing system a “better system,” said AG Tom Miller. “We are struggling,” he admitted, in finding ways to ensure borrowers that pass a “strict economic analysis” will get a loan modification.

As part of an agreement, the AGs want servicers to provide one contact person for each borrower that is being considered for a loan modification and to stop dual tracking—where borrowers in modifications are also being processed for foreclosure.

At the same time, fears are growing in Washington that the foreclosure mess could lead to more loan buyback risk for major banks.

A congressional panel that oversees the Troubled Asset Recovery Program has raised concerns that the rapid growth of mortgage securitization outpaced the ability of the legal and financial system to track mortgage loan ownership.

The panel’s report suggests robo-signings of affidavits served to cover up the fact that loan servicers cannot demonstrate who legally owns a loan or who can order a foreclosure.

In a worst-case scenario, a Wall Street bank may find it still owns defaulted loans that it securitized and sold years ago, the Congressional Oversight Panel report says.

Meanwhile, a federal interagency foreclosure task force is now investigating the nation’s largest servicers, focusing on foreclosure procedures and whether the affidavits and claims are accurate.

The review has been expanded to address concerns that documentation problems may exist with loans in securitization trusts, said outgoing Treasury assistant secretary Michael Barr.

“Regulators have begun to review compliance of servicers, custodians and trustees with procedures required by the pooling and servicing agreements,” said Barr.

At the Federal Reserve Board, there is a growing concern that put-backs are accelerating and pose a potential risk to the banking system. “The Federal Reserve has been conducting a detailed evaluation of put-back risk to financial institutions,” said Fed governor Elizabeth Duke.

“We are gathering information to ensure that institutions we supervise have adequately assessed these risks and have accounted for them properly,” Duke said.

National Mortgage News 11/24/2010

So…..The opportunity for a nimble investor to capitalize on the weakness of mega-corporations is here under your nose. We have the experience of dealing one on one with defaulted loans since 2001. We create win-win situations that the large Banks cannot. We can modify payments in an instant with ZERO BUREAUCRACY . This means more people stay in their homes, & we receive a handsome return for our investors.

I wish everyone Happy Holidays! I am especially grateful for all my friends, business partners, family, & investors who make my life joy everyday.

Investing in Defaulted Mortgages

Friday, December 17

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Defaulted mortgages occur when the individual does not make payments for their mortgage and the loan is considered to be in default, where investor who holds the note has the authority to foreclose on the property. defaulted notes, non-performing paper, are some of the names of non-performing notes.  

Defaulting on payments will result in the borrower losing the property if they don't take action. Even if the situation does not reach that stage of foreclosure, defaulting on their mortgages may decrease their credit score, which will make it difficult to negotiate with lenders to allow future loans. Many banks may not allow partial payments for the loans when there are defaulted mortgages. However, the bank sends a notice to the owner within 60 to 90 days prior to the determination of the default of the mortgages.

 

Defaulted mortgages are included in the range of specialized investments for savvy investors who recognize opportunity in economic downturns such as we are experiencing now. With the crash in the prices of houses and the lack of liquidity in the lending market, many investors need to consider defaulted mortgages now as an investment choice for a portion of their investment allocation.

 

Many people, who have defaulted mortgages, because of lack of regular payments have many disadvantages to face. Since the lenders consider it risky to lend their funds, such people find it tough to get any kind of credit. They continue to remain mortgage defaulters on their reports for many years from the time the loan goes into default, thereby, affecting the credit rating. Nevertheless, certain investors can utilize loan workout specialists to consider the circumstances of the mortgage defaulters and providing the ability for borrowers to stay in their homes for a win for both the investor & the homeowner.

 

Note Investing is a proven long-term profit strategy where you can buy it right and hold it. You need to have patience & expertise to maximize your investment. This way, you can control quality assets at discounted prices and get above average returns & cash flow for many years. Due diligence is very important when you are planning to invest in non-performing notes, as the buying and selling of non-performing notes, which is also known as defaulted loans, requires the proper specialized education to understand possible risks & returns.  ....read more stuff on note investing  www.thenoteguys.com