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


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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”.

This was my reply: You need to be clear (both in your language and the way you think) about the difference between properties and mortgage notes. In your question, you mentioned both of these.

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 For Buying Mortgage Notes

Just a word of caution to bone up on your note lingo before you talk to the banks:

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

How is that for wisdom?

A list of reasons:

Instutional-Level – Why Sell Mortgage Notes?

a) banks in the process of merging, or posting quarter/annual financials and needs to get assets off its balance sheet. Quick way is to sell the notes

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

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) 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) bank wants to “price” a part or all of its non-performing book, in which case it sends out loans to bid to see what the market would pay for them.

Individual Reps- Reason to Sell Mortgage Notes

a) loss mitigation rep is “sick” of dealing with a particular borrower. Never follows through on reinstatement promise/swears at loss mitigation rep/ticks rep off

b) they cannot get in touch with borrowers

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.

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