Mobile Home notes

[Jena Liberty]

Hi Everyone,

I have an opportunity to buy one or several mobile home notes. They range from $5000 to 23,000 with an interest rate of 12% across the board. The seller is trying to raise capital for expansion. Assuming the notes I am looking at pass due diligence would I ask for a discount on the notes and if so how much? And does anyone know of any books on buying notes?

Thank you 

[Ken Rishel]

The obvious questions are:

1. Are you properly licensed in the state(s) where the borrowers reside to service and collect these loans?
2. Were the note originated by a properly licensed lender and are they compliant with all state and federal laws?

If the answer to either the questions is NO, then you should not look any farther at buying them. If, the seller is a licensed lender, there is a possibility of you investing in the notes while they retain service but the agreements to do so safely is a complex one and putting it together for several notes would not make sense.

Any books on note buying are likely out of date regarding the legalities of doing so, and no one I am aware of has anything current as the laws change so fast that books are of little value any more. ( We update our clients monthly via email of any relevant changes in rules and regulations, and even we have trouble tracking all the changes in the 44 states we cover.)

[Kevin Moen]

@Jena Liberty Firstly, you can always buy a loan and board with a licensed loan servicer, so don't worry if you are not licensed to do so. Secondly, to Ken's point you should make sure the notes are Dodd Frank compliant if originated after 2012. 

The answer to your discount question would require knowing a lot more about the note. High yields are exchanged for risk. Note pricing is a fairly complex consideration, and all buyers have their own underwriting and metrics to price loans and assess risk. The questions you need to know to asses are: 

- UPB of loan, FMV of property

- Borrower credit score

- Borrower down payment

- Borrower pay history 

- Loan structure

- Interest rate and loan term

If you know that, or get that info and want a note buyers opinion of offer price, feel free to message me and I would be happy to help. 

Kevin Moen

[Jena Liberty]

Thank you Kevin 

I see have more homework and thank you for shedding some light on the subject. I am going to research this offer and maybe take you up on your offer of help.

Best Regards 

Jena

[Steve Hodgdon]

@Jena Liberty Hi Jena - LOTS of good info on the BP Notes, liens forum. But also lots of misinformation too. 

Don't take legal advice from anyone on the Internet, including me.

Using a nationally licensed MLO is the safest path if you are intending to carry lots of notes. If it's a just a couple and your LLC is the originator you might be inside of the SAFE Act rules. Doesn't take much to create an illegal loan and then be in a bunch of trouble.

I own mortgages I bought on the open market. Plus I've originated some of my own. I'm a licensed lender in CA. But I still use a national MLO to shield me from liability and to make sure we're doing everything right. Costs about $1400 per loan. Working on finding a cheaper way, but in meantime upped the size of loans to $50k and up. 

I'm on this forum because we're looking for a park to purchase and are learning the ropes flipping MH units in So Cal. 

Good luck!

[Joseph Scrocca]

Hi Jena

I am in NJ and in NJ we have mobile homes that are in parks (where the land is leased not owned) and mobile homes on land won by the home owner (not in a park). I would not purchase notes on units in a mobile home park. You are buying a note on a rapidly depreciating asset (the mobile home). In any real estate investment the land is what appreciates so if you don't own the land, even if you buy at a discount you may see your collateral decrease faster than the loan balance. Again, I am only speaking of my experience in NJ but I would not buy a note unless it was secured by real estate. All the best. J

[Jasmine Willois]

We love buying mobile home notes. They can be lucrative and awesome. There are a few things that are important to us.

We have an entire 11 point list of what to look for before you by notes. Here are a few.

* Loan to value ratio
* Land or no-land
* Down Payment
* Payment history
* Credit rating of payor
* Interest rate