June 10th, 2011
On occasion we make a new loan origination. Recently, I was contacted by a referral source who presented an opportunity to make a refinance loan on a 10 unit apartment building in West Hollywood. One of the old loans on the building had a balloon payment come due. When borrowing money from a non-bank source, you can expect that the loan rate is going to be higher than the bank would offer you. In this case the borrower had difficulty going to a bank for several reasons.
The borrower had only part time employment and doesn’t have much income, only the income from the rents at the building to speak of. There were enough rents to pay for a loan payment of about $6,000 per month and enough left over for all the fixed expenses and some reserves for replacements, as things wear out or break over time.
After inspecting the building and meeting with the borrower, it was evident that there was much deferred maintenance to be done, also the borrower had a habbit of paying his bills, including mortgage payments at the last possible moment in the ‘grace’ period. Borrowers think that if they mail their payment on the 14th of the month that it is on time. If your monthly payment is due on the 1st of the month, each day past the first, the payment is in a ‘grace’ period until the 15th, but if you think about it, it is 14 days past the due date if you mail it on the 14th and from many years in this business I can tell you that the mail doesn’t always deliver the next day, so when we receive your payment on the 16th, 17th or 18th, we mark it late, also charge a late charge to the account. Your FICO score is one of the things you likely don’t think about or much care about until you try to borrow money. Having habbits like the one I just described can really pull your score down. If your score is much below 680, you are not going to get the most preferred interest rate at the bank, if your score goes below 640, you are not going to get a bank loan at all these days.
After consulting with the borrower and our inspection of the building, we came up with a loan at 7.5% using our private funds, payable monthly, with a due date in 4 years. We are also withholding money in order to get the deferred maintenance completed. We also do not have a prepayment penality in our loan, so the borrower can pay us off at any time by finding a better loan at a bank. We did charge a 4 point fee, which is about the lowest I can go on a loan origination, the bank would only be 1 point, but the borrower was not able to proceed after being turned down due to credit issues and the deferred maintenance.
If you own a Multi-Family apartment building in So. California and need a refinance loan, we can arrange financing with a bank by being your loan broker, recently we secured a 5.3% fixed rate 10 year loan on a 15 unit building in Los Angeles, we only charged 1 point fee, since we didn’t have to use private funds. Give us a call if you would like to get a quote.


May 23rd, 2011

Earlier this month we purchased a seller-carryback 1st position loan on a 2 unit commercial property in Sherman Oaks, CA. The seller shopped around and actually was quoted a slightly higher price by another company who promised to deliver. After the other company fell through, we funded the deal in 72 hours.
That was a bit quick, but it doesn’t take very long because unlike other companies that need to “fish” for their funds in order to come up with $500,000, we have an established long history with our bank as well as adequate deposits to handle any sized seller carryback loan that comes our way. I was able to get right out to the property in order to take a look at it, I never disturb the tenants or new buyers, the couple of photos I took were taken very discreetly and the whole thing took less than 15 minutes.

Having an experienced note buyer who knows what they are doing is important in your transaction. Usually we’re the highest quote, if you call us and we are lower than somebody else who is legitimate in the business, tell us and we will make every effort to match or beat the other guy. In this case it just wasn’t a
real quote from the other company, I had to tell the seller if the other company didn’t perform, please call us back and that is exactly what happened.

After 32 years in this business, we are firmly established in the market and know what is real and what is not. After receiving a price quote from us, I offer customers references of other customers that have recently sold us their note, so they can call for themselves if they like and confirm that we paid what we quoted, on time and by Cashier’s check or bank wire, if requested. We are only as good as our last
deal is our attitude. Let us earn your business.

If you are thinking of selling your seller-financed 1st trust deed, please consider calling us for a price quote!


April 19th, 2011

     The Associated Press posted an article today concerning economic data coming out for the month of March that shows housing starts in the West are up 27.6%, you would think that is good news and to an extent it is.  But the bigger picture is that just the month before in February, housing starts were at a 5 decade low!  Even if housing starts were up an amount double the statistic, it is still woefully lacking to have any meaningful effect on the economy.  Housing starts are still at a lower point right now than during any recession in the 80′s and 90′s.

     Housing starts are an indicator of the economy that effects the Note business the most in my opinion.  If housing starts are up, that means in 6-9 months those houses will be hitting the market for sale.  Builders are looking to make their profits by selling homes and have forecasted that the market will be favorable for them.  Single Family Homes (SFR’s) are comprising about 80% of the new home construction, then condominiums and apartments comprise the rest, which were also up, but again still at a very, very slow pace.  Notes secured by Trust Deeds are carried back on real estate, most notes carried by private parties are on SFR’s.  The more housing starts, the more housing sales, the more potential for Notes from sales in general.

     Real estate construction can support jobs, for each new home built, it supports 3 new jobs for a year.  California has a big part of its economy based in the real estate industry.  Housing traditionally has accounted for 15-20% of overall economic growth, however in this post-recession period since 2009 on into 2010, housing only accounted for 4%.  This is saying much about the true nature of the slow recovery we are experiencing.   No true recovery can take place unless housing and real estate picks up.

     Millions of foreclosures have kept the real estate market down and continue to do so.  Most economists still predict that 2011 will be another year of slow housing sales, also prices to remain down, even slipping a bit more before a modest recovery takes hold.  

     Housing starts being up for the month of March can be a good sign, but only if the trend continues.  The banks are still in the midsts of filing so many foreclosures that the market for those new homes which will be completed in 6-9 months from now is likely to be not be as favorable as the builders are predicting, which may cause some builders to go bust and prices to remain depressed.

     If you are thinking of selling your seller-carryback Note in this environment, all the more important to have the note well secured by having the most cash down payment that your buyer/borrower can afford, at least 20-25% cash down and have your note be fully amortized, where the balance reduces each month as the payments are made, making the note safer as time goes on.  You might consider having the real estate tax payments impounded with the note payment as well, another safeguard to have.

     We can help you structure your note for the most protection in this market.  We can let you know how much your note is worth by just a simple call, or fill out our quote form and submit it, we will e-mail you back within a short period of time.

Americans Net Worth Continues To Rise…

March 11th, 2011

Today the Associated Press released statistics that Americans net worth rose by 3.8% during the last 3 months of the year last year.  The numbers are showing how we are continuing to rebuild net worth lost from the recession.   This is welcome news for us in the mortgage business because rising net worth means that the recovery is continuing.  Higher net worth means more available cash and other assets to draw from in order to make mortgage payments.

The AP article also stated that cash accounts for 13% of corporate assets, the highest percentage since 1984.  The 1/6 trillion dollars in cash being held by corporations could be used for job growth, much needed hirings which would bring the unemployment rate down faster. 

In the recession we lost nearly 8 million jobs in this country.  There are only just over 1 million replaced since.  The recession technically ended in the last quarter of 2009, but jobs are lagging sorely.  We still have a long, long way to go to recover the remaining 7 million.

Prices of oil, food, metals and just about everything are rising as the dollar is weakened by both federal government policy and the events that are unfolding in the world.  The federal reserve announced that their policy of quantitative easing of interest rates will be phased slowly out, meaning that rates will be going up in the future at a planned slow pace. 

If you are holding a seller-carryback note, I would say that now is most likely the best time to sell it.  When interest rates rise and as the economy gets a little better and better, your fixed low rate on your note will become less and less attractive.  The main factor affecting the discount on a note is the face rate or “coupon rate” it bears.  If your note is only written at say 5%, when interest rates rise, it will have to take a higher discount to make up for the then market rate.  A higher discount means less money paid to you.

Call or click for a top dollar quote on what your note is worth now.  We have been buying notes for decades and have a great reputation to pay the highest possible market price.


February 4th, 2011

Yesterday I attended a conference hosted by the California Mortgage  Association.  As a member I have access to information directly from economists, assemblymen and women, government agency representatives, attorneys and my peers in the business, all present at this quarterly seminar.

What I can share with you from the keynote speaker is that by nearly all measures the economy is getting better and will continue to do so over the next 2-3 years.  It is not a recovery as robust as in the past where a recession took place and the next following quarters saw growth of up to 5%, we are seeing more like 3% GDP growth.  None the less, banks and other lending institutions are slowly loosing up lending restrictions in order to lend funds out to borrowers who are qualified.

California real estate values have remained flat in some areas, some small appreciation in the costal areas (1-3%) and still declining in certain inland areas, but overall the real estate market here is slowly recovering.  Overall pricing for homes is at about 1999 levels.  Having that in mind, it is a good time for buyers who have a job (California has 12.5% unemployment) to buy a home.  In 2006 when an average home price peaked close to $600,000.00, the affordability for somebody moving here from say Texas or back east was nil.  Having housing more affordable in our state is essential to our recovery.  If housing prices shoot back up to the levels of 2006 and the recovery is still slow, there would be no buyers and the economy here would suffer greatly.  So don’t expect real estate values to be at 2006 levels for many years.  The typical pattern of 3% appreciation should return after the inventory of foreclosure properties are sold off in the marketplace.  Banks still have a large inventory of foreclosure properties to sell and a large amount of foreclosures to complete, but we have seen the worst peak of it.  So flat pricing for now, then hopefully by 2012 we return to the typical 3% appreciation per year pattern.

With keeping in mind that real estate values are not going to rise much any time soon, it is very important to be careful when carrying back a Note.  Make sure you require the borrower to place at least 20% cash down payment when buying your property.  Make sure to have a note that is at least partially amortizing, a late charge provision, a due-on-sale clause, also you might think about having the property taxes paid with the mortgage payment 1/12 at a time each month because if your borrower is like many, its difficult to come up with those extra funds each April and December.  Using a “belt and suspenders” approach won’t let you get caught with your pants down in case you have to take the property back and sell it again.

If you carry a note and want to sell it, we are just a click or a phone call away.  We would love to hear from you.


January 7th, 2011

  Today in Massachusetts a judge ruled that Wells Fargo Bank had foreclosed on 2 homes without having the proper paperwork in order regarding ownership of the 2 loans they foreclosed on.

Large banks and others use the Mortgage Electronic Registration System (MERS) to register ownership of the loans they originate, buy and sell.  The MERS system records electronically the ownership of the loans as they pass title from one lender to another, or from one lender to an investor.

Pools of loans in the hundreds or thousands sometimes are sold and more than once.  When the loans transfer title, MERS keeps track of the transactions and ownership of the loans.  The big problem with this is that the County Recorders records where the property is located may just show that the loans were transferred into the MERS system and nothing further, so MERS is the record owner of the loan(s).  Since MERS can’t really own the loans, they are just a record keeping company / system, it was ruled that the bank or foreclosing entity that conducts a foreclosure must be the record owner (actual owner) of the loan being foreclosed on and have accurate records regarding that loan.  It is required by law to have the County Recorders Office where the property is located be notifed by filing an “Assignment of Deed of Trust” or an “Assignment of Mortgage” regarding the ownership of a loan every time is transfers.

The stock market was affected by this ruling today, sending financial stocks down in fear that the Massachusetts ruling will fast spread to other states.  The fact is that the borrowers on these loans stopped paying their mortgage payments and deserve to be in foreclosure was not the issue before the court.  The two borrowers that defaulted found a legal way to get their houses back without paying on their mortgages, at least for now until the bank straightens out the paperwork regarding recording the ownership chain of title to the defaulted loans, then start all over again filing foreclosure.

Certainly in my mind the borrowers deserve to have their properties foreclosed on for non-payment on their loan(s).  If the government takes away the power to foreclose, or hinders it greatly, there will be no financing, or financing that is so expensive, an outcry from the public will take place.

On the other hand, having the proper “chain of title” ownership to the loan and showing full and complete paperwork is necessary when conducting business or taking a legal action such as a foreclosure. 

Do you have your Original Promissory Note?  Original Deed of Trust? Original or a copy of the Title Policy insuring your loan in the 1st position? An original or a copy of the Fire Policy insuring your loan in the 1st position? A copy of the HUD-1 escrow closing statement?  A copy of the escrow instructions or contract calling out for a Note to be created in your sale transaction?  All of these items are necessary to us when we buy a note.  If you are missing one or up to all of them, we can help you rebuild your file, even if you can’t on your own.  Rely on our expertise of over 30 years in the business to assist you.

If you are considering selling your loan that you carried back when you sold your piece of real estate, we would love to give you a quote.  Click over to our “Get a Quote” page or call us toll free (800) 834-9188, or fax over your request, we’ll get back to you promptly!

Recent Note Purchases

December 28th, 2010

December is almost always our busiest month. I attribute it to many Note sellers wanting to cash in and take advantage of the low capital gains tax rate of only 15% (which was just extended for another 2 years now).  Also there are institutional lenders that want to get those loans off of their books that perhaps are deemed less desirable to them due the borrowers non reporting of their annual financial condition or other factors, we review perhaps 20 prospective loans before conducting due diligence on one.  We pay top dollar for the loans we like and usually win the bidding battle when a good one comes along.

This December was no exception to prior years, we had 6 notes that we purchased and closed and I am bidding on a 7th, but it doesn’t look like that one will happen in 2010.

Each note we purchased this month had a late charge provision in it, a due-on-sale clause, as well as the note was either fully or partially amortizing.  5 out of 6 of the notes were on income producing property and the 6th one, even though it was on a house, there was tremendous amount of equity in the house, making the note very attractive.

If you have a note that you are structuring, always consider having a late charge, due on sale clause and having some amortization in the Note, even if you are not thinking about selling it. Later if you do decide to sell it, the note will be much more attractive compared to other notes without those features. Of course the equity or cash down payment is the single most important factor every time making your note salable or not, but don’t forget the other important clauses which are easy to negotiate and insert when the note is written, but impossible to place in the loan later when it comes time to sell it.

If you would like a quote on what your note is worth, please call, fax or e-mail us.

Hello world!

December 28th, 2010

We have our blog up and running again after a move over from our old webhost.  Unfortunately our 3 years of old posts didn’t make the trip over, but we will try to discuss many of the subjects that we did over the last few years so that you don’t miss anything.