Any problems with buying partials?

[Jon B]

Is there any potential issues with buying note partials on the legal side? Any special licenses or requirements for it? Thanks

Sincerely,

Jon

[Chris Seveney]

If you are buying partials, some key things to ask are:

1. Who is managing the note? Does it stay with the seller and they pay you or does money come from the servicer?

2. What happens if the borrower defaults?

3. Who is responsible for costs if it goes into default?

4. What are your remedies if the seller defaults with you?

5. Is your payment in priority position over the seller? ie. if it forecloses and the UPB was $20k and you bought $15k of it, and it sells for $12k, do you get all $12k or how is that split?

Make sure the contract includes the collateral for the note you are buying a partial on.as well as a payment/amortization schedule. That way if you bought 60 payments and the borrower paid it off on month 20, its crystal clear what your payment is.