- Teleseminar Non-Performing Notes TOMORROW / Note FAQs
Published: Tue, 09/16/14
In This Issue:
-- FREE TELESEMINAR ON DISCOUNTED 2nd MORTGAGE INVESTING TOMORROW!
--Note FAQs
--Note FAQs
THE CASH FLOW EXPRESS
A Service of The Paper Source, Inc.
Sept. 16, 2014
Hi ,
The article Frequently-Asked Questions On Note Investing by Fuquan Bilal is below.
JOIN US FOR ANOTHER FREE TELESEMINAR TOMORROW, WEDNESDAY. I'll be talking with Fuquan Bilal of National Note Group on investing in 2nd mortgages and taking your questions.
Fuquan will tell us how to find and analyze 2nd mortgages -- both performing and non-performing -- to determine the right purchase price.
He'll also explain the 4 different asset classifications of 2nd mortgages and the different strategies that will turn non-performing notes into good profits!
The free teleseminar starts tomorrow, Wednesday, Sept. 17, at:
6 p.m. Pacific Time
7 p.m. Mountain
8 p.m. Central
9 p.m. Eastern
When it starts in your time zone, call 605-562-3140 and when prompted enter the code 794728#
(This will not work on Magic Jack or other VOIP systems. It will work on cell and land lines.)
Join us for what will be a terrific, FREE opportunity to learn more about how you can profit from both performing and non-performing 2nd mortgages!
Cheers,
Bill
W. J. Mencarow
President, The Paper Source, Inc.
P.S. Fuquan Bilal will teach at the Paper Source non-performing notes conference Nov. 20-22 in Las Vegas and will be available to sit down with you for a complimentary consultation. For more information go to
www.papersourceseminars.com/non-performing-notes-seminar-2014
www.papersourceseminars.com/non-performing-notes-seminar-2014
or call us at 800-542-2270.
Frequently-Asked Questions On Note Investing
answered by Fuquan Bilal, National Note Group
www.nationalnotegroup.com
What is a note? And how is it different than a mortgage?
A note is the document used to promise the repayment of the loan and a mortgage is a lien against the property to secure the loan.
Where do notes come from?
Notes are created as an IOU. The benefit of a real estate note is that the lien is collateralized by real property.
What does your company do, and why do you prefer buying second mortgages?
National Note Group (NNG) purchases discounted notes and mortgages from industry wholesalers at sizable discounts. By sharing the purchase discount with the homeowner, we are able to create a payment workout and convert the note into a performing asset.
NNG prefers to buy second mortgages because of the lower price point and higher upside potential. This way, we diversify our risk amongst many assets.
As an investor, why would I buy a non-performing residential second?
We have a system in place to turn that non-performing note into a performing note. After working with us, the property owner wants to make their payments because they now have equity in their property. One of the biggest reasons people stop paying is because they are upside down in their property and see no way out. We have a full time staff that knows how to deal with this by turning a negative situation into a positive one.
Why buy a note when I can buy property? Will I have something to show for my money?
When you buy the property, you are responsible for the repairs, maintenance, etc. With a note, you collect the payments and do not have to get your hands dirty. You control the property without the negatives of owning the property. Another advantage of owning paper over property is amortization over appreciation. In these volatile times, real estate amortization is a much more secure position.
What do you do with non-performing assets after purchase?
The first rule is to work with the homeowner to design a payment plan and loan terms that work for their financial situation. The key is to engage the homeowner, build trust and keep their best interest at heart. We have found that many times there are short term circumstances such as a health issue, job loss or divorce that prevents homeowners from making full payments on their mortgage loan. By purchasing the notes from the bank at such deep discounts, we are able to create a "win-win" scenario until they get back on their feet. Other strategies are payment plan re-instatements, reinstatement with discounts, refinancing, seller assistance, deed-in-lieu of foreclosure and foreclosure as a last resort.
How do I get the money to buy a note?
Many note buyers get money through equity lines of credit on properties, cash savings and retirement accounts/self directed IRA's, HSA's, CESA.
Are notes secure as an investment?
Yes. They can be more secure than the stock market or actually owning the physical property. We deal with notes where a strong equity situation has been created, so if we have to foreclose on the property, the deal will still be profitable.
What do I do if the note stops performing?
Performers purchased through NNG are covered by our warranty, and otherwise the note buyer would proceed to foreclose.
I hear there is more profit in notes than actually owning the property. Is this true and why?
When you own the note, you control the property and the property owner pays you just like paying the bank (you are now the bank). In today's market, with all the non-performing notes and upside down properties, many notes can be purchased at a discount. Being a property owner, you have to deal with the repairs, tenants, problems, etc. which can be costly and can eat into your profits. With notes, you collect the payments and if the homeowner chooses not to pay, you move to foreclose on the property.
We deal with notes that have a good equity spread. If the property has to be foreclosed on, there is still money in the deal which, in many cases, can turn a higher profit. We use foreclosure as the last resort though. We only take possession of someone's property as a very last resort.
Why are notes discounted?
They are discounted for a variety of reasons, such as performance, borrower status, and property value, condition, and status. Banks do not have the personnel to attend to and process defaulted notes resulting from interest rates on mortgage loans adjusting, natural disasters, fraudulent loans, unqualified buyers, housing price declines, and personal catastrophic losses to the borrower. Banks are in the business of lending money. They can lend out approximately 10 times the amount on a performing mortgage loan balance, depending on the institution's financial strength. For example, a non-performing mortgage with a balance of $250,000 results in a lost lending opportunity to the bank of up to two and a half million dollars. Due to this regulatory requirement, economics prove that a discounted note today will reap far greater returns for the bank tomorrow by allowing it to put money back into loan circulation sooner rather than later. This is known as the Time Value of Money (TVM).
What do you mean when you say I am like the bank?
The borrower pays you as the owner of the note like they would pay the bank. You also control the property by owning the note. Those who control the debt control the property. You can also resell the note, if you choose (just like the banks), and reinvest that money into another note, or walk away with your profit!
Real inflation is said to be 12%. If I invest in notes, can I make enough money to beat inflation?
We cannot promise you an exact yield because every situation is different. We can share that we consistently have investors calling in to tell us they are receiving much better than expected returns and are now going to refer friends and family. They also tell us they are doing better with notes than any other investment they've had in the past, including the stock market.
How long after I purchase the note will I receive the assignment/collateral from NNG?
You will get the collateral in about 15 days. If you purchased a performing note, the original assignment is sent to the recorder's office for recording on your behalf. If you buy a non-performing note YOU are getting a signed notarized assignment that you must then send out for recording to the county recorder's office for the property referenced in your note. (There are times when the assignment is not included and that is usually when we are waiting for a previous assignment in the assignment chain to come to us, so that the recording is completed in order).
What part of the collateral file goes to the IRA custodian if purchased through a retirement, health savings, or college education fund?
Copies of: note, mortgage, workout letter (CAMA only), NSA, original recorded assignment after it comes back, purchase asset directive (CAMA only). If you have any questions about what these documents are please visit our glossary.
Do you use the purchase price of the property to figure equity?
No. All property values are figured at today's fair market value (FMV). We check many sources to come up with the actual value of the property in today's market, including BPOs or appraisals. No one should use just one source. We use many sources to give all involved a more realistic value.
Can I sell a note?
Yes, you can borrow against it as well (which is known as a collateral assignment and note and mortgage
How long does it take to set up a note with a servicer?
The application goes to the servicer immediately at funding and takes approximately four days.
If there are delinquent taxes on a property, should I stay away from the deal?
Delinquent taxes do not go away, even if bankruptcy is filed. They have to be paid by someone. When you are looking to invest, figure the delinquent taxes into the scenario. If the numbers work, it may still be a good deal.
How is my money secured?
Depending on the investment structure and the amount, your investment is either secured by a single note, several notes or a portfolio of notes - with instant equity due to the purchase discount.
How do you create revenue for your investors?
We buy notes in such a way that allows our investors multiple exit strategies for returns. By investing in a mini-pool of notes, you diversify your risk and allow for more exit strategies to work for your portfolio. Watch our videos or contact our Acquisitions Department for inormation about the exit strategies.
Does NNG foreclose against the Homeowner?
There are circumstances where we initiate foreclosure on properties in our portfolio. However, we make every attempt to help the homeowner keep their home. Foreclosure is generally a result of the homeowner avoiding discussions with us or where they have already vacated the property. If necessary, we make apartment deposits, provide travel money, and pay administrative fees, etc. on their behalf to assist in their transition.
Why should I sell my mortgage note?
Usually, a promissory note is acquired instead of the desired cash during a real estate transaction. If retained long enough, many notes will eventually pay off. However, late payments, insurance liabilities, tax problems and foreclosure may soon plague some mortgage note holders. Even when these problems do not arise, many people would still prefer to have their cash right now!
What other reasons are common?
Other reasons include: to pay off high-interest debts, to invest in a business, real estate or stocks, to pay tuition, to remodel a home, to buy a new car or boat, to settle an estate, to provide for relatives or the inability to service the mortgage. Some people did not want to carry back the note in the first place, or have grown tired of collecting the monthly payments.
Where can I buy institutional notes?
From NNG or other banks and servicing companies.
How does the warranty work for Performing Notes?
At NNG we warranty your principal. If your loan defaults, please notify us and we will start working on your behalf to try to get the note to reperform. If the loan stops performing for six months we will give you a note credit. Please see post sales support.
What do you rep and warrant (back and guarantee) for non-performing notes?
That it is a valid lien and in second position.
How can I learn more about notes?
Attend The Paper Source Conference on Non-Performing Notes Nov. 20-22 in Las Vegas. You'll meet and mingle with note investors and brokers and learn from the cream of the crop of note experts. Visit http://papersourceseminars.com/non-performing-notes-seminar-2014 or call 800-542-2270.