Buying Mortgage Notes-Why Would A Lender of Bank Rep Sell?

I want to share some valuable information with you. Recently I was asked the question below:

"I have been doing some reading on all the reasons why lenders would sell properties at big discounts...

Dean, what would be a lender's main concern which would get them to sell mortgage notes at deep discounts? I feel that since we're trying to get into the minds of the LMREP, it would be more advantageous to all, if we could sell our services to their main concerns".

My reply: Make sure you distinguish (in your thinking and in your language) properties from mortgage notes. You mentioned both in your question above.

If you were speaking to a bank rep, they would know that your inexperienced. They would probably think that you're a newbie that doesn't know the difference between a deed of trust and a deed, this for certain would get you no repsonse from the bank.

A Tip on Buying Mortgage Notes

Make sure you know the lingo before you call these banks:

You get one chance to make a good first impression, when you're talking to the key person/gatekeeper when buying mortgage notes.

There's a great tip right?

A list of reasons:

Reasons to Sell Mortgage Notes at the Institutional-Level

a) Selling notes is quick. Sometimes the banks need to clear their balance sheets or may be in the process of merging, in these instances they need to move fast.

b) their might be a relatioship between the borrower and the bank, or some kind of other circumstance.

c) the bank may not want "bad press" and might be under to pressure not take aggressive recovery actions like foreclosure against the borrowers. An example would be minority first time home buyers.

d) bank may not want to actually take borrowers to sale, though having no trouble with foreclosure procedures. (I've often found myself in the position of buying mortgage notes from a bank 1 week prior to sale because they didn't want to be seen carrying out the actual foreclosure)

e) loan is upside down and doesn't warrant recovery action/expense (small 1sts sub $20k on properties of similar value may never be foreclosed on by certain banks - great opportunities in buying mortgage notes present themselves in many cases)

f) To see the amount that people would pay for their loans, a bank might price a part of their non performing book.

Individual Rep Reasons to Sell Mortgage Notes:

a) Borrowers can be flaky, they won't follow through on payments, or just unwilling to work with the bank. The loss mitigation rep does not want to work them anymore as well.

b) there has been no contact with the borrowers

c) depending on the state they are in, the foreclosure process may be harder

e) the rep doesn't want to go above their head to get an approval for a write off or mortgage note sale. So they sell at their authorization level or at the direct managers.

f) rep needs a few extra bucks to meet monthly recovery quota - a last minute mortgage note sale could get them bonuses (usually banks, not mortgage companies/wall street/hedge or private equity funds)

Hope this was useful to you.