Here is some good news for those mortgage note owners that are thinking about selling a mortgage note to an investor:
Far fewer borrowers are under-water on their mortgages, according to a recent report from Realty Trac
– which was reported on CNN Money.
So how does this make selling a mortgage note easier for note holders and note owners across the country? The major problem that I ran into as a note investor on the secondary loan market was not finding people that were willing to sell their notes or a shortage of salable mortgage notes to purchase, once the note sellers agreed to move forward.
The major problem over the past 4 years (since the 2008 banking and housing crash) was finding that many note borrowers (the people making payments to the note owner) were completely under water on the mortgage.
Finding out that the borrower is under water on a property secured by a mortgage note that one is attempting to sell to a note investor is a sure fire way of having the deal fall apart mid-course (at least on a full purchase offer. Click on full purchase note offer and a partial purchase note offer to see the difference in the note-sale options).
The reason for this is that once the equity decreases, the note significantly drops in value across the board. As there are many variables to determining what the value of a mortgage note, equity is the first item on the list that any reputable note buyer will look for when pricing said note. This is then followed by credit score of the borrower and the loan structure (i.e. pay-back period, interest rate, if there are any balloon payments, etc.).
In essence, the equity in the property (a.k.a. – the collateral securing the note you may be selling), determines the security of the note as an investment in a note buyer’s portfolio. It indicates the risks and the likelihood of recouping losses in the case of borrower-default and/or foreclosure. It is one of the most important ingredients to identifying a good note to purchase for an investor.
According to the CNN article, a 14% increase in US housing prices helped turn around the fortunes of many home-owners (and home borrowers that owe money on seller-financed notes). The 14% increase was gauged year-over-year through to October 2013, which makes life a lot easier if you are trying to sell your seller-financed note on the open market. Increase in home prices means an increase in borrower equity, which in-turn translates into higher note offers when you go to sell your note.
An increase in home equity mainly means fewer foreclosures, said Daren Blomquist, a spokesman for RealtyTrac. According to a CNN interview, Blomquist states: “Negative equity is the foundation that foreclosures are built on, but you need another event — a job loss or illness, for example — to trigger a foreclosure,”.
So if you were thinking about selling your mortgage note, you should strike when the iron in hot! Contact me directly at any time to speak in full about your note’s value and your sale options: 415-295-1401 ext 3 (Abby Shemesh).