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Thread started 30 Dec 2017 (Saturday) 16:02
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Anyone investing in mortgage notes?

 
Larry ­ Johnson
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Dec 30, 2017 16:02 |  #1

I've been doing some research/thinking about becoming a landlord and have had several people suggest that, instead, I should invest in mortgage notes, either performing or non-performing mortgage notes. I'd never heard of it, so did a little bit of research. Seems fishy to me. Anyone have first-hand experience with it. Run as fast as I can or is it legit?


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Bassat
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Post edited 7 months ago by Bassat.
     
Dec 30, 2017 16:13 |  #2

Investing? With what? I spend all my money on camera stuff.


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Perfectly ­ Frank
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Dec 30, 2017 16:35 |  #3

Larry Johnson wrote in post #18529606 (external link)
I've been doing some research/thinking about becoming a landlord and have had several people suggest that, instead, I should invest in mortgage notes, either performing or non-performing mortgage notes. I'd never heard of it, so did a little bit of research. Seems fishy to me. Anyone have first-hand experience with it. Run as fast as I can or is it legit?

I looked into it several years ago. I decided not to invest as it requires a pretty good knowledge of RE and business principles - understanding contracts, that sort of thing. But some make a go of it. If you do give it a try remember...you'll be swimming with the sharks.


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Larry ­ Johnson
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Dec 31, 2017 13:29 |  #4

Perfectly Frank wrote in post #18529627 (external link)
I looked into it several years ago. I decided not to invest as it requires a pretty good knowledge of RE and business principles - understanding contracts, that sort of thing. But some make a go of it. If you do give it a try remember...you'll be swimming with the sharks.

Bassat wrote in post #18529614 (external link)
Investing? With what? I spend all my money on camera stuff.

Home equity. I doubt that I'll buy a note. More interested in a vacation rental that I can use in the off season.


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Wilt
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Post edited 7 months ago by Wilt. (7 edits in all)
     
Dec 31, 2017 13:32 |  #5

According to Wikipedia: "In the United States, a mortgage note (also known as a real estate lien note, borrower's note) is a promissory note secured by a specified mortgage loan. Mortgage notes are a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfill the promise."

So how is this 'mortgage note' any different than the financial instruments which, bought and sold freely prior to 2007, were responsible for almost taking down so many banks and losing value for so many retirement funds in the Great Recession?! Prior to the Great Recession, US mortgage-backed securities were marketed around the world. Many of these securities were backed by subprime mortgages, which collapsed in value when the U.S. housing bubble burst during 2006 and homeowners began to default on their mortgage payments in large numbers starting in 2007. Worth investigating and understanding how these 'mortgage note' investments are different/better than what collapsed the world economy not that long ago.

From a web page posted 2011: "Atlanta—If you told me five years ago that the selling of distressed notes by banks would become a virtual retail industry, I wouldn’t have believed it. Yet here we are, and business is booming. As an example of the frenzy, I recently had three different clients bidding on the same note. Pretty amazing. In multifamily alone, there are billions of dollars worth of outstanding, distressed debt. Whereas a few years ago, banks would have been more inclined to foreclose on a non-performing commercial real estate property, they are now choosing to sell the note....you can see why banks were looking for an alternative to foreclosures. Note selling has provided that alternative avenue."


It sounds like you would be buying a single note for ONE property, rather than buying a collection of many notes which are collectively owned as a single morgage-backed security...so that rather than having any 'cushion' you are fully exposed should the real estate borrower default on his mortgage! SCARY! One could end up holding a note that is theoretically worth $500K, but the owner let the property deteriorate before defaulting, so that the property declined to $200k in market value...contrats, you own $500K note where you are stuck holding the repossesed property, but you can only get $200k of cash value out of it!


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texkam
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Dec 31, 2017 14:14 |  #6

Good luck. I'm still trying to understand what Bitcoin is all about.
: /




  
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Larry ­ Johnson
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Jan 01, 2018 09:16 |  #7

Wilt wrote in post #18530247 (external link)
According to Wikipedia: "In the United States, a mortgage note (also known as a real estate lien note, borrower's note) is a promissory note secured by a specified mortgage loan. Mortgage notes are a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfill the promise."

So how is this 'mortgage note' any different than the financial instruments which, bought and sold freely prior to 2007, were responsible for almost taking down so many banks and losing value for so many retirement funds in the Great Recession?! Prior to the Great Recession, US mortgage-backed securities were marketed around the world. Many of these securities were backed by subprime mortgages, which collapsed in value when the U.S. housing bubble burst during 2006 and homeowners began to default on their mortgage payments in large numbers starting in 2007. Worth investigating and understanding how these 'mortgage note' investments are different/better than what collapsed the world economy not that long ago.

From a web page posted 2011: "Atlanta—If you told me five years ago that the selling of distressed notes by banks would become a virtual retail industry, I wouldn’t have believed it. Yet here we are, and business is booming. As an example of the frenzy, I recently had three different clients bidding on the same note. Pretty amazing. In multifamily alone, there are billions of dollars worth of outstanding, distressed debt. Whereas a few years ago, banks would have been more inclined to foreclose on a non-performing commercial real estate property, they are now choosing to sell the note....you can see why banks were looking for an alternative to foreclosures. Note selling has provided that alternative avenue."


It sounds like you would be buying a single note for ONE property, rather than buying a collection of many notes which are collectively owned as a single morgage-backed security...so that rather than having any 'cushion' you are fully exposed should the real estate borrower default on his mortgage! SCARY! One could end up holding a note that is theoretically worth $500K, but the owner let the property deteriorate before defaulting, so that the property declined to $200k in market value...contrats, you own $500K note where you are stuck holding the repossesed property, but you can only get $200k of cash value out of it!


texkam wrote in post #18530281 (external link)
Good luck. I'm still trying to understand what Bitcoin is all about.
: /

texkam wrote in post #18530281 (external link)
Good luck. I'm still trying to understand what Bitcoin is all about.
: /

As I understand it, yes, buying the note on a mortgage. As I mentioned above, I doubt I'll buy. In fact, I won't even do any serious research unless I happen to stumble onto some info.

Tex, you know all you need to know about bitcoin.


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Anyone investing in mortgage notes?
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