Mortgage Notes Purchase

5 Replies

Originally posted by @Rafique Karim :

Similar to purchasing real estate, is there any need to use an escrow service when purchasing mortgage notes? 

 I'd suggest hiring a RE lawyer local to the real estate (not local to you or the note seller, but the underlying asset - the home) and doing whatever they say. There are a ton of consumer protections, and now you're a mortgage servicer in the most over-regulated era of the mortgage industry in all of human history. I would suggest treading very very carefully, and not trying to skimp on the things that are going to protect you from a judge rendering the entire amount owed void because you did something "predatory."

@Rafique Karim - the notes I acquire are from reputable sellers and hedge funds. If you were not comfortable with the seller you could have an escrow agent hold the funds but it’s not common.
The process goes like this: you make an indicative offer; if accepted the seller provided the soft collateral package and you run title report and confirm property value. Bid may get adjusted after due diligence and when final price is agreed seller sends you a loan sale agreement. You execute loan sale agreement then wire funds. Seller then sends you hard copies of collateral and you record assignment.

@Chris Mason . I barely know anything about servicing so I will be using a servicing company.
Originally posted by @Chris Mason:
Originally posted by @Rafique Karim:

Similar to purchasing real estate, is there any need to use an escrow service when purchasing mortgage notes? 

 I'd suggest hiring a RE lawyer local to the real estate (not local to you or the note seller, but the underlying asset - the home) and doing whatever they say. There are a ton of consumer protections, and now you're a mortgage servicer in the most over-regulated era of the mortgage industry in all of human history. I would suggest treading very very carefully, and not trying to skimp on the things that are going to protect you from a judge rendering the entire amount owed void because you did something "predatory."

@Chris Seveney : I was thinking same but wanted to see what's out there. You are right about having reputable sellers.

Originally posted by @Chris Seveney:

Rafique Karim - the notes I acquire are from reputable sellers and hedge funds. If you were not comfortable with the seller you could have an escrow agent hold the funds but it’s not common.
The process goes like this: you make an indicative offer; if accepted the seller provided the soft collateral package and you run title report and confirm property value. Bid may get adjusted after due diligence and when final price is agreed seller sends you a loan sale agreement. You execute loan sale agreement then wire funds. Seller then sends you hard copies of collateral and you record assignment.

The risk isn't in the "closing" it's in the due diligence and understanding exactly what you are buying along with borrower/property issues and possible exit strategies.