The thing that worried me was when he made the following statement. He told me that the reason why he was getting into the business of buying defaulted mortgages was not only for some good cash flow, but also to keep people in their houses.

Don’t get me wrong. I’ll be the first to admit that Humanity counts. But…

Don’t forget about the bigger picture here.

One Exit Strategy Is Not Enough When Buying Defaulted Mortagages

It will not work.

You see, you may WANT to pursue A SINGLE exit strategy for the defaulted mortgages you purchase (in this case, he was looking to re-perform all the notes he bought – possibly by modifying them all – and then to hold them for cash flow).

Mulitple Exit Strategies Are Need When Investing In Defaulted Mortgages

In order to invest successfully in defaulted mortgages, you need to be like Rafael Nadal.

Nadal can do it all. He has a great serve, an awesome forehand, and can play an excellent game on both the grass and clay court.

You should have the same approach when you are buying defaulted mortgages. Have the ability to pursue multiple exit strategies at once in your note buying business.

Don’t get stuck with just one note buying strategy.

Buying Defaulted Mortgages – Using Foreclosure as a Tool

One useful tool to get a borrower to cooperate with you in getting a loan modified can often be to start a foreclosure action.

And you might ask why?

Because for someone who has been missing payments regularly and hasn’t been current for a while, sometimes a wake-up call with a foreclosure notice (combined with a helping hand from you to help them with a loan modification) is what prompts them to get their act together, take control of their situation, and to work their way out of their delinquency.

Don’t fall into the same trap the investor I talked to did.

If you want to be successful in your Defaulted Mortgage Buying business, 1 Exit Strategy is not enough.

You really need to be a jack of all 5 Exit Strategies to do well in the note buying business.

If you have any friends, co-workers or family members who have recently purchased a home, ask them if they can highly recommend the realtor who helped them. If you are for any reason not satisfied with the realtor you’ve been speaking with, by all means find another.

A good Realtor should provide you with statistical reports regarding appreciation as well as be able to suggest the best local schools. It is a good idea to work with a Realtor that is local to the area you are interested in.

They should be trying to determine what your wants and needs are for the new house. A Realtor should ask you lots of questions when you meet them for your initial consultation.

What area do you want to live in? What type of home are you looking for? Do you have children that will be attending school in the area? How long do you plan to live in the home?

Look for a Realtor that responds quickly to emails and phone calls. Waiting hours or days for a response can add too much stress to the home buying process.

If you get a recommendation of a Realtor from your mortgage professional and you are not happy with that Realtor, by all means let the mortgage professional know. Customer service cannot be made better if people are not aware of a situation.

A seasoned realtor will have the history of your neighborhood and information about a given area, which can help you determine the true value and likelihood of appreciation in a purchase.

With a sale of a home, a seasoned realtor will be able to truly assess the value of your home and have a better understanding of how to increase the potential of your home for sale.

“I have read all there is to know about lenders and their reasons to sell properties at discounts…

What I want to know specifically is what criteria do lenders base their decision on when selling their mortgage notes at discounts. With focuses on LMREP, it would benefit me tremendously if I was selling my services based on their criterias”. Here is my response: First of all make sure that you are using the correct terms when trying to express your points. You need to differentiate the difference between mortagage notes and properties. You mentioned both in your question.

If you used this same language when making your call to the bank rep. I can guarantee that they would probably brush you off. In their minds, you are probably just a some knucklhead that doesn’t know the difference between a deed of trust and a deed. You can bet that you won’t be getting further repsonses from them.

A Tip on Buying Mortgage Notes

Study your lingo, and make sure you know it before you try contacting your lenders:

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

Great information right?

A list of reasons:

Institutional-Level Reasons to Sell Mortgage Notes:

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) maybe a relationship already exists between the bank and the borrower, or some situation like that.

c) in certain cases, the bank might now want to foreclose on borrowers because of the negative press they will get. These actions may affect their public image.

d) although the banks have no problem starting the foreclosure process, a lot of them do not want to carry our the actual foreclosure. When buying mortgage notes, you may see a lot a week away from foreclosure proceedings.

e) the loan can be negative equity, and the banks dont want the recovery action/expense. (small loans amounts might never be foreclosed on because the expenses are too high, this is a fantastic opportunity in buying mortgage notes)

f) To see the amout 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) borrower is non-responsive, no contact

c) foreclosure processes in their state are too long

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 authroziation level or at the direct managers.

f) in order to meet quotas, they may sell off a couple mortgage notes so they can get their bonus. (this usually happens in banks)

I hope you found this information useful.

If you want to purchase your own home but do not have the deposit or meet other criteria to obtain a mortgage from a traditional lender, owner financed home may be a solution to your dilemma. Rather than continuing to pay rent to a landlord who benefits from property ownership, you can build wealth yourself. Every home payment you make brings you one step closer to owning your own home outright.

The way owner finance homes work is that instead of borrowing from a bank or mortgage finance company, the seller of the home can actually finance all or part of the purchase price. While partial financing is more common – if you lack funds for a deposit, for example – 100% financing may be possible depending on the terms the seller is willing to offer.

If you’ve been looking for an owner finance home by perusing real estate listings and ads, chances are you haven’t seen too many owner financed homes for sale. Don’t get discouraged – they are available – you just need to know where to look, and how to approach a seller about an owner finance option. Though a particular seller might not advertise owner financing, if a home has been on the market for a while and the seller does not want to budge on the price, then they might be willing to consider owner financing. Of course, this depends on whether the current owner is in a good financial position to take on an owner finance contract, but you’ll never know unless you make a proposal.

There are also websites, which specialize in marketing owner finance homes. You may not have to meet normal lending criteria but you will have to be able to prove your capacity to pay the required monthly payment. These payments are often higher than if you took out a traditional mortgage, however if you are able to make them they can be a means to an end. Once you build a history of payments and create equity in your home, you may be able to refinance with a bank or other traditional lender at a lower interest rate.

Before committing to an owner financed home, however, it is important to employ a lawyer to carefully read through the contract. Make sure you understand what you are agreeing to. You need to be able to pay out your loan without heavy penalties and refinance if you wish. It is also important that you understand your rights and obligations once you enter into the agreement.

Owner finance homes provide seller with the opportunity to quickly sell a home at the price they’ve set. But, buyers need to realize that the seller isn’t doing you a special favor. It’s important for buyers to exercise caution in evaluating any type of seller financing. All of the steps you would take for buying a home with a traditional lender, like a building inspection report and professional survey, should be undertaken.

In some cases, overeager buyers are quick to jump the gun and enter into an owner finance contract without really thinking it through. Make sure you’re not buying someone else’s problem home or being taken advantage of with a predatory lending contract. Doing your due diligence is important – resist the temptation to jump in with both feet without good research and planning.

With careful planning and research, an owner financed home can create a path to homeownership when other avenues are not available. If you have a long term plan for your success in buying an owner finance home, you can switch to a traditional mortgage later on when circumstances allow.