Where are people buying notes today?

Question

Hello All,

I have recently struck up an interest in notes, and heard of FCI exchange, but they appear to no longer be in business. I then ran across paper stac and was wondering if someone had thoughts on them? I am wondering where else people are buying notes via the internet. I am assuming that these internet purchased notes do not have servicing in place, so where would I go to find a servicing company? I tried a google search of local companies, and didn't find much of substance. I am assuming that because you can buy notes all over you don't necessarily need a local servicer, but I still looked it up.

TIA

Logan Hassinger · Answer

@Tyler Mutch

We source our notes direct from banks and a few brokers that we trust. You will find that there are plenty of people out there and on BP who are Joker Brokers just pushing some old tape of assets that they have 3 and 4 degrees of separation from the sellers. Be cautious of random people reaching out to you saying “I’ve got assets all across the country, just provide me your buying criteria”.

As for servicing, we use Madison Management. Like others have already stated, I’m handling all of the workouts in house and simply use a servicer for the legal/licensing piece. Not worth the risk.

Andy Mirza · Answer

@Tyler Mutch In my experience, note servicers range from mediocre to terrible. We use FCI Lender Services, Inc and they're ok. They have good systems where things don't usually fall through the cracks but they can be slow. Loss mit is worthless like all the other servicers. I'm thinking about using Madison but I've heard negative things about them as well. Stay away from Del Toro Servicing in CA!

As to your other question, people are buying notes directly from sellers and a few trusted brokers. We tend to not share this info as it takes a long time and lots of effort to develop these relationships and sellers know that most note buyers are really not that serious or professional when it comes down to it.

Chris Seveney · Answer

@Patrick Sears

I considered bringing servicing in house and decided against it because of the risk. While it may be more economical once you hit several hundred loans - to me I don’t believe it’s worth the risk and costs for licensing, insurance etc.

What I have started to do is “shadow service” my loans. I have the same software servicers have to track and manage my portfolio but I still have a servicer do the minimum to stay compliant and we have been doing the workouts.

Patrick Sears · Answer

@Chris Seveney Yeah that figures.  Another bright idea bites the dust!

Chris Seveney · Answer

@Patrick Sears / licensing alone would cost you a probably a $100,000 per year. I cannot see how companies with less than a few thousand loans can be profitable.

Absolutely not worth the headache for the low cost you Get. If you read about servicing companies a lot are merging because they have low margins and it’s all about volume.

Patrick Sears · Answer

@Chris Seveney @Andy Mirza I would think one benefit of having a neutral 3rd party servicing your loans is that when it came time to sell your paper, the quality of the payment history couldn't be called into question by a potential note buyer, vs. the note buyer having to take your word for it if you are doing your own servicing.

Still, servicing OTHER people's notes might be a business worth looking into, depending upon the potential profits margins vs. regulatory headache.  How many notes do you think an average servicing probably has on their books?

Jamie Bateman · Answer

On PaperStac (which I recommend), once you click on "Message Seller" or "Make Offer" you can request a payment history from the seller. @Brett Burky will happily answer questions about Paperstac for you.

As for servicers, there are several that service all/most states (as others have mentioned above). I use Madison Management, but some others are: SN (https://www.snsc.com/), FCI (like @Andy Mirza mentioned), and Allied (like @Dan Deppen mentioned).

Andy Mirza · Answer

@Patrick Sears I wish I knew why servicers were so bad. One principle I believe in is that, "No one will care as much about an asset more than an owner does." That applies to property managers, real estate agents, contractors, attorneys, etc, as well as note servicers. Loss mitigation is the most glaring example. An hourly or salaried employee cares primarily about what he or she needs to do to keep their job and make their income. However, this is in conflict with my desire to put in the necessary work and apply my problem solving skills to work out solutions with my borrowers or the foreclosure process that will get me the most profit. Loss mit is best done in house because I care deeply about how my assets are handled. To the loan specialist handling my loan plus a couple hundred others, they just want to get through their day with the least amount of hassle.

Chris Seveney · Answer

@Tyler Mutch

Yes ask them for the pay history.

Tyler Mutch · Answer

I’m looking to dip my toe with a sub 10k performing note, that seems to be a relatively safe way to get started. A first position lien as well. When I look on paperstac the issue I have found is that they call it performing but the seller has not posted any payment history, do I just need to reach out to the seller to verify?

Thanks all!!

Where are people buying notes today?

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