Hi, Attorney Susie here again. One of my favorite professors in law school was A-OK with his students using the excuse “my dog ate my homework” to turn in a late assignment. However, in order to use the excuse, you had to produce the evidence proving your dog ate your homework. Not surprisingly, all of us opted to turn our assignments in on time rather than follow our dogs around after their “meal.”

It seems that during foreclosure proceedings these days judges are following my professor’s sage advice and requiring a foreclosing note holder (that’s you) to actually produce the ORIGINAL note to foreclose upon a property.

This isn’t standard practice in every foreclosure proceeding; it’s usually only raised when a borrower brings forth a defense asserting that the note holder doesn’t actually own the note.
OK, so what if a borrower DOES raise this defense and I don’t have the original note?

That’s where things could get a little hairy.

In most states, if you have filed a Lost Note Affidavit (LNA) along with a certified true copy of the note you MIGHT be out of the woods. Having a LNA and a certified true copy of the note will not guarantee a rubberstamp by a judge. Judges are now looking carefully at the LNAs to determine that authorized parties have executed the LNA and that it has been properly notarized.
A few examples: an unnamed bank submitted a LNA to a court and it was discovered that the LNA was executed in a different state than where it was notarized. Result: Foreclosure proceedings dismissed.

Here’s another one: a savvy judge figured out that another unnamed bank submitted a LNA executed by an individual with no authority to bind the bank. Result: Foreclosure proceedings dismissed.
Lesson to be learned: Devil is in the details–Make certain that your LNA is watertight!

Now you ask, what if I don’t have a copy of the note, can I just file a LNA?
Well, theoretically (we lawyers love theory) you can, but you would have to attach other documents to the LNA to prove that the note once existed. For example, you could provide a loan payment history, closing documents, and/or a sworn statement of the notary or escrow officer. Filing a LNA without a copy of the note is a HUGE gamble; every judge is different and it’s hard to determine how each judge will determine what evidence is needed to prove that you are the rightful owner of a note.

Most likely, if a borrower raises the defense that you are not the holder of the note and you don’t have a true and certified copy of the note, foreclosure is going to be a long, costly road.

You’ve read all this and now you’re asking yourself: I’m foreclosing on properties in non-judicial foreclosure states, why should I care?

The reality is that borrowers can raise this issue in judicial OR non-judicial foreclosure states. The principles are the same, but the procedures will be different.

To sum it up, don’t let the dog (or in this case, the bank) eat your note! When purchasing a note, make sure the seller can provide you with an ORIGINAL note – or at worst, a certified true and exact copy of the note, along with an LNA that is executed properly. If they can’t, DON’T BUY THE NOTE.

NOTE: The information presented in this blog is for informational purposes only, and should not be construed as legal advice. There is no intent to create an attorney-client privilege or relationship by reading this email and/or blog update.

“When a securitized Note is foreclosed & sold at auction, & the court approves the sale back the bank, does the Note now become a non-securitized Note? Thanks, Steve”

Great question – and it made me immediately think of John Cleese and Monty Python.

Why?

Well, a note is a note is a note, but

A mortgage is a mortgage until a foreclosure sale, after which it “is no longer” and “becomes one” with the property.

The mortgage is the parrot…

Watch this – it’ll all become crystal clear to you!


[See post to watch Flash video]

The mortgage is the parrot in the famous Monty Python Dead Parrot sketch taken from Monty Python’s Flying Circus. Let me explain:

If an investor forecloses on a mortgage (remember you technically foreclose on a mortgage or a deed of trust, not on a note), they are exercising their right to claim the “collateral” (e.g. the property) that “secures” the Note.

Why the word “secure”? Because that’s what a mortgage or a deed of trust does: it secures the Note – or the borrower’s obligation to repay a loan, to the collateral – the property. And it also gives the lender the right to reclaim that collateral if the borrower stops making payments on the Note.

So, to clarify terms here:

1. a Note doesn’t get foreclosed on, a Mortgage does

2. a Note doesn’t get sold at auction, a property does

3. a Note doesn’t disappear at auction, though you may not be able to collect on it after a foreclosure sale (details, details!)

4. a Mortgage or Deed of Trust DOES disappear at auction, regardless of whether the property reverts back to the bank or whether it is sold to a 3rd party

5. since there is no longer a Mortgage or Deed of Trust after a sale, there’s no longer any relevance to whether a Note and Mortgage was in a security or whether it’s taken out of a security.

Make sense? If not, I’ll have to get John Cleese to do a nice little skit with me. (I saw him a few years ago when I was living in London – he drove up to the little corner market in a huge yellow Bentley, walked in, got a bag of carrots, paid and walked out without saying a word to anyone. Ah well, fame extracts a price I suppose.)

You’ve probably heard of Sun Tzu’s (the famed Chinese
warrior) instruction to his soldiers to “know your
enemy” before going into battle.

Well the same is true with note buying.

“Know your seller” should be the mantra for every
note buyer (and broker for that matter!).

Why?

Because if you don’t “know” your note seller then you
might be entering a negotiation with them without
having any idea of their key negotiating points.

Let me give you an how-to-buy-notes example,
based on a note we recently bid on:

A bank has a 1st mortgage on a single family home in
Salt Lake City that they want to sell.

The borrower hasn’t paid on the note in over 120
days, and the note matured over 2 months ago, so the
whole loan could be called due.

The bank hasn’t served the borrower with a
foreclosure notice.

And they’ve called you in order to find out if you
want to buy their non-performing note and mortgage.

I looked at this loan first from the standpoint of
price – how much could I offer for it. We pulled a
title report and a BPO and looked at comps that a
local realtor provided to us.

And we put in our bid.

My rep at the bank hinted that she would need
approval from a committee of senior staff at the bank.

But she was very cagey about answering any of my
questions about where she needed pricing to be in
order to sell, and what the status of the borrower was.

I became a little suspicious and tried probing for
more information, but she immediately clammed up and
said: “I’m not at liberty to say more about our
borrower.”

Something was up in this note buying deal.

It was odd that the bank rep would react that way -
in fact it was the first time I’d seen that kind of a
response to an individual loan before.

How-to-Buy-Notes Tips when talking to the Banker

So I called her back again, and tried a little
“exploratory” language with her.

“Would it be safe to say that the bank has a unique
relationship with this borrower?” I asked her?

“Absolutely,” she immediately replied.

I was curious – what was going on here
in this defaulted mortgage deal?!

So I kept fishing, understanding full well that she
couldn’t reveal any information to me, but that she
wasn’t opposed to my pressing for more information as
long as she could answer in yes or no terms.

“And there’s a reason why the bank isn’t foreclosing
in this case, correct?” I asked.

“Yes,” she answered simply.

“And you’re probably not at liberty to tell me, but
this sounds like it’s a difficult relationship for the
bank to foreclose on, is that correct?”

“Absolutely,” she answered again. “I can’t tell you
any more than that.”

“One last question,” I asked. “Is it safe to assume
that the bank may be more open to a bid on this loan
that clarifies what exit strategy we’ll be pursuing
with the borrower rather than an actual purchase price
for the nonperforming note?”

“Yes,” she answered briefly again. “That would be
correct.”

So what was going on in this note deal?

Well, what I learned in two more phone calls with the
woman I was negotiating with at the Bank was that the
borrower was extremely well connected in Salt Lake
City political circles, and her ex-husband was a close
friend of the bank’s President.

Foreclosing on her could create a political ruckus
for the bank, it turned out. So the bank was exploring
discreet options to rid itself of its non-performing
loan – namely via a note sale to a 3rd party investor.

——————————————————-
* The lesson you should take from this How to Buy Notes example *
——————————————————–

If you don’t take the time to probe WHY the seller is
looking to sell a loan, and the circumstances around
the sale, you may completely miss the seller’s key
negotiating points on a transaction.

In this case, it wasn’t price. It was what we were planning
on doing to work out the note with the borrower.
Price was much less of an issue.

Your how to buy Notes Action Items from this:

1)    Always try to understand WHY a bank wants to sell
you a note or a pool of notes.

2)    Try to find out what the key negotiating points
are for the bank for selling you this defaulted mortgage

Usually it’s one or more of the
following:

a.    Price

b.    Speed with which you can close

c.    Your ability to close (in other words, the Bank
cares more about WHETHER you can close rather than
what price they Buyer is offering for the discounted note)

d.    Your note buying exit strategies (in other words, the
bank may determine whether to accept a bid or not based
on what kind of Buyer you are – are you a foreclosure
operation with no attempt at loan modifications, for
example?)

So keep all this in mind when you’re next talking to
a Bank to buy notes.

It’ll make you that much better a note buying warrior!

Talk soon,

Dean
PS: If you enjoy this kind of no-fluff info, you will be delighted
with our A-Z NoteBuying Course. It’s full of it!
(And our insane 33%-off Special will not go on forever. Hint, hint.)

And to say it in the words of  Josh Gray
from UpgradedProperties.com in Chandler, AZ, who put the
following (unsolicitedly, I might add) on our forum:

“Dean, I truly appreciate all the information you have provided in
the A-Z Course. I have read ALL the competition’s materials and
it comes nowhere near yours.”

If you really want to know the in’s and out’s of how to talk to banks to buy defaulted mortgages aka nonperforming notes, why not hear it direct from the horse’s mouth, so-to-speak?
 
I mean direct from a banker.

Make that TWO bankers.
 
That’s right….

Join me tomorrow (Wednesday) at 8pm EST, 5pm PST for a conversation with TWO bankers, Saprina and Janet (some of you may remember Janet from the ‘A-Z Profiting from Defaulted Mortgages Business-in-a-Box’ Course, others may have heard Saprina before in our Private Access Club – here is a brief snippet from our last call with Saprina to give you a taste).
 
So if you want to know anything about the following, then don’t miss out tomorrow:

* What are the first words to say to a banker to buy defaulted mortgages?

* Does it matter what language you use?

* The 3 Things never to say to a banker when buying defaulted mortgages

* The 2 Things always to say to a banker when buying defaulted loans
 
And if you want to test your phone calling skills, a few of you will get the opportunity to try a sample conversation with Janet and Saprina!
 
This could be the time that you perfect that banker call you’ve been dreading for so long.
 
Don’t miss it!

Short Sales aren’t going that well, aren’t they?

It’s NOTE BUYING TIME NOW.
 
Dean

PS: Again, here is the link to be on the webinar/call tomorrow.
(If you see this after the fact: no worries – all recorded!)

A critical skill when buying notes aka defaulted loans aka defaulted mortgages aka nonperforming notes aka ‘bad paper’… all the SAME THING!

Actually, a critical skill, no matter what kind if investing you are doing… be it doing Short Sales, or any other types of Foreclosure Real Estate Investing!

Check out this short Video, which is an excerpt of a 20-min on the subject.

It’s a FREE bonus as part of the ‘A-Z Profiting from Defaulted Mortgages Business-in-a-Box’ 16 hour+ Training Course.

Wow – what a wild week last week, and it’s continuing this week.

Will it be $700 Billion, or $150 Billion as some lawmakers are suggesting?

Will Treasury get its way?

And then, if it passes, will that suddenly dry up the ENTIRE supply of non-performing bank notes out there?

ABSOLUTELY NOT.

The bad news is that a lot of banks are actually going to be in trouble and have to recapitalize themselves if they have to sell their assets, even at Treasury’s anticipated prices.

In fact, you should be “sharpening your pencil” as they say in the note buying industry, in order to get ready to start bidding on paper.

Whether it comes from Treasury, or whether banks themselves engage in “price discovery” in order to see what their assets are really worth, I anticipate there will be a lot more paper in the market over the next year.

I put together a short VIDEO with my take on the subject for you, where I am also pointing out the webinar we are doing tonight in the Private Access Club on ‘How to get Your Note Buying Business UP-AND-RUNNING within 8 Weeks!’ (No worries, if you are reading this later… the REPLAY will be up in the members area! And, hint, hint, there is a 30-day FREE trial for you…)

I will take you by the hand through an 8-Week Roadmap I put together for you, where I am laying out a CLEAR PATH for you, from A-Z. Step by Step. Done for you.

(Currently, we are putting on a new LIVE ‘how to buy nonperforming notes’ webinar every Wednesday at 5pm PST/8pm EST – and you can check that and ALL THE REPLAYS of past webinars for 30 days for a FREE here…)

Anyway, here is another 12-min Video Segment from the 90-min Interview we had with Saprina on buying nonperforming notes.

‘How to buy Real Estate Notes‘ Topics covered in this segment:

- Did you ever ask a note buyer for Proof of Funds?
- On GIFTS  to bank reps…
- % Single Note Buyers vs. Portfolio Note Buyers she dealt with
- Would you tell the Defaulted Mortgage Investor in what RANGE his bid would need to be?
- Comp structure of Bank Reps
- Why Note Sales are MUCH easier than SHORT SALES…
- Which Position Name to ask for when trying to locate the Bank Rep in charge of selling Non-performing Notes within the Bank
- INSIDER TIP: find a (former?) Bank Rep YOURSELF to consult for you!
- The KEY TO SUCCESS when buying nonperforming notes from banks

And that’s only 12 minutes… We have the full 90-min Interview, LOADED with REAL-LIFE ‘how to buy nonperforming notes’ information, in the Private Access Club members area (as well as LOTS of other great Video/Call recordings in the PAC Archives)!

Hope you enjoy this no-nonsense info on how to buy Real Estate Notes.

Good.

You’ll want to meet Saprina.

She’s a veteran – a former seller of Notes at one of the largest national banks.

And I’ve asked her to share tips on how to get YOU in the door with banks.

She was a mentor for me on my first note purchase. The one I made $96,500 on that I’ve highlighted on www.notebuyingprofits.com (first Video at top of that page).

If she can help me, she can help you.

Some of the questions I’ll be asking her:

• How did new investors/note buyers introduce themselves to you and “get approved”?
• What are the biggest “no-no’s” you look for when interviewing non-performing notes investors – any words that give away certain info that “kills” their chances to buy from you?
• Did you ever ask note buyers for references?
• Are there “blacklists” of non-performing note buyers? If so, how are they used in the industry today?
• Would you receive gifts from a real estate investor? What kinds?
• Who’s your best investor of all time? Why?
• Do banks proactively go looking for investors?
• Did you sell single non-performing notes?

You’ll have a chance to ask her additional questions yourself TODAY AT 5pm PST/8pm EST.
(For Private Access Club (PAC) members, the recording will be available later inside of PAC.)

Join me for this unique opportunity, today at 5pm PST/8pm EST.

Register now for this how-to-buy-defaulted-mortgages Special Interview.

Webinar spots are limited.

And, as a special goodie & pre-taste: watch ANOTHER interview I did before with another veteran bank rep – straight out of my ‘A-Z Profiting from Discounted Mortgages Business-in-a-Box‘ Course. (You can get the complete interview FOR FREE, incl. online video, Audio MP3 & iPod video version, by putting in your name & email at the top right of this blog!)

(They get see this kind of REAL-LIFE info WEEKLY, plus an ever-growing ARCHIVE of recordings (Online Videos, MP3 Audios, iPod Video Downloads, etc.) of literally anything that took place in PAC so far…)

You can check it out yourself for a buck for 30 days for right now…)

This is a 22-minute Video Case Study of a note buying deal that I am currently doing. So this is UP-TO-DATE stuff. This note buying transaction should net me over $70,000. And believe me, there is no reason why YOU, with the right training, couldn’t do the same thing, buying defaulted mortgages.

It’s September 2008… TONS of defaulted mortgages out there, that banks want to unload!

The Exit Strategy for this one turned out to be Foreclosure & REO.

Take a look. And leave me a comment and tell me what you thought.

(Sorry, the Video misses the first couple of seconds, but it’s still easy for you to follow along…)

Hope you enjoy this ‘How to buy Defaulted Mortgages’ Case Study!