A good understanding of the private mortgage note sale process will help guide you whenever you decide to sell your property note in the future. There are three basic components to the mortgage note sale process review: 1) the mortgage note supporting documents; 2) the credit status of the note borrower and 3) the projected valuation of the property supporting the note. If there are no “surprises” in the review, the funding of the mortgage note purchase will take three to four weeks to complete. The more detailed and accurate the information provided by the note holder, the faster the process and sale of the note.
Mortgage Note Sale Process
Step 1 – The note holder (seller) begins investigating the sale and market value of their note.
Step 2 – After speaking with potential note buyers, the note holder determines whether to sell, the best sale option (Full or Partial) and chooses the note investor company to do business with.
Step 3 – The note holder provides the note investor company with preliminary information regarding the mortgage note. Based on this information and support documents, the note investor company does a review of the note status, credit worthiness of the borrower and current property valuation to prepare a price quotation for the note holder. The more accurate the information received from the note holder, the more precise will be the note investor price quotation.
Step 4 – When the note holder accepts the price quotation offer, the note holder and note investor company enter into a purchase and sale agreement for the sale of the note. The agreement will contain the sale price, the number of payments sold and who will be responsible for the expenses necessary to close the transaction.
Step 5 – The note investor company then performs the detailed due diligence process (noted below).
Step 6 – Assuming the due diligence process was consistent with the note holder preliminary information, the note holder and note investor company will schedule the closing of the purchase. The closing is normally scheduled at a local title/escrow company. At the closing the note holder will sign the closing documents and surrender the original note, mortgage and policy of title insurance.
Step 7 – The note holder will receive their sale proceeds from the closing agent via wire transfer or certified check.
Note Investor Company Due Diligence
- All pertinent documents will need to be reviewed, including the promissory note, mortgage, trust deed, and the settlement statement from the sale of the property.
- A credit report on the note borrower will be requested and reviewed.
- The payment history (normally twelve months) of the note borrower is evaluated. This will require evidence of the payments received via copies of canceled checks or bank deposit statements.
- The property insurance company will be contacted to verify that the collateral property is insured and the current note holder is named as an additional insured party on the policy.
- A drive-by appraisal on the collateral property will be ordered and reviewed.
- A property title search will be ordered and a commitment for a lender’s policy of title insurance will be issued by the title company.
- A review of the collateral property tax status will be performed.
- An estoppel letter will be sent to the mortgage note borrower verifying the note terms and the current outstanding balance on the note.
- Prior to the closing the note investor company will contact the note borrower to introduce themselves and ask a few questions about the status of the note.
In conclusion it is important to remember that every mortgage note sale process is different as well as every note sale purchase.
Please call us at (888) 213-3383 to help establish the market value of your mortgage note or Contact Us via Email.