Buying mortgage notes

Mortgage debt for sale: what it is and where it comes from

Mortgage debt for sale is mortgage notes: loans secured by real estate that a lender, bank, government agency or private holder sells to an investor. The buyer pays a lump sum and collects the borrower's remaining payments. Performing notes are being paid as agreed. Non-performing notes are seriously behind, so they usually sell at deeper discounts.

Hold a note and want to sell it instead? Get a no-obligation note review.

What "mortgage debt for sale" means

When someone borrows to buy property, two documents are signed. The promissory note is the promise to repay. The mortgage or deed of trust ties that promise to the property. Together, people call them a mortgage note.

The note is a right to future payments, so its owner can sell it. The buyer steps into the lender's place. The buyer doesn't own the house. The buyer owns the borrower's promise to pay and the right to enforce the lien if payments stop.

You'll see the same thing called mortgage notes for sale, whole loans, loan sales or loan pools. A pool is a group of loans sold together. Mortgage debt is different from unsecured consumer debt, like credit card balances, because real estate stands behind it.

Types of mortgage debt for sale

Type	What it means
Performing	The borrower is paying as agreed. The buyer is mainly buying a payment stream.
Re-performing	The loan fell behind, but payments are current again, often after a loan modification.
Sub-performing	Payments come in, but late, partial or irregular.
Non-performing	Payments have stopped or are seriously behind. The buyer takes on the work of resolving the loan.
Seller-financed	A private seller carried the loan when selling a property. Also called an owner-financed note.
First lien	The loan gets paid first from the property if it is sold or foreclosed.
Second lien	The loan sits behind a first mortgage. Home equity loans and lines of credit are common examples.

Notes can also be residential or commercial. For more on the payment-status types, see performing vs. non-performing notes. For private seller notes, see owner-financed notes.

Who sells mortgage debt, and why

Banks and credit unions. They sell single loans or pools to manage risk, release capital, or clear out loans that are behind.
Government agencies. The FDIC sells loans from failed banks, both performing and non-performing, often through sealed-bid sales. Fannie Mae sells pools of non-performing and reperforming loans to qualified bidders. HUD's Office of Asset Sales has sold defaulted loans that FHA insured; check its asset sales page for current sales. Bidders in these sales must qualify first.
Funds and note investors. They buy notes and later resell some of them, often after a loan starts paying again.
Private holders. People who sold a property with seller financing, or inherited a note, sell for a lump sum now. Some want to stop managing payments. Others want cash for an estate, a purchase or retirement.

How a mortgage note sale works

The seller shares the loan data. Balance, rate, payment, payment history, property details and lien position, often for many loans at once.
Buyers bid. Each buyer prices the notes that fit its own rules, called a buy box.
Due diligence. The winning buyer checks the files, title and property values before closing.
Purchase agreement and closing. A title company, escrow agent or attorney usually handles closing. The note is endorsed, often with an allonge, and an assignment of the mortgage is recorded.
Servicing transfers. The borrower gets a notice telling them where to send payments. Many buyers use a licensed loan servicer.

Investors who want the full step-by-step can read how to buy mortgage notes.

What affects the price

A buyer works out what the remaining payments, or the property behind them, are worth today at the return it needs for the risk. That's why mortgage debt usually sells below its unpaid balance. These things move the price most:

Payment status and history. A long record of on-time payments supports a higher price.
Equity. The property's value compared with what's owed.
Lien position. First liens are generally worth more than second liens.
Rate and time left. The size and length of the payment stream.
State rules. Foreclosure time and cost differ a lot from state to state.
Paperwork. A complete chain of endorsements and recorded assignments.
Costs to own it. Servicing, legal work and property upkeep.

See how notes are priced for the math, or test numbers in the note value estimator.

Due diligence basics

Property value: a broker price opinion or appraisal, plus photos or a drive-by.
Title: a title search to confirm the lien position and spot tax liens, HOA liens or senior loans.
Payment history: verified from bank records or a servicer.
The collateral file: the original note, every endorsement or allonge, the recorded mortgage or deed of trust, and every assignment.
Taxes and insurance: both current.
Rules: federal and state rules cover servicing and collecting on home loans. Ask an attorney about the states you buy in.

The FDIC sells loans largely as is and doesn't guarantee how they will perform. That puts the risk on the buyer, so the checks above matter.

Where investors find mortgage notes for sale

Common sources are bank and credit union loan sales, the government sales above, online note marketplaces, note brokers, and private holders selling one note at a time. Check who you're really dealing with, and close through an independent title company or attorney.

CashForMyNote.com doesn't list notes for sale or run a deal feed. It explains how notes work and helps people who hold a note get it reviewed.

Holding a mortgage note? Get offers from note buyers

If you sold a property and carry the loan, or you hold another note secured by real estate, you can see what buyers would pay.

This is for private holders, such as people who seller-financed a property or inherited a note. It isn't for banks or other institutions selling loan pools.

Start with a no-obligation note review. Answer a few questions about the note, and get offers from note buyers whose rules fit it. You decide whether any offer is worth taking. Read how to sell a mortgage note and who note buyers are to see how it works.

Four quick questions to start. No obligation to sell.

Get a no-obligation note review

Questions

How do you buy mortgage debt?

Decide which notes you want, such as performing or non-performing, first or second liens, and which states. Find notes from banks, government loan sales, online marketplaces, note brokers or private holders. Check the property, title, payment history and paperwork, price the note at the return you need, and close through a title company or attorney.

Can you legally buy mortgage debt?

Yes. Mortgage notes are bought and sold between lenders and investors. Some sellers, like the FDIC and Fannie Mae, require bidders to qualify first. Servicing and collecting on home loans is regulated and the rules vary by state, so talk to an attorney about licensing before you buy.

Where can I buy mortgage notes?

From bank and credit union loan sales, government loan sales such as those run by the FDIC and Fannie Mae for qualified bidders (HUD's Office of Asset Sales has also sold defaulted FHA-insured loans), online note marketplaces, note brokers, and private holders who carried a loan when they sold a property.

Can you buy mortgage notes from banks?

Yes, but banks usually sell loans in pools, often to established buyers who have qualified to bid. Smaller banks and credit unions sometimes sell single loans. Ask about their loan sale process and what they require from buyers.

Is buying mortgage debt profitable?

It can be, but it isn't guaranteed. The return depends on what you pay compared with what you collect, and how long that takes. Defaults, a lower property value, paperwork gaps and foreclosure costs can cut into it or cause a loss.

What is the difference between performing and non-performing mortgage notes?

A performing note is being paid as agreed. A non-performing note is seriously behind, often 90 days or more, though definitions vary. Non-performing notes usually sell at deeper discounts, and the buyer takes on the work of a payment plan, modification or foreclosure.

Does CashForMyNote.com sell mortgage notes?

No. CashForMyNote.com doesn't list or sell notes, and it doesn't buy them. It's an information and referral site. If you hold a note, a no-obligation note review lets you get offers from note buyers.

Have a note to sell? See what it may be worth, with no obligation.

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Educational information only, not legal, tax or investment advice. Laws and practices vary by state and situation, so talk to a qualified professional about yours. CashForMyNote.com does not buy notes. Affiliate disclosure.