mortagesandforeclosures

by Dean Engle

Buy Notes - Do You Know Your Borrower?

A friend of mine who is a note broker, set up a call for me with the Senior Vice President of a CA bank. He was in charge of the banks note sales.

The Sr Vice President advised me that they had 3 non performing notes that were commercial loans in the LA area.

How to Buy Notes...communicate with your borrower

Hear me out...

As we continued our conversation...the SVP at the bank notified me that one of the loans had a scheduled foreclosure sale in 2 weeks.

The bank had not been in contact with the builder/developer (borrower).

I asked her if she was concerned about the loans or not, and if she was worried about whether she would have any problems taking over the properties through the foreclosure.

She let me know that the bank didn't have too many concerns because the property values were enough to pay off their debt.

Buy Notes - My Concerns

The main thing that I've learned while I've been in the note buying business is that your relationship with your borrower is key and you need to manage it properly.

By not working with your borrower, you can really mess up your chances of getting out of your note deals.

And here is the reason...

For all loans, there are 5 Note Buying Exit Strategies:

foreclosure, refinance, short sale or deed-in-lieu, note sale, and reperformance.

Only 2 of those plays, foreclosure and note sale, can succeed without any communication at all with the borrower.

The bank has chosen foreclosure as their exit in this example. But there are risks with foreclosures, the main one being the high possibility that the borrower will file for bankruptcy. If this occurs, you will not be able to recover the property.

My Advice on Buying Notes

Make fantastic returns when buying notes without having to foreclose or to sell the note on to someone else.

If that's true, then losing contact with your borrower essentially kills 60% of your note buying exits (3 of the 5).

Would a seasoned golfer get onto a golf course with only 5 out of their 12 clubs?

That would limit their game right?

Most likely.

It would be a funny sight watching him hit a putt with a 9-iron.

Much as it can be painful or unappealing to some of you - working WITH your borrower is essential when you buy notes.

That was the advice I gave to the SVP at the LA bank today.

We'll see if she takes my advice - we'll be tracking her nonperforming notes to see if any of them end up in bankruptcy.

If those notes do end up in bankruptcy, it's for certain that she will be wishing that she kept communication with her borrowers.

About the Author:

Interested in learning more about the Note Buying Business? Watch Hours of FREE Training Videos here: Buy Notes Real-life, Up-to-Date Information for You. Visit NoteBuyingProfits.com or Call 718-783-7605 Or Click Here: Buy Defaulted Mortgages From Dean Engle & NoteBuyingProfits.com - This time on Buy Notes.

Get all the information and photos:: http://mortgagewide.info/buy-notes-hitting-a-put-shot-with-a-9-iron/