Buying Paper from Banks / Loan Originators

[Ian Wright]

Has anyone had success purchasing paper directly from a bank? If so, how did you convince the lender do to a deal with you?

[Chris Seveney]

@Ian Wright

Likelihood of buying from banks is very slim unless you have a few million $. You may find a local bank who has some assets but I have founded the time and effort is not worth it.

If you do get a bank to send assets I have found the majority have been commercial vs residential paper.

There are some gurus who get you excited about calling banks and actually will have you pay them for you to call banks (which is insane). Don’t fall for those types of scams.

[Jay Hinrichs]

Quote from @Chris Seveney:

@Ian Wright

Likelihood of buying from banks is very slim unless you have a few million $. You may find a local bank who has some assets but I have founded the time and effort is not worth it.

If you do get a bank to send assets I have found the majority have been commercial vs residential paper.

There are some gurus who get you excited about calling banks and actually will have you pay them for you to call banks (which is insane). Don’t fall for those types of scams.

that horse left the barn some years back..  lets see what happens with the foreclosures moratoriums being lifted.

[Ian Wright]

Quote from @Chris Seveney:

@Ian Wright

Likelihood of buying from banks is very slim unless you have a few million $. You may find a local bank who has some assets but I have founded the time and effort is not worth it.

If you do get a bank to send assets I have found the majority have been commercial vs residential paper.

There are some gurus who get you excited about calling banks and actually will have you pay them for you to call banks (which is insane). Don’t fall for those types of scams.

If someone were looking for paper, how would you recommend they find it? Hedge funds? Networking with other investors?

[Don Konipol]

Quote from @Ian Wright:

Quote from @Chris Seveney:

@Ian Wright

Likelihood of buying from banks is very slim unless you have a few million $. You may find a local bank who has some assets but I have founded the time and effort is not worth it.

If you do get a bank to send assets I have found the majority have been commercial vs residential paper.

There are some gurus who get you excited about calling banks and actually will have you pay them for you to call banks (which is insane). Don’t fall for those types of scams.

If someone were looking for paper, how would you recommend they find it? Hedge funds? Networking with other investors?

 As a hard money lender (commercial Property), most of our loan requests come through mortgage brokers.  When the borrower/property doesn’t meet our loan criteria, I do a further analysis to see if purchasing the note (at a discount) from the current lien holder would allow us to meet our risk/return criteria.  Additionally, I may need to factor in a loan modification for the borrower to help/encourage/enable him to make the monthly payments, or enable him the time needed to market/sell the subject property.  While we only do about two a year of these discounted note purchases, we are able to acquire the notes at large discounts from unpaid balance, and end up with return 2-4 times our normal hard money returns, with a somewhat higher but acceptable risk.  

Other than that, I will sometimes get offerings of existing notes from mortgage brokers who come across them although their business is actually loan origination.

Where I haven’t been successful in purchasing existing notes is from note brokers who specialize in the sale of existing notes, financial institutions looking to unload mortgage pools, and hedge funds selling their left over offerings.  I assume that most of these are residential and we are only interested in commercial; additionally we’re not set up to compete with the established players in the existing note purchase and investment business, since 85% of our note portfolio is notes in which we are the original lender.  

If I were an individual investor satisfied with a return in the high single digits, I believe I could find those investments from numerous note brokers, some of the best of whom participate right here in this forum.

[Chris Seveney]

@Ian Wright

Networking.

[Harrison Silverstein]

Quote from @Ian Wright:

Has anyone had success purchasing paper directly from a bank? If so, how did you convince the lender do to a deal with you?

 Hi Ian, 

As many here already mentioned, those institutional bank notes are difficult to come by. Its all about creating relationships with those institutions/funds. For individual investors this is usually hard to come by, and like Chris said, even if by chance they did want to deal with you, they'd be looking to sell entire tapes (which could cost a cool million give or take ;) 

There are communities out there that do have these relationships and all the notes I've bought in my 4 years of note investing have been from these banks and hedge funds. Private notes aren't bad, you just need to know what you're looking for when you're doing your Due Diligence. Education is key so you can start talking the same language as bankers. 

[Jamie Bateman]

@Ian Wright As others have said, this is a relationship space. You can still buy bank-originated (institutional) paper but just don't expect to buy that from banks directly. Get to know note brokers, fellow note investors, and smaller note funds. Timing is key--pay attention to when a specific fund is closing and the fund needs to liquidate and return investor capital. I know you are in our FB group now so just that is a good start. With that said, deal flow has been challenging lately fore sure. I expect it to open up some in the next 12 months. 

[Ian Wright]

Quote from @Jamie Bateman:

@Ian Wright As others have said, this is a relationship space. You can still buy bank-originated (institutional) paper but just don't expect to buy that from banks directly. Get to know note brokers, fellow note investors, and smaller note funds. Timing is key--pay attention to when a specific fund is closing and the fund needs to liquidate and return investor capital. I know you are in our FB group now so just that is a good start. With that said, deal flow has been challenging lately fore sure. I expect it to open up some in the next 12 months. 

 Great advice on watching out for funds that are closing down. At the risk of sounding like a newb, how are you able to find funds that are winding down? I'm guessing, mainly through networking? 

[Ian Wright]

Quote from @Harrison Silverstein:

Quote from @Ian Wright:

Has anyone had success purchasing paper directly from a bank? If so, how did you convince the lender do to a deal with you?

 Hi Ian, 

As many here already mentioned, those institutional bank notes are difficult to come by. Its all about creating relationships with those institutions/funds. For individual investors this is usually hard to come by, and like Chris said, even if by chance they did want to deal with you, they'd be looking to sell entire tapes (which could cost a cool million give or take ;) 

There are communities out there that do have these relationships and all the notes I've bought in my 4 years of note investing have been from these banks and hedge funds. Private notes aren't bad, you just need to know what you're looking for when you're doing your Due Diligence. Education is key so you can start talking the same language as bankers. 

 I wanted to ask, have you ever brokered a note tape?

[Ian Wright]

Quote from @Chris Seveney:

@Ian Wright

Likelihood of buying from banks is very slim unless you have a few million $. You may find a local bank who has some assets but I have founded the time and effort is not worth it.

If you do get a bank to send assets I have found the majority have been commercial vs residential paper.

There are some gurus who get you excited about calling banks and actually will have you pay them for you to call banks (which is insane). Don’t fall for those types of scams.

 Is there just not the demand for commercial notes as there is for residential notes?

[Don Konipol]

Quote from @Ian Wright:

Quote from @Chris Seveney:

@Ian Wright

Likelihood of buying from banks is very slim unless you have a few million $. You may find a local bank who has some assets but I have founded the time and effort is not worth it.

If you do get a bank to send assets I have found the majority have been commercial vs residential paper.

There are some gurus who get you excited about calling banks and actually will have you pay them for you to call banks (which is insane). Don’t fall for those types of scams.

 Is there just not the demand for commercial notes as there is for residential notes?

Correct. Everyone and their sibling thinks they can analyze a residential property, but most realize that commercial properties require significantly more experience, knowledge and skill.  We’ve found a nice niche in the commercial space with loans of $1 million to $4 million.  This size doesn’t attract the masses, but also is too small for the big funds.  However, like almost everything else, knowledge and experience are kings.