Investor · Houston, TX · Member since 2014 · 128 posts · 87 votes
I'm working on learning about notes. I hope to start investing with performing, first liens to continue learning and then eventually branch out into seconds and non-performing. I've been studyIng and reading and looking at sites. Sites like FCI and Watermark Exchange have notes for sale, but the data seems very questionable. For example, WE posted notes today that say they originated in 1969. There is also a lot of missing data. Some of the loans listed as performing showed the last payment being 6 months ago. Etc...
I understand that things like title and BPO need to be verified independently. But if the basic listing data is so skewed, how do you even choose which ones to look at? Is this typical of these sites? Is the data that comes through on a tape directly from a bank more accurate? Is there a trick to confirming the basic data, so you can decide whether to pay of title searches and a BPO?
I've bought 3 notes thru FCI Exchange but none from Watermark. They did not even reply to my inquiry about a note that I sent in last week via their website form. As I understand it they don't own many or any of the notes in their inventory, they are more like a fancy broker. With FCI you have a vetted seller and FCI holds your funds in escrow until you approve the collateral files. Very above board and clear transactions.
I've bought 3 notes thru FCI Exchange but none from Watermark. They did not even reply to my inquiry about a note that I sent in last week via their website form. As I understand it they don't own many or any of the notes in their inventory, they are more like a fancy broker. With FCI you have a vetted seller and FCI holds your funds in escrow until you approve the collateral files. Very above board and clear transactions.
Sites like FCI and Watermark are only as good as the data try receive from the sellers. Both are a sort of consignment store for note sellers. I have personally purchased non-performing notes through both successfully- the key is to remember that you must do your own due diligence on any note you are considering before taking possession. In FCI's case they are also a servicer so I would look for notes where they have the pay history and you can easily see it via that button. The same would hold true for performing notes. Watermark gets pools of notes from banks and makes them available for individual purchase so you don't necessarily need a lot of capital to get started in this business. But oftentimes they are provided incomplete information on the notes they offer. When you find a few notes you are interested in possibly buying order an O&E report to see what outstanding liens are against the property and request a pay history before paying. If they cannot produce it then you need to weigh the risk versus reward. In my situation I'm only buying non-performing notes so I am paying less for the notes but accepting a higher, but manageable risk for doings so. Good luck!
Ann, I like FCI. If you bid and your price is accepted, you then go into the DD phase of the process. You then get to see the collateral file, order BPO, title search get boots on the ground and what ever else you want to do without going on the property. The last step you can lower your bid if think the price is to high. I have used them many times and use them to service all my loans. Watermark I don't use, very new and I have followed Val for something and he is the CEO.
I've bought 3 notes thru FCI Exchange but none from Watermark. They did not even reply to my inquiry about a note that I sent in last week via their website form. As I understand it they don't own many or any of the notes in their inventory, they are more like a fancy broker. With FCI you have a vetted seller and FCI holds your funds in escrow until you approve the collateral files. Very above board and clear transactions.
Bob
Thanks, Bob. FCI has appealed to me, since they also service the loan. Plus they make it easy to arrange a title search and BPO.
Thanks Wayne and Jason. You have helped confirm that FCI is probably a good place to start. FCI seems to have more detailed data available. They also have the diamond program, so you know what loans they are already servicing.
You can get a BPO and O&E for a bit less than FCI charges if you go direct to a third party provider. If you want to create a member account with us I've published a resource page at http://www.rcm.company/nplresources/ which has links for a pleathora of NPL vendors.
Data integrity is the chicken or the egg question when it comes to notes. Often times I see new and eager note investors pursue loans with lots of missing data or obviously inaccurate data. This is an issue with the industry not just those sites. Data issues occur on tapes for pools as well as these sites. A combination of human error when inputting the data, a lack of QC and perhaps laziness.
While it is possible to make some reasonable assumptions for missing data, I would be careful when engaging a sale with inaccurate data. We have a minimal data standard that we must have prior to even pricing the loan out. Often times I have to reject loans and tapes because the data is missing. In some sales settings this means we miss the deal all together since there are some investors who will simply bid based on the data they see. I tend to think that game is just about getting the pool or loan awarded and then they haggle the price down even more.
Data issues can lead to document issues. So for those who do decide to proceed with lesser quality data sets be warned that you may be walking into a situation where the documents are not available as well.
For all of those reasons I would not recommend ordering a vendor service to find out what is missing. The seller, if they want a decent and accurate bid should really just do a better job. Put it back on them.
You can get a BPO and O&E for a bit less than FCI charges if you go direct to a third party provider. If you want to create a member account with us I've published a resource page at http://www.rcm.company/nplresources/ which has links for a pleathora of NPL vendors.
Bob
Bob - Thanks so much for the referral to your site. The tools you have there are tremendously helpful. I was in the process of compiling a lot of that information for myself. You saved me a lot of time!
I would just like to make a statement here. I am not new to the BP website. I have been reading it on an off for years in other areas of real estate, however, this is my first time posting anything. In the past, I have always dealt with foreclosure properties, and have successfully negotiated many short sales for investors.
I am now ready to delve into the note business. I would like to say that your website Bob, is very, very informative. I wish I had had it when I was solely wholesaling foreclosures, it would have saved me quite a bit of time.
I would also like to thank Dion for generously allowing me his time, sources, and knowledge on a personal level.
Thank you gentlemen for the wealth of information, and I look forward to continued reading, and also asking my own questions.