How do I do this properly?

[Bill B.]

Hello,

Thanks in advance for reading this and any help you may provide.

I am a note investor.  We have one note in Ohio.  We initiated FC.  However, the borrower, just Friday, wired $5K and begins making $913 payments monthly starting 4/1/15.  (all payments are being handled by the a licensed servicing company) This is beginning our forbearance period.  If the borrower performs, we will negotiate a modification.   I can't adequately describe how gratifying it is to help someone keep their home.  The communications from the borrower to the servicing company are filled with thanks and gratitude.  The icing on the cake is that we stand are projected to make a forty percent return on our investment.  That will be in just over a year, if all goes well.  

We're doing the happy dance. 

This, obviously, has wet my appetite for "more".  I want to jump start this and start dealing with small pools of three to ten NPNs.  I come from a family of modest means.  So, I can't approach them.  Even if I did, the most significant resources in that area are prohibited to me by federal law.  

So, I'm contemplating HML. BUT, I am not afraid to admit that I don't know what I don't know. I understand how the HML lender would be on title, that there are points and higher interest involved, etc, etc. I just want to be certain that I am not approaching HML companies and asking that they violate some law of which I'm not aware. I don't want to make my first contacts with this industry make me look like a complete dolt.

Also, can anyone point me toward an HML willing to loan to a relative newbie for investing in NPN? I have several that I plan to contact, but the faster I ramp this up, the faster I can start reviewing NPN portfolios to purchase.

As usual, a lot of background and a short question.  

Sorry for not being more concise.  

Any help/insight is most appreciated.

Bill

[Bill Gulley]

How about we not knock off the lawyer speak and you guys who think you know something start learning?

BTW, borrowing against notes is "arbitrage" that is accomplished by mortgage brokers, banks, mortgage bankers, not pawn brokers or HMLs who are not properly registered, next, someone will probably ask if a HML can loan against a stock portfolio.....they are commercial real estate lenders! Again, notes are not real estate, not part of the real estate industry, they are in another industry called FINANCE. Notes are listed on BP because notes are popular with those in RE, it drives posts which is BP's business, they are not in the financial advisory business.

Scott, what is a company that buys and sells notes as it's primary source of business or making money? IT'S A BROKERAGE! Companies that INVEST have other business functions that are the primary source of income, when the primary incomer becomes through note operations you're a BROKERAGE!

Really don't give a half a hoot how long someone does something or what is common on the black market of note gurus, wrong is still wrong.

Folks need to be very careful getting advice off the internet from those dealing in notes.

I could chime in Ken Rishel who does lending compliance and ask him this question:

How many dealers/brokers are in full compliance with regulations? The answer will be NONE, not if they are really doing business, I examined banks and not one was ever perfect. No broker nor any bank will admit being out of compliance, they all think they are doing things right.  

You can be in the note "business" for 10 maybe 15 or even 20 years and never have an issue, you can also buy your second loan and lose your tail and be fined from not being in compliance. Your risk!

I'm sure Dion can load you up with much more than he mentioned as well.

To say you "can just" put something in your LLC Operating is peanut gallery talk, marketing side lines.

Fractionalized note, just put all your investors names on the assignment, that is a fractionalized interest and ILLEGAL in some states. Hey, people jump off bridges in some areas, why don't we all just start jumping too, we're missing all the fun!

You aren't an SDIRA Fund manager licensed to arrange financing conduits, you aren't a mortgage brokerage, you aren't a registered lender or servicer, so, absolutely not, you can't jus do what they do! Get a license, then you can.

What @Christian Carsondidn't mention was the fines that may be assessed to a holder for the violation. You don't just lose a note and pay attorney fees and court costs, you can pay hefty fines as well!

Different types of notes require different compliance requirements. When you buy a note, any note, you take on the liability of it's origination and all past servicing. Yes, someone may held harmless from past operations, that doesn't mean you still aren't responsible.

So, no, let's not knock off the lawyer speak in favor of listening to some note broker operator, they are a dime a dozen out there, get an attorney to bless your plans!

I spent more time in federal regulatory aspects, bank and mortgage compliance, than anyone on this site so far, not to mention servicing consumer and commercial loans. A RMLO gets a 20 hour class, they could have sold cars last year, who knows, at least an independent mortgage broker will have more requirements, assets, bonding, insurance, registration and oversight that many dealing in notes won't be showing you.

You can have a SDIRA, your money and kick it off to a licensed broker, you should then have the note assigned for servicing, you should not be talking to a borrower, owning a note does not give you license to originate or modify notes. Give your money to an established, registered properly organized firm, let them broker for you. And, no, you can not just advertise for investors as these firms do as an individual "investor"!

Notes are an area that experience alone will NOT teach you what you should know, especially if you start learning from another under educated investor/dealer who spends all their time trying to pull deals.

I love the note business, many in it are skating by, giving bad advice, many talk about how they "use to do this or that"   

Rant is over. :)