Below is a question I got asked recently. I thought this was valuable info, so I am sharing it with you here:
“I have been doing some reading on all the reasons why lenders would sell properties at big discounts…
In regards to lenders and their concerns, what factors determine their choice to sell discounted mortgage notes? Since we are trying to think in the mind set of the LMREP, it would be helpful for us to understand their concerns so that we can sell our services”.
This was my reply: You need to be clear (both in your language and the way you think) about the difference between properties and mortgage notes. In your question, you mentioned both of these.
If you were speaking to a bank rep, they would know that your inexperienced. They would probably think that you’re a newbie that doesn’t know the difference between a deed of trust and a deed, this for certain would get you no repsonse from the bank.
A Tip on Buying Mortgage Notes
Make sure you know the lingo before you call these banks:
You get one chance to make a good first impression, when you’re talking to the key person/gatekeeper when buying mortgage notes.
There’s a great tip right?
A few reasons:
Reasons to Sell Mortgage Notes at the Institutional-Level
a) banks in the process of merging, or posting quarter/annual financials and needs to get assets off its balance sheet. Quick way is to sell the notes
b) bank may have a “relationship” with the borrower, or there are extenuating circumstances.
c) banks may be under pressure (image/marketing, legal or other) not to take “aggressive” recovery action (foreclosure) against borrowers either across the board (image has been hindered by bad press in foreclosure action), in a certain geography (Detroit/Cleveland, hard hit urban areas seen as minority/poor/fraud-rich) or in a certain situation (1st time minority home buyers)
d) the bank may have started the foreclosure processes, but they do not actually want to take the borrowers to sale. (in the past, I have purchased mortgage notes 1 week prior to sale).
3) sometimes the warranty cover/expense is not worth the hassle when the loan is upside down, especially when the loan amounts are so small. (when buying notes, these types of deals are a great opportunity)
f) In order to see what the market would pay for these loans, banks may price a part of its non performing book and send it out.
Reasons to Sell Mortgage Notes at the Individual Reps
a) in some cases, the loss mitigation rep does not want to deal with borrower anymore. Reasons for this can be the borrower unwillingness to discuss matter, or broken promises of repayment.
b) borrower is non-responsive, no contact
c) long foreclosure state/process
e) authorization over certain write offs and mortgage note sales is within the rep or their direct managers authorization. When required to go to upper managment for aprovals the process is lengthened…so in those cases they may pass.
f) the rep might be shooting for their monthly bonus and sell off some mortgage notes to reach this. Sometimes it could just be a matter of meetin a monthly quota.
Hope this was useful to you.
