I would like to discuss the current market and predictions for post Covid-19 regarding notes.
Do you feel we will have more notes available in the market? Or will the government provide enough assistance to banks allowing them to work with borrowers during this time?
If you are unsure about mortgage notes, I provided a brief introduction with some questions to ask lenders if you are buying.
Loans that borrowers take out to purchase a property are called mortgage notes.
Banks and other entities will sell those real estate notes to free up their cash flow. Note buyer's step into the role of the bank and collect the borrower’s principal and interest rate payment.
To be clear when you purchase a note and mortgage, you’re buying the debt that remains to be paid on the note, which is secured by the asset outlined in the mortgage.
When screening notes you must qualify the note to be sure it is marketable.
Their are two types of notes: Collateralized or unsecured
Some questions to ask when speaking to a lender:
- Is the borrower currently making payments on the mortgage, trust deed or contract for deed?
- Are the payments current?
- Is the note secured by any property? If so, what kind?
- What was the sale price and date of sale?
- What is the current balance of the mortgage?
- What was the down payment for the loan?
- Is there a balloon? If so, when is it due?
You forgot the most important factor in buying a note and that's the current Market value of the collateral on secured notes. Buying a collateralize in a falling market can significantly increase the risk.
Couldn't agree with you more @Brian Van Pelt .
How do you feel banks will service loans if we continue to have Covid-19 restrictions?
The FDIC & NCUA have been encouraging banks to help meet the needs of customers affected by Covid-19. Some assistance includes, for example, waiving fees on late or missed credit card or loan payments, extending payment due dates, and providing small business loans to small business members during this crisis.
Banks will increase the use of remote signing and other contactless methods of doing business such as postal,zoom etc.
Banks will also continue to take loan applications, but start slowing down the processing of loans and slowing down the approval of loans. The issue for them is as home prices decline it will get harder for them to lend on a depreciating asset.