Navigating Hurricanes For Mortgage Note Investors

How can mortgage note investors best navigate major storms and hurricanes?

This is a great time to be a note investor. Yet, situations like the major hurricanes we are dealing with now can call for extra preparedness. What can you do to be ready and best deal with any storms that hit areas you have assets in?

Lines of Communication

One of the most critical factors for note investors to get a handle on in the face of big storms is lines of communication. During and after the storm it can be very difficult to communicate or establish new connections. Utilities can often be down for days or weeks. Start by trying to collect more contact information from borrowers. Be certain to have email addresses, current mobile numbers, and if possible, alternate numbers and addresses. You may also need back up communications yourself, including portable phone numbers, access to the internet, and maybe even alternate payment addresses if you are going to take a big hit.

Property Inspections

When possible note investors may be wise to get someone out to assess property damage and conditions in the wake of a hurricane. While your paper is your real asset, you want to know what shape the underlying collateral is in, and how that may impact your investment’s performance.

Insurance

In advance of a storm you need to make sure borrowers have up-to-date insurance coverage, with you as the beneficiary, and in the right amounts. Often insurance claim checks will be made out to both the lender and the borrower. In the past some lenders have made the grave mistake of withholding the release of this money or dragging their feet on sending back the cosigned check. The result was that borrowers couldn’t fix the property and small leaks often led to complete ruin, with roofs, foundations and interiors being destroyed, and mold growing. In these cases, if you are the roadblock, you can expect the borrower to stop paying.

Rental Payments

In situations like Houston with Harvey, note investors should expect some interruption and lag in income. Even if the property isn’t directly hit, local businesses are closed, preventing borrowers from going to work and earning money .They will likely also have extra emergency expenses. Just expect it. Be proactive in communications and cut them a break when they need it. This way they will be more likely not to panic and make bad decisions, and more likely to get back on track fast.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund