Notes

[Dalston Jules]

Hello Guys,....

I have some interest in diversifying into Notes. I'm interested in a gradual shift. So I've decided to use my current resources (network and knowledge) to do so. The model i am pursuing is one where I acquire the DEED/TITLE on the subject property first, then seek to purchase the 1st position note. I am thinking this will allow me many options in terms of speed with modification and short sale should i choose that path. Also it also opens up the opportunity for seller financing and later selling that note for a lump sum.

This is just my thinking, I welcome comments on the feasibility of my strategy from the Forum. Also, How would i go about seeking to purchase a particular note? Are there note investor out there who are interested in purchasing first position notes? Most of the chatter is about 2nd position notes.

Thank you!

[Dion DePaoli]

Dalston, you don't really have the parties correctly defined in your head.

You have to own a property in order to grant an interest in it. So if you purchase a property and take title to it, unless that is Subject To, the title to the property to will be free of mortgages and other liens, etc.

You can finance the said property, offering the property as security for the loan, your role at that point is a Borrower.

Lending yourself money is not arm's length and does not do anything for you.

If you invest in a mortgage, then there is a third party borrower, it is not you. That borrower has title to the property and you lien it or it is held in trust. The point is, you are not the title owner of the property, the borrower is.

What you maybe thinking, I don't know, is if you purchase the mortgage and offer to work with the borrower (not you) for a short sale or deed in lieu or modification. These things you can do as a Mortgagee (investor in the mortgage). If the borrower gives you a DIL, you take title to the property in exchange for satisfying the mortgage, so you stop being a Mortgagee and start becoming an Owner at that point.

In order to offer Seller financing, you would need to be the owner of the property. Otherwise you are a Lender. Both of these roles have other implications with license and regulation. See SAFE Act in BP under Seller Finance and Dobb-Frank under Seller Finance and Lending.

Purchasing a specific note, will depend on who you are sourcing the note from. There are institutional Mortgagees and Private Mortgagees. The latter tends to be a little easier for single loan purchases. Finding them looks similar to finding distressed home owner's to sell a property.

Yes, there are investors who purchase first potions mortgages and deeds of trust as well as second positions along with all types of other debt instruments, for that matter. Some folks do specialize in seconds and some only transact in firsts. You will find a plentiful amount of knowledge here on BP. So look around and ask questions as needed. There is a specific forum which deals with notes investing as well as lending. You can explore those forums at your will.

Welcome to BP.