Notes and Unicorns

[Justin S.]

1. Can I call up the bank (like Chase, B of A, WF) ask to speak to some person who is in charge of the notes and ask to buy one? The note would be several months late and most likely in a pre-foreclosure status.

2. Can the homeowner formally request the bank to attempt to sell their note? If so, what form/contract is needed?

3. Or is all note buying done in bulk and you cannot cherry pick which ones you want to buy.

4. Or should I focus on private notes and local portfolio lenders?

Or does this not exist..like unicorns (sorry kids).

[Bill Gulley]

Hi Justin, slow pays are loans that have a poor payment history, sometimes on time, sometimes slow, but they are not considered in default to the extent of giveng a notice of demand, they are a pain to collect sometimes.

When a loan is in default and a notice of demand is given the loan is placed in a non-accrual status. This means that interest no longer accrues or accumulates on the principal amount.

If the loan is a pain to collect and the loan officer is tired of calling that borrower, if he gets a letter from the borrower saying plesse sell my note to Justin, that loan officer will probably rejoice! It comes out of his portfolio and his boss no longer rides his tail about it.
Management wants to see it go as well because it might be a loan identified by regulators as a poor performing loan and that effects the capital requirement for Loan and Lease Loss Reserves.

If it is a note serviced, but not owned by the bank, they will still like to see it go because in the event of default the holder may require the originator to repurchase the loan.

After the slow pay status, next is non-performing loans, where payments are not being paid or are over due and not brought current. These are pre-foreclosures. The lender will likely have a note in this status before a notice of demand is sent requiring full payment of the obligation. A request to purchase this note has the same effect as meeting the notice of demand, paying all amounts due. To the lender, selling the note is the same thing as having it paid off.

The borrower can request that a note can be sold at any time, but where is the motivation of the lender to sell it if it's current and in good standing? If it's not in good standing, they have a motivation to get rid of it.

Consider this too- smae example given in a forum last month, if you don't like someone and banks just sold notes to anyone, you could go in a buy my mortgage. I'd send you my payment and you could simply trash them or deposit my payments late effecting my credit. You could set me up for a foreclosure and maybe end up with my house. The bank has a liability in selling a note like that. You might get my house but I'm going to sue that bank fro their wreckless and imprudent lending practices and they will be paying me!
If I am in default and they have given me notice saying pay up or we are going to seek all remedies available to collect our money, then they can seek buyers for the note without my consent or even my knowledge, at that point I brought this upon myself! Looking at it that way might help understand when and how a note can be purchased.
Sorry I didn't make that clear upstairs for you.

Question.....should I put all this note stuff in an article or ebook, I get alot of questions on this and seems I'm retyping much of it, which is OK, but evidently there is not much info out there on the topic, I don't know! What do you think? Thanks Bill.