What is a Note?
A note is the legal document used to document the borrower’s obligation to repay the loan. Terms of a note include the principal amount borrowed, the interest rate, borrower name, lender name, the date, and the maturity date.
How is a Note Different Than a Mortgage?
A mortgage is the lien against the property to secure the obligation to repay the loan. The note is the loan, the mortgage is what creates the collateral, such as a house, attached to the loan.
What does SCL do?
We purchase notes and mortgages from banks, hedge funds, and servicing companies at substantial discounts. Our strategy is to share the purchase discount with the homeowner, so we are able to create a payment workout that truly works with the homeowner and their current financial situation to give homeowners a second chance to keep their homes. This workout process turns a non-performing note into a re-performing or performing asset.
Why are Notes Discounted?
Each bank is a little bit different, but a major reason is that the FDIC strictly regulates banks on a quarterly basis to determine which assets they must sell from their books based on their overall portfolio through Capital Adequacy Ratios (CAR). FDIC regulators will shut down banks when their CAR is too low, so banks may need to sell assets, sometimes quickly, to remain in business.
Does SCL Foreclose Against the Homeowner?
Unfortunately there are circumstances where we initiate foreclosure on properties in our portfolio. However, we make every attempt to help the homeowner keep their home. We have 7 other exit strategies before foreclosure option. The reality is that sometimes homeowners view foreclosure as their best option to get a fresh start and may have already vacated the property. If necessary, we make apartment deposits, provide travel money, and pay administrative fees, etc. on their behalf to assist in their transition.
What Happens After A Non-Performing Loan is Purchased?
The most important part of the workout process is to create a relationship with the homeowner and show them that we really can help unlike the previous bank who owned their mortgage as we have much more flexibility. We ask three simple questions after establishing rapport “what happened to get you in this situation? Where are you now with the situation? What do you want to do from here? We always keep the homeowners best interest at heart. We have found that many times there are short term circumstances such as a health issue, job loss or divorce that are preventing them from making full payments on their mortgage loan. By purchasing their loans from the bank at such deep discounts, we are able to create a “win-win” scenario until they get back on their feet. Other strategies are payment plan reinstatements, reinstatement with discounts, refinancing, seller assistance, deed-in-lieu of foreclosure and foreclosure as a last resort.
Do You Also Purchase Performing and Re-Performing Loans?
Yes. We are a very active buyer of both performing and re-performing notes as well. We evaluate each note based on our proprietary due diligence system.
How Can I Learn More about Notes?
SCL offers workshops on building a profitable note business for yourself based on our experience and lessons learned. You can see our free training at www.NoteAcademy.com. Also, ask any question on the contact us page and we will get back to you within 24 hours.