American Note Warehouse

49 Replies

Has anyone bought performing notes from JW Warr's American Note Warehouse web site? Please share your opinions. 

I have had a meeting with him once and he seems pretty legit, but still feeling out the business and trying to have a 1 on 1 with him as soon as my schedule allows.  I cannot find too much on him or his company before 2007, or for that matter before 2011 which was based out of NM.

Suzie, he will be our featured presenter on our Seattle Note Meetup group next week. I put a description on our Meetup board. Basically it seems he provides education on how to sell a partial on an owner carryback note and I assume acts as a broker to help find a buyer for the partials. 


@Bob Malecki, do you have more info about the Seattle Note Meetup?  Thanks.

Hi Adrian, yes you can sign up at we meet the first Saturday morning of each month in Seattle and have a monthly webinar on the last Tuesday of each month. Looking forward to seeing you at our meetings.


@Gordon Owen @Bob Malecki

 Thanks for the info. Unfortunately, I cannot make the meetup next Tuesday. I'll try to make the next one.

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Yikes! Thanks so much for posting this Cecilia!

I had a feeling about him-- this finally substantiated my gut....


Looks to me like Warr hit the big time with SEC fraud alerts!

Not hard to find, google his full name and you'll get pages of articles.

I certainly wouldn't have this guy as a guest speaker! Much less do business with him. 

Here you go........and there are lots of guys out there running backroom mortgage operations, know who you're dealing with, personally, before jumping in. :)

@Bob Malecki Wow, so how will this new found info change your meet-up scheduled? Is he going to be un-invited (replaced) or asked to disclose this info to the crowd? I know its not your fault that he is deceptive, just curious as to how one would handle something like this in your situation. 



Originally posted by @Mary B. :

@Bob Malecki Wow, so how will this new found info change your meet-up scheduled? Is he going to be un-invited (replaced) or asked to disclose this info to the crowd? I know its not your fault that he is deceptive, just curious as to how one would handle something like this in your situation. 



 Hi Mary, he is not part of our meetup group, he was a presenter to the group based upon one of our members introducing him. I have sent a link to my members to make them aware of his indictments and a warning as well. 


I spoke with him a couple years ago and walked away understanding that he indeed is engaging in securities trades.

There is lesson here for note newbies - these partials you attempt to play with can be viewed as securities.  That is why I always have and always will tell note investors to stay away from partials.  They are more  of a security than a loan.  

Partials separate the debt from the secured interest in real property.  That my friends is by definition an non-exempt security.  It is pretty black and white. 

He sold me 3 notes, 2 of which were 36 month partials. One of them went bad and JW did not help to resolve it. He was slow on responses and started avoiding my calls and emails. I will have to hire a lawyer now 

Updated over 1 year ago

JW is working with me to get the principle back on the note that did not perform. He is paying out of his pocket until the property is back at rental status. He promised me that he would then sell the note and recoup my money.

@Alex Gitman , did JW warranty or guarantee the payments or repayment of the notes?  Did he provide misleading information that you relied on for your investment?  just curious as to why reaction to an investment going bad is to hire a lawyer to sue the person who sold you the investment?  Isn't it the investors responsibility to decide whether or not to invest?  Losing money is part of investing.  Not all loses warrant lawsuits or blame.  Just trying to understand your post.

@Don Konipol   @Alex Gitman     Don just guessing here but maybe Alex needs a lawyer to file for foreclosures etc.. and not necessarily to take legal action against the broker who sold him the note or the partial as it were.

@Dion DePaoli   as I would never ever question your authority on the matter.. however in CA when its acceptable and legal to fractionlize DT's without registering them as a exempt or non exempt security.  I would think partials in that state are OK as long as the originator used the CA department of Real estate disclosure form that spells out all the fractionlized bene's in the transaction.. just curious if you have seen that.

@Jay Hinrichs , yes it seems that whether or not fractionalized debt is a security is a state issue, IF (a) the property providing security for the debt is located in that state and (b) all investors are located in that same state and (c) no investors from other states are solicited.  

California sellers of fractional mortgage interests actually require a real estate broker license, not a mortgage broker license.

Back before 2008, fractional interests in mortgage notes where not considered securities by the Texas Securities Board, although my conversations with TSB regulators indicated that they were trying to push that direction.  I made the decision earlier - 2002 actually, to acknowledge fractional interests as a security and become regulation compliant.  Obviously, Mr Warr did not.  I personally am not convinced of the separate charge by Texas Securities regulators of personal use of investor funds.  Sounds like they don't want the case decided on the merits of whether or not fractional debt is a security alone; they have added some "insurance" for a judge or jury.  Regulators, state, Federal, whatever, can run rough shot over the individual business owner.

@Don Konipol its the second "provide misleading information" He told me that he was selling first lean but ended up after all said and done a second lean. I feel like i was cheated out of my retirement money.  Don how do your investors feel when you loose their money?

@Jay Hinrichs

I am not familiar with the CA registration rules.  My concern and my opinion stem from the perceived likelihood that in most of these cases the structure of the investment is what makes the investment a security.  Which is often the case.  

To test for such things we have what is referred to as the Howey Test:  

1.  Is there an expectation of profits?
- Yes.  Interest income.
2.  Is there a common enterprise?
- When an investor buys a whole loan, there is no common enterprise.  The investor stands on their own.  If the borrower goes delinquent or defaults there is a direct impact on the investor.  In some partial structures, dare I say setup by folks who are not seeking proper counsel on these matters, the promoter creates a common enterprise, perhaps unintentionally, by "protecting" the investor's return or by stepping back in and doing something.  (note the OP's response above - "...did not help resolve it.")  So in those settings, the investor is not invested in the whole loan by themselves.  The promoter is still around somewhere, somehow so they can offer that level of income protection.  The promoter and investor both have interest in the loan at some level.
3.  Does the investment depend "solely" on the efforts of others?
- This is the other half of the fuzz.  The second layer of issues is when the promoter offers to step back in to help with loss mitigation then there is a reliance on the promoter from the investor.  I would also point out, most of these types of offerings in the street level world are created and offered under the guise of "passive investment".  The investment is advertised under the idea that the investor need not lift a finger if something goes wrong, the promoter will solve it for them.  This implies that the success of the investment is based on the efforts of someone beside the investor.  

So if we apply the Howey test to the general idea and structures that I have seen in these street level offerings they are in fact securities.  Now my claim is not necessarily that every partial note sale is a security.  There is probably a way to structure them which passes the test to be exempt.  However, the other common promoters of these types of investments are institutional in nature and have both the legal counsel and likely the license to be able to weather the storm if the nature of note is contested.  Bare in mind that all notes by definition are securities.  Notes secured by real property are simply exempt from registration.

So in my opinion, for the sake of the non-institutional investor and the street level whole loan player I error on the side of absolute - stay away.  To me it is a case of not really knowing what you are messing with and in this case what you don't know can indeed hurt you.   

The example in this thread which illustrates the structure and frame of mind by which they investor entered into the investment seem to imply the investment was in fact a security.  Now in this particular case, it may be important to understand now that the OP as the investor has been harmed (even if by perception), I would imagine one of the claims to go after JW is that the investment was in fact a security and he lacks the appropriate license to sell securities.  My point there is, when everything goes fine there is a lower threshold of litigation and prosecution.  When things go south, as we have here, the gloves come off and the promoter will have to defend themselves against these ideas which more commonly illustrate the investment as security rather than not.  

- Opps - Sorry Alex wasn't the OP.  I was referring to his experience.

@Don Konipol I operated my HML company in Oakland and I was the RE broker of record.. our threshold in the day was no more than 10 fractionalized interest. but every single loan just about that we made was fractionalized.. full time job cutting monthly checks to all our investors we did it by hand in the dark ages :).

@Alex Gitman   Alex this is pretty routine stuff to figure out your lien position.. but if you were a unsophisticated investor and did not really understand notes or Real estate I can see how this happened and you probably just took this guys word for it... So yes I would say you have a bone to pic..  Not answering for Don... however like most things the sponsor of your investments is critical.

I have also seen my fair share of investor who really did not know what they were doing buy Seconds at foreclosure sale thinkning they just bought  a 500k home for 75k .. and leave with  a huge smile on their face until they realize there was a 600k first ahead of them  LOL.

not making light of your situation.. but in the future you can run title on notes. I know its not common but I personally do it just for my own satisfaction... And maybe one of the other guys can answer but we used to do a 104.1 endorsement for 50 bucks or so that helped the initial policy transfer to the assignee.  now this was 20 plus years ago so I may be a tad fuzzy on the endorsement..

@Dion DePaoli   yes I learned of the Howey test . the State of Oregon gave it to me chapter and verse so I had to do a RE paper offering. it was the common enterprise.

I think @Bob Malecki there could be a little bit of confusion of what each of you think of as a partial.

I am thinking Bob thinks its just buying a set amount of cash flow.. or partial amount payments.. IE you get 100% of the note and payments for only a partial amount of time then the note reverts back to the original bene...

Were we are talking about paritial or fractionalize interest IE multi bene situations.. and maybe there is no difference between the two.. I would let @Bob Malecki explain what he means I see him post about this often.

Originally posted by @Alex Gitman :

@Don Konipol its the second "provide misleading information" He told me that he was selling first lean but ended up after all said and done a second lean. I feel like i was cheated out of my retirement money.  Don how do your investors feel when you loose their money?

 I don't lose their money!

I see how you were defrauded.  There is a difference between being defrauded and losing money on an investment absence any fraud, etc.  

First off all, we acknowledge that we are "selling securities", and are SEC compliant.  We utilized 506 (c) and or 506 (b) safe harbor exemption from registration.  We provide the SEC with Form D prepared by our securities attorney, and provide investors with PPM, as well as all information we have on any particular debt financing; MAI appraisal, title report, financial records, surveys, etc.  Further, all the loans we facilitate have title insurance, casualty insurance, professional third party servicing, loan docs drawn by an attorney representing the lender/investors, etc.  And in most cases my partner and I invest our own money along side the limited partners.

Despite all this, it is reasonable to expect that given a sufficient sample size the following will occur

(1) A certain percentage of loans will become "problems" with periods of late payments and defaults

(2) A certain number of these problem loans will result in foreclosure filing

(3) A certain number of these foreclosure filings will result in the lenders obtaining ownership of the property through foreclosure

(4) In a small percentage of (3) above the lenders will end up incurring a windfall profit. In others the lenders will end up incurring a loss.

Fraud, misleading promotion, unethical practices, is one thing.  Loses occurring naturally through mistaken analysis, changes in market conditions, unaccounted for circumstances is another thing, and to be expected in a small percentage of cases by any investor in "at risk" investments.  

Nobody should think an investment yielding 12% has the same risk as a bank deposit yielding 0.5%.  

@Don Konipol   I have experienced this personally many times when a deal went south and the lender took a loss usually small.. but said lender in most instances and for what ever reasons they think its the fault of the broker and take shots at the broker.. were as If they bought a stock and it went down 20% and then they sold and incurred a loss you don't see them run to an attorney. but in Real estate related investments its the first knew jerk reaction.

@Don Konipol just spelled it out folks.  "First off all, we acknowledge that we are "selling securities", and are SEC compliant." - Kudos Don, once again.

If the interpretation of this was cut and dry, there would be no debate now would there?  So let's not participate in a discussion trying to make things bend to our will.  At the end of the day what I think or what you think has no relevance when there is a judge sitting in front of you about to make a ruling on the nature of your transaction.  

If we just "sell cash flow", that seems like a fairly straight forward idea that the transaction is not secured by real property and thus is not exempt.  So, we just walked over the trap door and fell in.  

Additionally, let's not forget the core of this thread is in fact a guy who is selling partials from second lien notes as being securities.  I would point out, if he is right or wrong is not as bad as the idea that the Feds are trying to prosecute him.  Clearly he stands in his corner arguing they are not.  When push comes to shove, I wouldn't want to battle against the Feds.  They don't have a track record of losing.  So, at some level that sort of says something, doesn't it?

The Howey case is important because it brings into perspective how the courts 'can' interrupt these dealings.  I thought I did a fairly bang up job above laying all that out.  It is substance over form.  So, let's stop trying to argue form as evidence that the transaction is "OK".   

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