Newbie question on Notes

7 Replies

Greetings everyone!

First, I apologize for asking something that must be obvious for most people on BP. I have recently started poking around notes (mostly out of curiosity and for my own education) and one thing that I can't figure out - when they refer to a "monthly payment amount" on a note, does that mean PI or PITI? In other words, does the advertised payment normally include the taxes etc. that normally would go into the impound?

Thanks in advance!
Alex

Actually that is a very good question. I focus my efforts primarily on non-performing note. When you receive a tape with NPLs nearly every most seller refers to the payment as P&I (meaning just principal & interest) and if you are lucky that then include a separate line item for any escrow such as taxes and insurance. You evaluate a NPL by looking at the unpaid balance (UPB), delinquent taxes, current market value of property, and potential cash flow if loan is reinstated. In the performing world, it would stand to reason that the payment is the same (P&I). The reason for this is that your servicer should be the one collecting any escrow directly from the borrower, as well as the fee for their service.

refer to

214‑620‑5057 | http://www.platinumventures.net

Alex, 

Check out Invest in Debt and Performance Anxiety, these 2 books will give you a nice intro to the NPL world. I just bought my first Performing 2nd lien and currently researching 2nd position NPL's. In this case I am buying multiple. 

Which leads me to this question for....

@Wayne Snell how much focus do you put in to the arrears? Do you make that a starting point during your workouts? Do you make contact with the homeowners or do you have a servicer do that for you? 

As Wane mentioned, "payment" is P&I, not escrows listed separately if applicable .

I realize that NPN are hot, that's really because of the brokers pushing them, books, seminars and the guru stuff.

Not really where to "learn" notes.

Jay, the modification of any note is an origination of a new obligation. Just because you own a note doesn't give license to originate loans to homeowners, it requires a RMLO, let the servicer negotiate modifications for you.

I consider all the arrears and look to the LTV of collateral. From there you and determine collection efforts with any amount you may forgive.

Another point, ask for proof of collection efforts on "stale" NPN, as you can lose amounts in arrears or an entire note if servicing failed and demands were not timely and current.

I'd say more but BP is not responding again....  :(      

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Originally posted by @Bill Gulley :

Jay, the modification of any note is an origination of a new obligation. Just because you own a note doesn't give license to originate loans to homeowners, it requires a RMLO, let the servicer negotiate modifications for you.

I consider all the arrears and look to the LTV of collateral. From there you and determine collection efforts with any amount you may forgive.

Another point, ask for proof of collection efforts on "stale" NPN, as you can lose amounts in arrears or an entire note if servicing failed and demands were not timely and current.

I'd say more but BP is not responding again....  :(      

Thanks for the information. I know the only way to learn this is to get a couple and learn by doing and asking 1 million questions. I will take what you say under advisement and put it to good use.  Any other information you can provide Bill?

I'd suggest you do that the other way around, ask questions, learn then jump in, you'll always be asking questions, especially with NPNs in other jurisdictions, not a good place to start IMO. Learn to qualify the note or learn to qualify your advisor/broker, learning both will be better. Best of luck :)

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Thank you. Luckily I have help from a knowledgeable person. The performing note I bought was basically a JV. I have seen a lot of your posts and I'm taking away lots of good information. I am part of a group and each of us decided on learning a sector. Aside from reading books and doing some due diligence I am learning what I can each day. I really appreciate the advice you have provided me. I want to arm myself with as much knowledge as possible so; 1) I do not do anything illegal. 2) I hopefully maximize my ROI,,, ( I guess we all want that!)

@Alex Stepanov

Welcome to the BP community. You will find alot of good information here. Make sure to view the BP blogs under "Learn."

It is also worth mentioning that IRA funds can also be invested in notes.

Medium mysolo 401k logoMark Nolan, My Solo 401k Financial | [email protected] | 800‑489‑7571 | https://www.mysolo401k.net/

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