In today’s economy, news of defaulted mortgages have become a constant refrain. Despite the obviously negative tone you find in the reporting on this subject in the media, many people see the current housing situation as a once-in-a-lifetime opportunity to make money. Today, we’ll talk about one of the hottest trends in real estate investing now–the buying and selling of non- performing “notes, ” i.e. defaulted loans.

Assuming that you’ve learned enough about note buying to want to get into the game, what would you say is one of most important elements in your note buying decision?

Note Buying Basics

Let’s start with the basics. When you’re initially searching for notes, due diligence plays a major role. Take a look at any of the important decisions you make in your life. Don’t you always do your homework? Weigh the positive and the negative? Well, ask yourself, why shouldn’t you apply these same principles to your note buying business?

Exactly…there isn’t any reason why you shouldn’t.

Buying Notes – 4 Source to Determine Value

If you are going to buy some notes, you need to know what those properties are worth. How can you do this? Here are a couple of tips on how you can evaluate those properties without leaving your home.

Your four best sources for estimating value are:

1. Trulia.com 2. Realtor.com 3. Zillow.com 4. Local MLS data (from a local realtor)

How to Buy Notes – Online Research Tools

Let’s focus on the first three for now. Each of these online sites allows you to research comps near your property–all from your computer, without leaving home! You can access recent listing prices, average sold prices, and how long the properties have listed before they were sold. All of this information can give you insight on what these properties (that are attached to your note investments) are worth.

In one online session, you have determined the value of the property. You know generally what the note is worth and furthermore, a price that you should offer.

How to Buy Notes in Today’s Market

Note buying isn’t rocket science. With the correct guidance and knowledge, you can profit in today’s real estate market. Knowing what actions you need to take and how to perform them is a step in the right direction. As with any investment, know what you are investing in.

Stay tuned for my next article as we look further into the last source on my list. In the meantime, get on your computers and explore the three websites we mentioned. Become familiar with all the free information that is available to you.

Check out our Note Buying Forum.

Check out our ‘A-Z Profiting from Discounted Mortgages Business-in- a-Box’. -> 16 hours+ of Video Training, 23 pages of checklists, a complete 8-Week Roadmap, an extensive Table of Contents for quick reference, plus TONS of Bonuses.

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I listened in on an interesting call with the FDIC recently.

Note Buying: What I Learned about the Legacy Loan Program

a) FDIC and Treasury are two separate entities, and don’t always see alike. The two need to coordinate on the terms of the non performing debt (guarantee fees, interest capitalization, interest rate,”turbo- charging” returns on the debt side, and equity “control” and loss position for the equity side)

b) when asked how large a typical deal size might be, the FDIC admitted that the size of each note trade has to “make economic sense”. The only guidance given thus far is that a deal might equate to $1B

c) each deal will have its own covenants and restrictions imposed by the FDIC, in other words, on performing notes, for example, the FDIC might look for special loan modification capabilities or targets. This implies that the FDIC will likely make deals homogenous in the types of defaulted mortgages that are being sold.

d) in addition to each note deal having its own characteristics that the FDIC will be looking for from each prospective bidder, the FDIC will also be taking a close look at the servicers that will be servicing each non-performing note pool.

e) both (c) and (d) are an operational challenge, meaning that in order to set restrictions and covenants, enforce them, and to have evaluation guidelines for servicers – and to execute against those evaluation requirements – is an enormous task. Part of my background is in project management – I used to manage 10-person teams at Chase when we were reviewing brokerage trades in response to regulatory inquiries – and I can tell you that overseeing / evaluating and reporting on each PPIF will be a nice little bit of work.

The difficulty of executing (e) above points to a limited number of PPIF’s that will be allowed or approved.

Note Buying and the PPIP

PPIF’s are the individual funds approved for participation in the “P” “Pip” as it’s nicknamed.

So what I’m seeing evolve out of this program is:

A much larger note buying-side to the equation than I originally thought, with minimum trade sizes similar to the legacy securities side, and with similarly deep-pocketed investor participants. The role of the small, minority, veteran-owned firms in the note buying business will be as some form of limited partner in these funds, in my opinion.

———————————————————- Note Buying – How Will it Be Affected? ———————————————————-

My real concern is on the re-trades…

In other words, the amount of loan re-trading that will happen after a $1B non performing note pool is bought, for example.

What’s cleared the loan markets historically has been the ease with which larger trades could be broken up into smaller ones, and where the big buyers could carve out bits of their note portfolio to sell and to generate a pop in their funds’ IRRs.

I don’t see how that will happen in this scenario, unless the FDIC debt has some unique way of attaching to individual loans

There was some talk this morning about structuring the FDIC debt as some form of seller-carryback note on the banks’ balance sheets.

I’m not yet clear on how that might impact the note buying side, though.

Talk to you soon,

Dean

Interested in learning more about the Note Buying Business? Watch Hours of FREE Training Videos here: Note Buying Real-life, Up-to-Date Information for You. Visit NoteBuyingProfits.com

I wanted to share with you a specific example of someone…

* * Buying Notes- The Process of Bidding as an Art * *

You see, if relationships didn’t count for anything, and if the principle of High-Bid-Wins always applied in every single real estate note transaction, I wouldn’t have worried about my friend on his way to bid this commercial loan pool on DebtX (an online bidding platform for bank notes).But because a high bid does NOT always win when you’re buying notes, then I do worry about my friend bidding on that DebtX note pool.

======> Why?

Because if he’s not talking to the Seller of the notes, and doesn’t know the Seller (or the rep at DebtX that manages his account), then he’s not dealing with a full deck – he’s not playing all his cards right.

======> Why does this matter to you?

Because you may be the equivalent of my friend bidding that non performing note pool.

And if you ever are in that situation, you’re going to want to:

* * When Buying Notes, Engage Your Seller* *

This will improve your chances of winning the bid.

Winning bids in any market, but especially in this market, is not just tied to the price that you’re willing to pay for a note or a pool of notes.It’s tied to your ability to demonstrate that you’re a trustworthy and credible counter-party (fancy name for a note buyer), who can deliver when and how you say you will.

As former GMAC traders Matt Kennedy and Mike Mand pointed out in a recent discussion I had with them in our Private Access Club:

* *Buying Notes -Highest Bid, Not Always the Winner* *

And their “BEST” relationship was actually a note broker who ended up calling them almost once a day with information and news about other trades and deals that were happening in the note buying industry.

No matter if you’re bidding on a single note or on a pool of notes, take the time to develop and build a relationship, and you will see your success rate improve.

Guaranteed.

If you haven’t already, check out 4-minute video that I prepared for you at the top of this post.

Talk to you soon,

Dean

P.S. If you enjoyed this info, check out my 16 hour course. We have a special right now where you can try the whole course for 30 days for exactly $1.

For those of you out there that are trying to sell your defaulted mortgages and looking for…

***Prospective Note Buyers***

Always think of ways to use publicly available information that will help you in selling notes. (conference attendees and foreclosure auction buyers are ones I’ve mentioned in the past).

One other source for potential defaulted mortgage buyers is:

* * * The list of Commenters on the FDIC’s Legacy Loans Program includes a number of Self-Identified Note Investors * * *

Go to the public comments section and collect the following data about these note buyers:

* Name

* Title

* Affiliations

* Email address

Voila … a PROSPECTIVE BUYER LIST that might just be all that you need for your note buying business!

Here’s the link to the comments list on the

========> FDIC’s Website

(Probably won’t stay up forever, so be quick!)

Talk to you soon,

Dean

P.S. Did you enjoy this information? If so, my note buying course is full of no-fluff info like it. 16 hours to be exact. And you can try it for a buck!

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.”

First things first: I got a ton of emails from folks who got our news on the 40%-off special with Special Code ‘nofool’ too late.

So, we are leaving that up until Sunday Night.
CLICK HERE if you are ready to take action on that, and
use ‘nofool’ as Special Code. (Need further outside ’social
proof’ that my note buying course really works? READ THIS,)
****************************************

But back to why I am writing you:

I just got back from a distressed debt conference in
Los Angeles and some of the numbers we’re looking at
are enormous.

Check out this short Video I did for you to share some
of my note buying findings with you:

Here’s one estimate for the amount of distressed
whole loans (e.g. mortgages and notes that you and I
could buy as individual loans) in the note buying marketplace
today:

$3-4 Trillion.

This puts a lot of things into
perspective in terms of the number of transactions
that translates into for you and me and the entire Non-
-Performing buyer marketplace in the United States
today.

Buying Notes is something to take advantage of NOW – and with
potential FDIC financing, this could be very
interesting.

For those of you who are looking for some additional
insight (see the note at the end of this piece re:
another person’s assessment of the size of the whole
loan market – and note how wide ranging estimates
are!):
http://www.cumber.com/commentary.aspx?file=032909.asp&n=l_mc

Regards,

Dean

PS: Again, we are leaving the 40%-off SPECIAL up until Sunday night,
if it’s time for YOU to benefit from this market and leave the whiners and
nay-sayers in the dust.

Would you like to turn anyone you know (like
me), who has something to say, into a chipmunk?

There’s a F.REE piece of software called MySpeed
(offered at www.enounce.com) that allows you to
control the speed at which you hear/see (any flash)
videos. (And without changing the pitch!)

Absolutely great for spending less time listening,
and more time doing.

Here’s a way to shrink 16 hours of video, like our
A-Z Note Buying Course, hint, hint) into *10* hours.
-> Without killing the audio quality or changing your
learning experience in any way.

Matter of fact: at that faster speed, you don’t have
time to ’space out’ while listening, so not only will you
take the info in faster, but you will also be more
alert/learn better.

It just turns me into a chipmunk.

Go ahead … give it a try … you know you always
wanted to turn someone into a little furry cartoon
character.

Install the software (sorry, XP & Vista only) and
watch one of our videos (like this real investment club presentation)
to test it.

MASSIVE time saver!

And if nothings else, you got a good laugh out of it.

Dean

PS: There is a similar piece of software that has the
same effect on AUDIO MP3s: www.fasteraudio.com
(Lets you convert your MP3s into ‘faster audio’ MP3s.
Also useful!)

PPS: For Nerds only:
Learn to READ faster with software like www.readfaster.com
or www.acereader.com (Both excellent products, btw.)

=================================

* Check out our NEW FORUM: www.NoteBuyingProfits.com/forum

* Ready to REALLY get down & dirty?
‘A-Z Profiting from Discounted Mortgages Business-in-a-Box‘.
-> 16 hours+ of Video Training, 23 pages of checklists, a complete 8-Week Roadmap,
an extensive Table of Contents for quick reference, plus TONS of Bonuses.
[===> You can check out Hours of F.REE Training Videos of the actual Course Content HERE.]

* ‘PRIVATE ACCESS CLUB’ (PAC) – Test-Drive it for F.REE for 30 Days!
Get Your Questions Answered LIVE & get Ongoing Support & Training!
Conference Calls/Webinars, Interviews with Industry Insiders (Bank Reps, Top Note Brokers, etc.),
Real-Life Case Studies, Role-Playing, Members-Only Forum, and ‘HOT SEATS’ to get coaching on
Your Deals/Business Challenges, and more

* Questions? Chances are I already answered them at www.NoteBuyingProfits.com/blog.
(Use the ‘Search’ feature or click on the ‘FAQ’ category on the right to see them all!)

Here’s a great tip from an investor that just hit my desk today.

Remember how I’m a fan of buying from Regional Banks for Finding Notes?

Well, Will out of Miami just sent me something that might be of great assistance to you – it’s a source for contact information (not for THE person responsible for selling notes, but for a compliance officer or senior executive) at every single licensed bank or mortgage lender in every single state – available by searching all 50 states’ licensing records for banks and lenders in that state so you can contact them re buying notes.

Very useful contact info to at least get you pointed in the right direction and talking to an executive (who can then point you to THE person to talk to in charge of selling bank notes) at any target bank or lender.

Just follow Will’s instructions below and you should have a nice list of bank contacts you could call to find notes (remember, it doesn’t matter if the person you’re talking to at first is not the right one -  you’re looking to GET REFERRED to the person who’s in charge of selling notes.

Use the person in the attached lists as a referral source and you should do just fine.

For a short video example of  finding bank contacts to buy notes, me getting through to some example people in the state of Nevada, check out the how-to-find-notes video below.

And here are Will’s Notes on Finding Bank Contacts to Buy Notes:

Go to http://thomas-law.com/

Scroll down there, right-hand side, ‘mortgage banker licenses’:

http://thomas-law.com/50states.html

Check NV, for example, then click on the link that says ‘Mortgage Lending Division’:
http://www.mld.nv.gov/

Left side: click on ‘licensee records’ link:
http://www.mld.nv.gov/LicenseeSearch.asp

Click on link ‘82 licensed mortgage bankers’:
http://www.mld.nv.gov/LicenseesBanker.asp

Hit a link: gives you principal’s contact info & email, etc.! Gets you the source.

Can do for 50 States!

Also, just another thought: keep in mind that each state has its own way of getting to that licensing info.
For example, If you go to the Connecticut web page you would click on “find a bank” on the left hand side.

From there, it would take you directly to the page where you would find all the banks and that important contact info (..btw, it looks like CT has approx 1700 banks listed -crazy!)

For other states, you would look under ”licensing”,  ”bank licensing”, or ”find a bank”.

It will just take some simple snooping around for each one, that’s all. But most will have similar search terms.

And now find those bank contacts & buy some notes!
Dean’s Note Buying Course has everything you need to know what to say when you are calling!

“Can I get some distressed loans with my bonus, please?”

Credit Suisse (CSFB) just announced that it was going to pay its execs’ bonus compensation from a pool of non-performing assets on their balance sheet ($5 Billion was the initial amount indicated).

Now this is an interesting concept - talk about drinking from the Kool-Aid! Watch below for a bit of analysis on what the implications might be for your note buying business:

$2,000 for a $297 per month cash flow.

[Who said you can only buy POOLS of notes?
Who said you need a lot of m.oney to do this?]

Now that’s what I like to hear.

This is what Rick, a www.NoteBuyingProfits.com Student,
is receiving on the very first non performing
note he recently purchased.

Here are more of the details: Rick bought a 2nd
mortgage of $20,000 (so he paid 10 cents on the
dollar), behind a 1st worth $65,000, on a house that
he estimates is worth $130,000. So he’s at
approximately a 50% CLTV ($65,000 1st plus $2,000 he
paid for the 2nd, divided by the value of $130,000).

From Rick’s perspective, this is an amazing return on
his nonperforming note investment.

From the borrower’s perspective, Rick is a … well
actually Rick’s a saint from heaven.

Here’s the way Rick explains it: “The borrower was
actually getting foreclosed on [he had lost his job
and then found employment again, but fell behind]. So
he’s about $2,000 in arrears plus he was paying an
extra $50 a month due to a bankruptcy a couple of
years ago. ” Arrears mean how much he would owe to
bring the loan current.

So his borrower was behind on his mortgage, owing
over $2,000 on a $20,000 note. And he was also paying
$50 more than the original note payment due to a
bankruptcy filing that added an extra $50 each month.
So what did Rick do with this “deadbeat” of a borrower?

He cut him some slack.

” I said to the borrower, “Listen, I’m going to eat
the arrearage, I’m going to eat the extra $50 a month,
and you just pay me $297 a month and we’re going to go
back to the original note and I’m not going to
foreclose on you. “

The result?

The borrower made the first payment and Rick expects
to have little trouble with his remaining payments.

But how did Rick get there?

How did he get started in how to find notes?

Was it tough? Did it take a lot of time? Did he know
what he was doing? Are there more of these that Rick
can do?

===> Listen in this Wednesday, December 10, 2008 at
6pm PT/9pm ET.
Dial: 419-400-0202
Access Code: 468636#

I’ve invited Rick to share his experience
with you so that you can hear how a fellow student
went from the brink of bankruptcy (it’s true, Rick
almost filed bankruptcy himself), to receiving notes
unsolicited from 4 different people at a bank, and a
million dollar investment from a fellow investor. All
within a few short months.

And where does Rick go from here with his buying notes business?

“I’m really trying
to just get one or two a month now. My plan as I build
up is to just get one every other month and then build
up to one a month, one or two a month, like next year,
and start getting into larger pools.”

Step by step, Rick is building his note buying
business. And he’s starting with nothing.

Join us for this f.ree Teleconference this Wednesday.

We have room for 100
on the call, so be sure to be on it.

Again, it’s this Wednesday, 6pm PST/9pm EST.
Dial: 773-945-1010
Panelist Access Code: 260-435-355

You will learn about/from a Student who took * MASSIVE ACTION *
on the course materials of the A-Z Note Buying Course.

Plus you can ask ANY questions of yours.

Be your success.

Dean