Mortgage Note Buyers and Sellers, Loan Servicing, and Hard Money Lenders

Notes For Sale – Payor Co-Operation

The Texas Note Company closed two note deals this week and lost a third.  Why you might ask did we lose the third?  Well before I give you the answer let me tell you the details of the note.  A note holder approached The Texas Note Company to sell his note.  The note was secured by a piece of property in NoTrees (Love The Name) , Texas just a few miles outside of Odessa.  The property was 25 acres and appraised at $120.00.  The note was a Home Equity Note with an original balance of $30,000, it was originally created by a bank then sold to a private investor.   Great Loan To Value(LTV).

Original Amt:  $30,000

Interest Rate: 8.99%

Term:   120 Months

Payment:  379.89

Now this note is not all that large, but enticing b/c of the low LTV and good payment history.  The investor that was going to purchase this note uses The Texas Note Company not only to purchase note but also as it loan servicer.  A part of our procedure when we purchase notes is to conduct a payor interview prior to closing.  We want to know what type of relationship we can expect from the future payor and ask that all important question,  “Is there anything we should know about from you the payor concerning this  note?”  You never really know what type of answer you will get.  Usually the answer is did you account for the taxes and insurance that the note holder was escrowing or something of that nature.

Often is the case when we inform the seller that this is part of our procedure that they become very cautious because usually they have not told the payor.  It is usually the last thing we do before closing.  This particular case  was no different and we soon found out why.  Well start with when we tried to contact thee payor by phone he would not answer our calls or return or messages.  We then instructed the seller to contact the payor and tell him to take our call.  When we finally did reach him, it was a very short conversation, he informed us that he didn’t want the seller to sell his note, even though he thought he was a (input expletive ) and he would do everything possible to make it difficult if we proceeded with the transaction

Ok, we were a bit taken back figured that he may have fallen out of a tree, in No Trees Texas, and it put him in a bad mood, we will call him back tomorrow.  Well as you can imagine that didn’t work.  The next day when I, Robert E Young, called and felt like I was being drilled by Gunny Staff Sergeant Lee Ermey in the movie Full Metal Jacket.   We barely touched on his note and in his mind we were not up to his level.   Even with the potential of foreclosure should we purchase the note it did not phase the man.  The deal was dead we would not go through with the transaction, to a very upset note seller.

The other two note transaction we closed this week were just the opposite even with complicated circumstances.  In the owner finance industry you come across all type of owner financed promissory notes and deed of trusts.  In both cases we had to make a modification to the promissory note to make it clear what the monthly payment was and the interest being charged.  The notes were ambiguous in the way they were written.  In each of these cases we had to contact the payor early to inform them what the seller’s intentions were and what needed to be done to achieve that goal.  In both cases the payors were very cooperative and more than willing to assist.  One needed further explanation of the details but was very helpful.

To give you an idea of the modification, when had to specifically write out the interest rate and payment for each one.  The payors payment did not change one penny, we just has to spell it out literally.  Goes to show you the Payor can make a big difference in a note transaction.

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