Recently, we purchased 3 loans totalling $1.5MM from a bulk Note seller. The properties were all Multi-Family properties here in So. California. With our 31 years experience, it was very easy to make a quick decision and fast purchase. More and more we are hearing from bulk Note sellers or even directly from Banks that originated loans and now wish to sell them. If you represent a Bank, or have a portfolio of loans for sale, we would love to hear from you. (949) 222-9188 direct.
What we look for in these times..
October 13th, 2009I am nearing my 31st year in this business, time flys by. I remember starting out in 1979, working in a large office in Los Angeles on Wilshire Bl. It used to take weeks to buy a deal.
In the old days we didn’t have all the tools at our fingertips to just go online and check out a loan that we were offered. Now anybody can go to google map streets and instantly take a look at a property (of course I still drive there when I buy a note 90+ percent of the time). I can use Zillow.com and the MLS to check comps and values on property, I can go to the county tax collectors website and check to see that the borrower has paid their taxes, I can run a credit report from my desk on a borrower, I can go to the title companies website to check the title insurance on the loan that I am offered to buy, I can really do a lot of work from my desk at the computer before anything to make our price quote stick. Seeing the security for the loan is usually just a validation of what I already know and that is why I can perform to buy loans in just 2-3 days or so.
So with all the tools right at our fingertips what are we looking for in a note? The answer is a quality note. These days I see a lot of junk. So many times the value of the property is misrepresented to me, or the credit worthiness of the borrower, or the property itself. It is so easy to check the information on a loan today right from my desktop, you can rest assured that once we give you a price quote, it will stick. We ‘pay what we say’ and don’t have to ‘fish’ for the funds. Be confident when we issue you a written quote to buy your loan, there will be no surprises when we hand you your cashier’s check or send you your bank wire. Call, click or fax us anytime to get a quote.
Pinched pennies, in the end cost many dollars
September 11th, 2009We are in the process of purchasing a loan generated by an estate. A family comprised of a Father, Mother, Son and Daughters suffered the loss of the mother a few years back, then a family trust was set up by the Father. A few more years went by and the Father passed away, leaving the successor trustee to take care of the affairs of the estate and the family trust. The successor trustee was the Son.
The Son has a somewhat successful business and wanted the Family home (duplex) so he obtained a valuation from a local Realtor and his sister agreed with the valuation, so the Son (brother) issued a Note secured by Deed of Trust to his sister for 1/2 the value of the real estate to equal out the estate.
So far, so good. Now, about a year and a half after the settlement of the estate the sister wants to sell her note. This is when the problems are starting. First there was no title insurance purchased because the brother and sister were family and felt that they were sure their loan was a 1st position on the property. Second, the brother and sister now have a strained relationship, the brother is not happy that the property was valued much, much higher than the value now, but still owes the sister a large sum of money based on the 18 months ago valuation. The brother now pays slowly and doesn’t return phone calls. The sister doesn’t have her loan on the fire insurance policy because her brother won’t give her the information in order to have the loan properly listed and insured. There are unpaid real estate taxes due and the property has fallen into disrepair.
All the problems between family always can’t be avoided, however a little up front planning would avoid trouble. First of all, every time you carry a note, even between family members, get a title policy! In this case the brother took title as a married man as his sole and separate property. Inherited property is separate under California law, so the 1/2 of the property he inherited directly is his separate property, the mistake he made was that when he bought out his sisters share of the property, he didn’t get a quitclaim deed from his wife! Guess what, the title to the property is clouded! That makes the Note clouded as well. Another mistake is that the sister should have setup the Note with payments for impounds for property Taxes. She knew her brother had poor credit and now the taxes are piling up, all ahead of the Deed of Trust. Just suffice to say a little forward planing takes care of problems later. We hope to straighten things out soon.
Sales volume up, but prices still falling!
July 28th, 2009Late last week the statistics for June housing sales were released and the volume of houses that were sold was up nationwide. This may sound like good news and in some ways it is, however behind the headlines is the fact that nearly all the sales were of Bank-Owned / Repos. Prices of the Bank Owned real estate are much lower than the prices being asked by private party sellers! This is draging the price of real estate down still, espicially here in Southern California. Many areas of L.A. County, such as Glassel Park, the Westlake District and other areas have expierenced a downturn of as much as 57% from June of 2008. The decline continues.
What needs to happen so we can see a bottom? Well, first of all the large inventory of repossessed homes and other real estate that banks and other lenders are holding needs to be sold off. Secondly, there are many loans that banks have not even began the foreclosure process yet on, even though the loan is delinquent, those have to work their way to foreclsoure sale. A big problem for lenders is the new law that took effect on June 15 here in CA, a lender that is foreclosing on a “Primary Residence” property, (houses and even apartments where the owner lives there or mixed-use property where the owner lives there, etc.), now takes 6 months and 21 days to bring to foreclsoure sale if the loan was made between 1/03 and 12/08, unless the lender can obtain an “Exemption” by the California Department of Real Estate and stringent guidelines must be met in order to get one. We are in for an unstable market at best for a while!
All of the foregoing adds up to very choppy waters in this business. Without obtaining a large cash down payment, making your seller carry back note fully amortized (or close to fully amortized), making sure a late charge is included, also setting up the loan for impounds for taxes and insurance, without those things, your loan is not very desirable. Always look for ways to protect the loan you carry, after all you are making a large loan to somebody when you go through your escrow and carry back a trust deed, you should be as careful as if you were the bank making the loan, because you are the bank. If you want to sell your loan, we are buying quality loans, call, click or fax us for a quote.
Good News, Bad News
May 29th, 2009Earlier this month the courts decided that a Bankruptcy judge cannot order a loan interest rate to be lowered, or a balance “adjusted”, commonly known in the business as a “cram down”. This is a big victory for anybody that holds a Note secured by Deed of Trust. If the decision went the other way, it would have been yet another burden on the lending / mortgage business. We definitely see the decision as good news. The bad news is that property values continue to decline and foreclosure filings are accelerating.
What can you do as a seller / note holder of a property to ensure that your Note secured by Deed of Trust is not going to be one of those bad news statistics? You can start by having the buyer place as large a cash down payment as possible, at least 20 – 25% of the purchase price at minimum. You can also make your loan amortizing, so as time goes on, the balance will be reducing on the loan, making it have a much better chance of successfully seeing it through to a final due date. Consider having the requirement of the borrower to pay 1/12th of the Real Estate Taxes withthe monthly mortgage payments, so many times the borrowers fail to pay their real estate tax payments, then eventually the loan payments and you are stuck with all those back taxes and penalties which accrue typically at 1.5% per month!!
Taking a little extra time to put some thought and careful crafting into the loan you are carrying makes it more attractive if you decide to sell it later. We are buying quality notes and always paying top dollar for them. If you have questions, give us a call or send us an e-mail.
Tax time is here, are you selling your note?
April 13th, 2009So you sold your property and carried back a Note secured by Deed of Trust. You are receiving the monthly payments, maybe you are saving the post-marked envelopes to show the Borrower pays timely. You made sure your buyer (now your borrower) placed a good sized cash down payment on the purchase transaction and you made your note amortizing so that it becomes more and more secure each month as it pays down.
You are thinking of selling the Note, but wonder about the tax you might have to pay if you do. I am sure you heard that the tax rates that former President Bush put into place expire in 2010. Now may be a great time to make that move to sell your Note and pay the lower capital gain tax rate while you can. The Federal capital gain tax rate for long term gains is 15%, it will go up to 20% after next year. If you had a gain on the property you sold, selling your note will have 2 advantages, 1 is that the discount (if any) will be a tax-offsetting event (a deduction against the full gain you have on the property). 2 is that by receiving the lump-sum of money now instead of receiving it in the future, the capital gains rate is lower. Even after the increase to 20% capital gains tax rate, there is no assurance it won’t go up again. The capital gains rate was much higher in the 1960’s and 1970’s.
Call, fax or click anytime to get a Top Dollar quote on how much your note is worth. Quote@DiversifiedMortgageCo.com or (800) 834-9188.
Always ask about the credit, Credit, CREDIT !
March 17th, 2009During these troubled times sellers are happy enough just to have sold their property and close out the escrow! Getting that cash down payment and having the property sold is a great feeling when you close your transaction. How about wondering if that 1st payment is just going to roll in, or is there going to be trouble down the road? What if the property continues to go down in value as time goes on? How strong is your buyer/borrower besides the down payment he or she just put on your transaction?
When carrying back a note you have to consider that the ability of the borrower to repay you (or your assigns) it is as every bit important to the transaction as is the sales price. It means nothing if you get your price for your property and then 14 months down the road the buyer defaults on the loan you carried because they have too much debt or bad credit to begin with, with new laws, foreclosure is becoming more and more difficult, time consuming and costly!
It is so simple to ask your Realtor or the buyer directly for their permission to run their credit report before you accept their offer that involves you carrying back a loan. It used to be a FICO score of 680 meant an “A” rating, now anything much under 720 sends up a red flag! Of course you can still decide to proceed with your transaction whatever the buyers score is, but if you plan to resell the loan you are carrying, the credit worthiness of the buyer/borrower is one of the first things we look at! The FICO score is a good indicator, but you can also tell if your buyer/borrower has too many lines of credit opened, also if they tend to have 30, 60, 90 or worse days late on their other loans. If their credit habits are to pay late on other lines of credit, you can be assured they are going to be late with you has been our experience over the many years in this business.
If you don’t know where to order a credit report from, first get written permission, then give us a call we can assist you for a nominal cost. It’s better to have the knowledge up front before you make a bad decision.
Buying notes out of the area
January 28th, 2010On occasion we buy notes in the northern part of California, or out of state. When buying out of the area notes, we have to be careful to examine the documents well, applying the local rules and regulations to the Notary acknowledgment, legal descriptions, even how the margins are on the documents themselves. Each state and sometimes each county have requirements that need extra attention from us regarding recording procedures for documents.
Property values in areas that are outside our home base are not as familiar to us as say southern California. We need firm establishment of the current value of the property securing the loan we are buying, as well as the market trend and if necessary a rent survey and rent estoppels sometimes. Please have as much information regarding these items when presenting your loan for sale, especially outside of southern California.
While I would like to buy loans everywhere across the country, it is just very difficult to fly to cities over 1000 miles away to conduct business. I’ll be happy to look at your out of the area Note, but if you are much east of Phoenix or Las Vegas, or North of Sacramento, most likely I won’t be able to help you.
We would love to hear from everybody else!
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